Nasdaq is “putting its money where its mouth is” when it comes to corporate diversity, said Michael Hiltzik in the Los Angeles Times. The world’s second-largest stock exchange submitted a proposal to the Securities and Exchange Commission last week requiring all its listed companies to have “at least two ‘diverse’ directors, including at least one woman and one minority or LGBTQ director.” Nasdaq simply recognizes that this is the direction most institutional investors were headed in anyway.
Goldman Sachs earlier this year said “it won’t take a company public unless it has at least one woman or minority director.” California will soon be imposing similar diversity requirements on companies headquartered in the state as well. Unlike state legislatures or even advisory firms, though, Nasdaq “can put teeth into its standard.” Nobody wants to be delisted over resistance to “the emerging reality in American industry.” “The more we think about these mandates, the more absurd they seem,” said The Wall Street Journal in an editorial. Is a company supposed to hire private detectives to determine if a candidate is gay? Must that person’s sexual orientation then be broadcast “so progressives can be satisfied that the quota was met?” As Warren Buffett once wrote, he is “running a business,” therefore he “seeks business judgment” in his board candidates. Nasdaq could use that wisdom. “Every time one focuses on somebody else’s race or sexual orientation or other kind of ‘differentness,’” said Quin Hillyer in WashingtonExaminer.com, it submerges our commonalities.
Monolithic boards deprive themselves of perspective, but imposing quotas will invariably mean that qualified board members will be seen as “the gay guy” or “the black board member.” In the long run, the market will reward companies that bring a mix of views at the top, without the “misplaced sanctimony” of “Nasdaq’s prying potentates.” Four of Nasdaq’s top-five largest companies—Apple, Microsoft, Google, and Facebook— already “have boards on which straight white men are in the minority,” said Chris Isidore in CNN.com.
But as you go further down the list, boards become increasingly white and male. One authoritative analysis found that 16.8 percent of 33,000 directors at large-cap companies belong to a minority group, and only 27.4 percent of directors are women. Nasdaq’s own research shows that At least 85 percent of its 3,249 listed companies already have “either one woman or one underrepresented minority on their boards.” It’s getting to the next step that’s been harder. “Countless studies have shown that companies with a more diverse set of voices and perspectives in their boardroom outperform their peers,” said Pippa Stevens in CNBC .com. But this is the first time that companies are actually being required to follow the best practice. “I call this civil rights 3.0,” says Mellody Hobson, a prominent black investment manager.