SEC Approves Nasdaq "Comply Or Explain" Diversity Requirements

The Securities and Exchange Commission recently approved Nasdaq's proposed rules regarding board diversity.¹ Nasdaq's rules, initially proposed in December 2020, take a "comply or explain" approach, requiring most Nasdaq-listed companies to either (a) include on their boards of directors at least two "diverse" directors, or (b) explain why they do not meet these diversity benchmarks. The rules also will require Nasdaq-listed companies to disclose aggregate board diversity data.

Under the rules, each Nasdaq-listed company (subject to certain exemptions) will be required to have, or explain why it does not have, at least one director who self-identifies as female and one director who is either an "Underrepresented Minority" or is lesbian, gay, bisexual, transgender or queer ("LGBTQ+"). "Underrepresented Minority" is defined as "an individual who self-identifies as one or more of the following: Black or African American, Hispanic or Latinx, Asian, Native American or