U.S. Senate Republicans ask SEC to reject Nasdaq diversity rules

FILE PHOTO: FILE PHOTO: A view of the exterior of the Nasdaq market site in the Manhattan borough of New York City

Ross KerberFri, 12 February 2021, 6:41 pm

By Ross Kerber

(Reuters) – Republican members of the U.S. Senate’s Banking Committee on Friday urged securities regulators to reject corporate diversity rules proposed by Nasdaq Inc.

In a letter to the head of the U.S. Securities and Exchange Commission, the Republicans said the effort by the exchange operator to set boardroom diversity requirements for listed companies would interfere with boards’ duties to their shareholders, violate securities disclosure principles and could impose costs on companies.

“While we think America’s corporations benefit from boards that avoid groupthink and offer a diversity of perspectives and commend firms that look to increase diversity among their boards, we do not think NASDAQ should be using its quasi-regulatory authority to impose social policies,” stated the letter, signed by Pat Toomey, the committee’s top Republican, and 11 other senators.

On Dec. 1 Nasdaq outlined rules that, if approved by the SEC, would require listed companies on its U.S. exchange to disclose boardroom diversity statistics and to have at least two diverse directors, including one woman, or explain why they do not.

The proposal comes as part of a broader debate about a lack of diversity among top U.S. executives. Among the top 200 companies in the S&P 500, African-Americans held only about 10% of board seats and Hispanic or Latino people held only 4% of board seats, a study last year found – representation below their respective shares of the U.S. population of 13% and 19%.

The lack of self-reported disclosure by corporate directors has complicated efforts to increase those numbers, partly by making it difficult for investors to measure boardroom representation.

Asked about the Republican’s letter, Nasdaq spokesman Joe Christinat said that “Our proposal is a market-led solution that should simplify and standardize disclosure requirements to avoid the type of regulatory overreach the critics fear.”