SEC Approves Anticipated Nasdaq Board Diversity Rules

BACKGROUND

On August 6, 2021, the Securities and Exchange Commission (SEC) approved Nasdaq's board diversity rules. The rules include "diversity objectives" that require Nasdaq-listed companies to either have or explain why they do not have at least two diverse directors. The diversity objectives provide that companies must have at least one woman director and one director who self-identifies as Black or African American, Hispanic or Latinx, Asian, Native American or Alaska Native, Native Hawaiian or Pacific Islander, two or more races or ethnicities, or as LGBTQ+. Under the rules, companies are also now required to annually disclose their board diversity statistics using a prescriptive matrix, referred to as the "board diversity matrix." A company's repeated failure to comply with the rules would subject the company to delisting. In an effort to help companies comply with the rules, Nasdaq will offer listed companies access to a board recruitment service.