New Nasdaq rule encourages more board diversity

August 16, 2021



Mercy Investment Services has been a longtime member of the Thirty Percent Coalition, which advocates for diversity in corporate boards of directors to better represent company shareholders. Studies have shown that companies with diverse boards perform better.

The coalition has been following Nasdaq’s recent announcement regarding board diversity requirements for companies on its U.S. exchange. The new rule requires companies to include at least two diverse directors, including:

  • One self-identified woman director
  • One director who self-identifies as an underrepresented minority (Black or African American, Hispanic or Latinx, Asian, Native American or Alaska Native, Native Hawaiian or Pacific Islander, or two or more races or ethnicities) or as LGBTQ+

If a company does not satisfy both criteria, the company must specify the particular aspect(s) of board diversity it fails to satisfy or explain why it does not have two diverse directors

Nasdaq’s rule supports shareholders’ call for board diversity, as it shows movement toward governance best practices. Mercy Investment Services submitted comments to the Securities and Exchange Commission in support of the rule. Although viewed as a good first step, shareholders believe the rule forces minorities and women to compete for board roles and excludes LGBTQ+ persons from underrepresented populations. Mercy Investment Services will continue to educate and raise awareness of comprehensive board diversity issues both through company engagements and participation in the Thirty Percent Coalition’s work.