The proposal filed by NASDAQ Inc. would require companies to have at least one female board member and a member from an “underrepresented minority” or who is “lesbian, gay, bisexual or transgender”.
If companies did not meet those criteria, they would no be allowed to be listed on the NASDAQ exchange.
NASDAQ Inc. determined that more than 75% of companies listed on their exchange would not meet their proposed quota.
According to the Wall Street Journal, “if the proposal is approved by the SEC, companies would be required to disclose board-diversity statistics within a year”.
A recent study in the prestigious Journal of Finance has studied the impact of the first mandated board gender diversity quota in the United States as it was implemented in California. The study found that “firms experience[d] a large negative stock market reaction at the signing of the law”.
Another study found that gender quotas “had either a negative or an insignificant effect on firm performance in the countries considered”.
Women’s presence on boards has been increasing rapidly without mandated quotas in the last decade.
It is not clear whether the SEC will allow the proposed NASDAQ regulation to go forward. To many observers, setting a board quota based on political criteria would set a worrisome precedent for the U.S. public equity market.
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