Nasdaq Inc.’s effort to promote diversity on corporate boards establishes illegal “quotas” that discriminate against men and White people, a group of Republican-led states said in a court filing.

Texas Attorney General Ken Paxton on Thursday said Nasdaq-listed companies would have to “overlook a person’s relevant qualifications under the guise of promoting diversity” if forced to follow the rule. Nasdaq is requiring listed firms to disclose the demographics of their boards; those that don’t have any self-identified women and at least one underrepresented minority or LGBTQ person have to explain why not.

“It is unconscionable to see discrimination so blatantly put on display by requiring these companies to hire employees based solely on race, sex, and sexuality,” Paxton said in a statement.

Texas was one of 17 states that this week submitted a brief in the federal appeals court in New Orleans supporting a legal challenge filed against the U.S. Securities and Exchange Commission over its approval of the rule in August.

Republican-led states have repeatedly clashed with the Biden administration over its equity policies, though many trends, including new state laws and investor pressure, have also pushed boards to diversify. Most boards at Nasdaq-listed companies already meet the new standard, though more than a third lacked a racially diverse director and around 10% had no women, as of this summer.

The SEC lacks authority to issue the “crude and odious” rule, the GOP-led states said in their brief supporting the lawsuit by the Alliance for Fair Board Recruitment, adding, “The law is blind—the same legal standards and protections apply regardless of the race, ethnicity, or sex that is treated differently.”

In its approval of the rule, the SEC said the rule wouldn’t impose “any burden on competition that is not necessary or appropriate.”

The Alliance for Fair Board Recruitment is led by Edward Blum, who has also led several lawsuits over affirmative action in college admissions.

Nasdaq’s plan is the most significant diversity requirement in the U.S. since California passed laws in 2018 and 2020 that mandated diverse boards for companies headquartered in the state. The California rule has also been challenged by Blum’s group.

Other financial industry players have also taken steps to promote board diversity. Institutional Shareholder Services Inc., a leading proxy-advisory firm, said next year it will recommend voting against directors of all Russell 3000 or S&P 1500 companies whose boards aren’t diverse enough. Goldman Sachs Group Inc. since 2020 has refused to underwrite initial public offerings for companies with all-White, all-male boards with no LGBTQ representation.

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