Comment From Doug Chia on NASDAQ Board Diversity Proposal

Doug Chia‘s comment on the NASDAQ proposal for board diversity disclosure is well worth reading in full (see below). An excerpt;

  1. Nasdaq’s proposed rules are purely disclosure-based. The new rules would require listed companies to disclose information about the gender, ethnicity, and sexual orientation of their boards.1 This is disclosure about a board’s diversity or lack thereof. It would in no way impose what some detractors characterize as a “quota” for board composition. Calling it a quota misrepresents the substance of the Proposal. Many jurisdictions2 do have laws that require public company boards to include certain numbers of women or members of underrepresented groups. Without debating the merits of that type of requirement, the Proposal is anything but that.
  2. Board diversity data are important to investors. In the past, one major criticism of proposals to require companies to disclose board diversity data was that either no investors were asking for these data, or the investors that were asking for them represented a tiny fraction of the market, and these investors wanted the information mainly to further their social agendas—not for purposes of making investment decisions. That can no longer be said, as the world’s largest asset managers and asset owners have made clear calls for board diversity data to factor into their analyses of company-specific and systemic risk for purposes of making investment decisions involving trillions of dollars.
  3. Diversity data are necessary to understand important trends and factors affecting our capital markets. Without comprehensive, standardized disclosures, trends and factors related to the demographics of public company boards are difficult to identify and examine on an accurate and objective basis. Similar to national census data, definitive demographic data on corporate boards are critical to discussions over whether diversity does in fact impact board and firm performance. Both people who argue that it does and those who make arguments to the contrary would be better equipped to have this debate when using the same data, as opposed to non-standardized data from only a self-selecting portion of the market. While there are currently data on board diversity, those data are gathered in different ways and from different sources.

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