Comptroller Stringer: Nasdaq’s Proposed Board Diversity Rule Would Help Expand Racial, Gender and LGBTQ+ Diversity in Corporate America

(New York, NY) – New York City Comptroller Scott M. Stringer today submitted a comment letter to the U.S. Securities and Exchange Commission (SEC) detailing his support for the proposal by The Nasdaq Stock Market LLC (Nasdaq) to require the thousands of companies listed on Nasdaq’s stock exchange to either disclose that they include at least one woman, and in addition, an underrepresented minority or LGBTQ+ individual on their board or to explain why they have not complied with this standard. As the fiduciary to the New York City Retirement Systems (the “Systems”), Comptroller Stringer noted the importance of the Systems prioritizing board of director quality and composition, particularly with respect to diversity.

Nasdaq has submitted the Proposed Rules for approval by the Commission pursuant to Rule 19a-4 under the Securities Exchange Act of 1934. Companies that don’t meet the standard would be required to disclose why they have not done so to remain listed on the exchange.

The five New York City Retirement Systems, which collectively have $224.8 billion in assets under management, have “strong interest in assessing and promoting robust board diversity is reflected in their Corporate Governance Principles and Proxy Voting, or Guidelines which, similar to the Proposed Rules, define board diversity to include not only race and gender, but also sexual orientation and gender identity.”

Referring to the Systems’ policy to vote against directors on the nominating committee of any board that lacks adequate gender and racial/ethnic diversity, Comptroller Stringer stated in the letter that, “The Proposed Rules would finally provide the Systems with access to reliable data on racial/ethnic diversity that is contemplated by, and necessary to fully implement, the Systems’ Guidelines. The absence of regulatory requirements for information on racial and ethnic diversity on boards has made it incredibly challenging for investors to be transparent themselves in how they define lack of such diversity on boards.

In the letter, Comptroller Stringer also added several suggested improvements to the proposal such that “the Proposed Rules could be substantially strengthened by expanding the proposed matrix to describe not only each director’s self-identified gender and race/ethnicity, but also their skills, experience and attributes that are most relevant to the company’s overall business, long-term strategy and risks. In addition, the Proposed Rules should include safeguards to limit the ability of boards to engage in “grade inflation,” in which all directors are claimed to possess all, or virtually all, of the various skills and experiences identified as relevant to the company and its board.” The Systems have called on portfolio companies to adopt a policy requiring the consideration of both women and people of color for every open board seat (as well as CEO appointments recruited from outside the company) as part of their Boardroom Accountability Project 3.0. The participating Systems have also called on companies to adopt a form of a board diversity matrix similar to but more expansive than the proposed matrix in the Proposed Rule. Additionally, the Systems have called on the nation’s largest companies to match their recent statements affirming racial equality and diversity with concrete action by disclosing their annual EEO-1 Report data identifying diversity of their employees.

To read the full letter to the SEC, click here.

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