The Nasdaq Stock Market has developed a reputation for being the hip securities exchange, technologically and otherwise. In many ways, it deserves this reputation. For example:
- In 1991, Nasdaq became the world’s first electronic stock market.
- In 1992, it joined with the London Stock Exchange to form the first intercontinental linkage of capital markets.
- In 1998, using the slogan “the stock market for the next hundred years,” Nasdaq became the first U.S. stock market to trade online.
- In 2016, Adena Friedman was promoted to chief executive officer, becoming the first woman to run a major exchange in the U.S.
So it is not particularly surprising that, once again, in August 2021, Nasdaq took center stage and became the first major stock exchange to adopt a board diversity rule for its listed companies.
WHY THIS RULE? WHY NOW?
The answer to the first question is clear. Notwithstanding widespread acknowledgement by corporate America that board diversity leads to greater innovation, smarter decision-making, and improvements to the bottom line, actual board diversity remains elusive. As of 2020, only 20.9% of Fortune 500 board seats were held by White women, and a mere 5.7% were held by Black and Latina women; and while 2021 saw gains of 300% in new directors who are Black and 200% gains in Latino directors, 80% of all Fortune 500 board members are White, and 70% are male. So even though the new rule will not create “instant” diversity, it will create measurable board diversity goals, forcing companies that have given lip service to diversity to act – or to disclose that they have failed to act.
Why now? Personally, I ask, “Why not before?” The answers to those questions, however, are beyond the scope of this blog. For this moment, I am cautiously optimistic that Nasdaq’s new diversity rule can be a catalyst for meaningful change that leads to the bona fide board diversity that corporate America has been incapable of accomplishing thus far.
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