The Nasdaq Index said Tuesday that major public companies should have “at least two different executives” on their boards.
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This story originally appeared on Business Insider
Companies that are listed on the US stock exchange Nasdaq must have “at least two different executives” on their boards, according to the index on Tuesday.
If companies do not meet the diversity requirements, they can be excluded from the list.
According to the proposal, the 3,249 companies listed on Nasdaq’s major US stock exchange would have to have at least one director and at least one executive who identified themselves as an underrepresented minority or LGBTQ +. DealBook from The New York Times.
If they didn’t, they’d have to publicly explain why they didn’t meet the requirement or are facing delisting, Nasdaq said.
Currently, three out of four companies listed on the Nasdaq do not meet these diversity requirements DealBook.
Nasdaq defined an “underrepresented minority” as “a person who identifies himself or herself in one or more of the following groups: Black or African American, Hispanic or Latino, Asian, American or Native American, Hawaiian or Pacific Islander, or two or more races, or ethnic groups “.
“It’s not like we’re saying this is an optimal composition of a board, but it’s a minimum of variety that we believe every board should have,” he said DealBook Adena Friedman, CEO of Nasdaq.
Nasdaq will seek permission from the Securities and Exchange Commission on Tuesday to pass the policy. It will likely be weeks before the SEC reaches a verdict, he said. DealBook.
Under Nasdaq’s proposal, all publicly traded companies are expected to have at least one of the various directors within two years of SEC approval, while the largest companies would require at least two of the directors within the SEC for four years.
Companies would also be required to report diversity data to their board of directors within one year of SEC approval.
Friedman said the benefits of having a diverse board of directors include better quality financial information and fewer audit problems DealBook.
Other large companies have also advocated greater diversity in boardrooms. In July, Goldman Sachs stopped conducting initial public offerings for companies without at least one diverse board member, with an emphasis on women.
“We could lose some business,” said David Solomon, CEO of Goldman Sachs CNBC in January after the change is announced. “But in the long run, I think this is the best advice for companies looking to generate superior returns for their shareholders.”
BlackRock has also said that it is trying to build a representation of women and black leaders.