SEC Mandates Board Diversity for NASDAQ Companies

by: Rohan Atal

The Securities and Exchange Commission (SEC) has imposed new mandatory board diversity measures for all Nasdaq-listed companies. This landmark decision is in line with Nasdaq’s recent push for disclosure on board diversity in terms of race and gender statistics. One component of the new policy is the requirement of at least two diverse directors, a self identifying female, and a self identifying underrepresented minority or LGBTQ+ director.

“These rules will allow investors to gain a better understanding of Nasdaq-listed companies’ approach to board diversity, while ensuring that those companies have the flexibility to make decisions that best serve their shareholders,” Gary Gensler, Chair of SEC said in a public statement.

A Path to Change

The decision to mandate Nasdaq companies to meet standards for diversity is a catalyst for tangible change. Prior to this, many companies would implement superficial diversity policies that did little to change the workplace culture for their employees. A move like this forces companies to take a hands-on approach, tied to specific objectives and key metrics.

Based on Nasdaq’s findings in 2020, more than 75% of their listed companies would not meet the proposed standards. This means there will be a rapid shift in the way companies seek to collect, measure and analyze data surrounding diversity and inclusion.

How can Companies Bridge the Gap?

Here are three steps all companies should take as they embark on their diversity and inclusion journey.

  • Establish a system that measures, tracks and reports on D&I: It is important for companies to assess where they are now before they benchmark themselves against where they want to be. Collecting relevant data is a meaningful first step to indicate where a company has room for improvement. For example, after deploying Diversio’s pulse survey, clients report an average increase of 0.2 inclusion points.
  • Set interview quotas prior to any recruitment efforts to reduce biases in hiring and ensure a more diverse talent pipeline: Creating a recruiting pipeline that is reflective of the diversity goals of the organization is the first step in achieving them. A goal of 20% minority representation will require at least 20% of candidates that receive interviews to be minorities. Similarly, it is important to track where talent is progressing throughout the organization. For example, the newest batch of hires may be incredibly diverse however there could be a bottleneck preventing them from reaching upper management.
  • Assign accountability at the leadership level: Organizations should appoint a leader with the task of managing the recruitment process and guiding the company to achieve its inclusion goals. This ensures the top levels of management echo the commitment to the company. Similarly, this individual will hold the organization accountable to achieve these goals.

At Diversio, We use data analytics to determine the core problems companies are facing in relation to diversity and inclusion. We are then able to analyze the experiences of marginalized groups in conjunction with each other and benchmark them against the dominant group in their workforce. This allows us to provide tailored solutions pulled from a curated database of Diversio Recommendations.

Visit www.Diversio.com to learn how data analytics can help you achieve your diversity and inclusion goals.

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