Even the disclosure requirement is a significant change, since there are no federal rules forcing companies to reveal board diversity, and voluntary disclosure can vary from company to company, Kramer at ISS said. As more funds seek to invest in companies with diversity, more voluntary disclosure is likely to follow.
California will require public companies based in the state to have at least one diverse director by the end of this year or face fines. Adding to the pressure, SEC Chair Gary Gensler has said the SEC is exploring separate recommendations for company disclosures of diversity data.
It will take a combination of legal, regulatory and private efforts to get companies to fully embrace diversity, which also improves financial performance, said Meesha Rosa, vice president of corporate board services at Catalyst, which works to advance women in the boardroom. Time will tell what size role the Nasdaq rule will have, she said.
“The nudge will allow companies to proactively work toward board diversity,” Rosa said. “This sets a template for others to follow. ”
This article was provided by Bloomberg News.