Nasdaq Inc. plans to require more diversity on boards of directors, the latest push by corporate America to encourage change as regulatory requirements remain unlikely in a gridlocked Washington.
Under its proposed rules, most companies listed on Nasdaq’s U.S. exchange would have to include at least one director who identifies as female and one who identifies as an underrepresented minority or LGBTQ, Nasdaq said in a statement Tuesday.
About a quarter of its listed companies currently meet that standard, according to the exchange, which is seeking approval for the plan from the Securities and Exchange Commission.
“Diversity keeps groupthink from happening,” said Scott Yonker, a professor of economics at Cornell University who has studied the impact of board diversity. “You end up with more stable policy and less volatility. You also end up with a culture of thinking outside the box.”
Companies are under increasing pressure from investors and advocates to improve diversity in their top ranks and be more transparent about the makeup of their workforces.
In a recent survey, 25 of the biggest companies in the U.S. were willing to make public a copy of a form presented to the Equal Employment Opportunity Commission that gives the racial breakdown of their staff.
Nasdaq’s proposed rule would also require listed companies to disclose diversity statistics for their directors. Foreign companies or smaller firms could satisfy the requirement by including two female directors.
“Nasdaq’s purpose is to champion inclusive growth and prosperity to power stronger economies,” Nasdaq Chief Executive Officer Adena Friedman said in the statement. “We believe this listing rule is one step in a broader journey to achieve inclusive representation across corporate America.”
Earlier this year, Goldman Sachs Group Inc. Chief Executive Officer David Solomon said the firm will no longer take a company public in the U.S. and Europe if it lacks a director who is either female or diverse. The bank is Wall Street’s biggest underwriter of initial public offerings in the U.S.