Nasdaq proposal would require listing companies to have more diverse boards
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The Nasdaq Stock Market has proposed a new rule for the companies it lists, requiring boards to have at least one director who is a woman or person from an underrepresented racial, ethnic or LGBTQ group. It’s a requirement three-quarters of Nasdaq-listed companies do not meet at present.
A company’s board of directors serves an advisory role, helping to make key decisions about the direction of the business. Having a diverse set of perspectives at the table makes those discussions more robust, said Peter Gleason, CEO of the National Association of Corporate Directors.
“You get different perspectives on products and services. You get different perspectives on issues that might arise, whether they’re compliance issues, whether they’re legal issues,” Gleason said.
Multiple academic studies have found companies with more diverse boards get greater return on investment in research and development. Professor Yo-Jud Cheng at the University of Virginia’s Darden School of Business pointed out that boards also hire CEOs.
“Having a more diverse board might lead to having a broader network that allows an organization to have a more diverse candidate pool,” Cheng said.
A board could also decide to tie executive compensation to meeting diversity goals within the company, making the business more inclusive beyond the boardroom and C-suite.
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