Nasdaq

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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.[1]  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.
Continue Reading Nasdaq’s Board Diversity Rule: The “Hip” Exchange Does It Again

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Photo by Rachita Singh

A little over two years ago, the Council of Institutional Investors (“CII”) asked the SEC to review its proxy disclosure rules related to director compensation received from third parties, which we had blogged about here. At the time, the CII was concerned that the existing proxy rules did not capture compensation that may be paid to directors serving on the board of a public company by a third party, such as a private fund or an activist investor, which are typically referred to as “golden leashes.”

In its letter to the SEC, the CII cited concerns that compensation under golden leash arrangements is not generally covered by the existing proxy disclosure rules, but could be material to investors due to the potential conflicts of interest arising under such arrangements. We had noted many of these issues in a prior blog post discussing the performance-based compensation arrangements of hedge fund-nominated directors for the boards of Hess Corporation and Agrium, Inc. in 2013. As we predicted would be the case, nothing really transpired on this topic in the wake of the CII’s request. That is until recently, when Nasdaq filed a proposed rule change, subsequently approved by the SEC, attempting to address this issue.
Continue Reading Nasdaq-listed companies must now disclose director “golden leash” arrangements