Nasdaq Stock Exchange approved this month New rules Encourage companies to appoint more diverse boards. A company listed on the U.S. exchange will need to have two diverse directors: one who claims to be female and the other who claims to be racial or minority or LGBTQ+. If it does not meet the benchmark, the company will have to publicly disclose the reason.
Although these regulations will not take effect for at least a year, many companies may need some explanation.
A sort of Recent analysis Many of the 2,284 companies listed on NASDAQ may not be able to meet the new standards.Approximately 37% of companies do not have racial or ethnically diverse members, while 12% of companies do not have any female directors, according to ISS Enterprise Solutions.
So how do technology and biotechnology companies in Washington state measure it? It looks better.
A GeekWire survey of 34 Nasdaq companies in these industries found that 18% of companies have no racial or ethnically diverse directors, and 9% of companies have no female members. (Neither ISS Corporate Solutions nor GeekWire report the number of LGBTQ+ directors.)
But even when the diversity of multiple companies is limited, Nasdaq Rules This means that most Washington companies completed the cuts before the compliance deadline began.
A board of directors with five or fewer directors requires only one distinct member, divided by gender, race, or LGBTQ+ status. In addition, a company defined as a “small reporting company” can meet Nasdaq’s requirement for two female directors. At least six Washington technology and biotechnology companies meet one or two of these standards and meet their less stringent standards.
The remaining three companies, all in the field of biotechnology, may not be able to meet the requirements at present (but it should be noted that the LGBTQ+ status is unknown):
- Adaptive Biotechnologies has eight directors, including three women (two more this year) and no racial or ethnically diverse directors.
- Omeros has nine directors, including zero women and one racially diverse member.
- CTI BioPharma is a smaller reporting company with zero women and one ethnically diverse member on its six-person board of directors.
However, Adaptive Biotechnologies went public only two years ago, and it seems that the rule does not apply to the first four to five years after the IPO. The six new companies Washington recently added to Nasdaq—Absci, Icosovax, Impel, NeuroPharma, Nautilus Biotechnology, and Rover—seem to meet the regulations.
Generally speaking, the company will have 1 to 5 years to achieve the new goal, depending on its Nasdaq market level.
The state’s largest technology companies, including Microsoft, Amazon and T-Mobile, have exceeded the standards set by Nasdaq. Accolade, Expedia, and Microsoft have greatly exceeded their gender targets, almost reaching the parity of the number of women and men on the board.
For many companies, de-homogenizing circuit boards presents challenges. Since directors rarely leave their roles, changes are slow. Strategies to increase diversity include setting term limits or increasing seats. The candidate pool is limited, and this situation is exacerbated when the company only allows its highest-level employees to serve on the company’s board of directors. Sometimes the board needs a candidate with specific, unusual expertise that is difficult to find.
In addition to the Nasdaq rules, states and other organizations are also working to strengthen the diversity of their boards.That contains Washington’s requirements Most companies appointed 25% of the female board members and Perkins Coie Black Board of Directors Initiative.
Research on the benefits of board diversity is limited, but there are signs that it can improve a company’s bottom line.
Ready Provide board diversity analysis and help companies match diverse directors. In July, the Seattle-based non-profit organization issued a Report Examine the relationship between board diversity and revenue growth for S&P 500 companies.
Rajarakshmi SubramaniyaIt is BoardReady consultant and COO of Pro.com who wrote this study. Subramanian found that a board of directors with greater gender, ethnicity, and age diversity is associated with greater income growth in recent years.
“Nasdaq’s recent rules are a good first step towards improving diversity,” she said. “These data will be critical to proving the causal relationship between diversity and company performance and impact in the coming years.”