In a recent development, a coalition of twenty-two state attorneys general has expressed significant concerns over Nasdaq’s proposed rule mandating diversity quotas for corporate boards of companies listed on its exchange. The letter addressed to Nasdaq CEO Adena Friedman outlines their apprehensions regarding the legality of these diversity requirements, which stipulate that most Nasdaq-listed entities must have, or justify the absence of, at least two diverse directors—one identifying as female and one as an underrepresented minority or LGBTQ+. The attorneys general pointed out that Nasdaq had previously altered its characterization of this requirement, reframing it from a “board quota” to an “aspirational” guideline in response to objections related to anti-discrimination laws.
Highlighting the ongoing legal challenges faced by Nasdaq, the attorneys general noted that during litigation in the Fifth Circuit, the exchange shifted its terminology once more—referring to the diversity quota as a “disclosure-based framework.” In defense of its position, a Nasdaq spokesperson asserted that the exchange is committed to upholding the rule of law and has structured the board disclosure framework in response to significant demand from both investors and corporate entities. The statement emphasized that this approach is guided by pragmatism rather than ideology, seeking to strike a balance between market expectations and legal compliance.
The coalition of attorneys general articulated that despite Nasdaq’s insistence that its policies are not quotas, the reality reflects otherwise, given the recent rulings by the Supreme Court which declared race-based admissions policies unconstitutional. They underscored that the Court reaffirmed the principle of absolute equality among U.S. citizens before the law, advocating that elimination of racial discrimination necessitates a complete eradication of such practices. This legal precedent raises critical questions about Nasdaq’s approach to its diversity requirements and its perceived disregard for existing anti-discrimination laws at both state and federal levels.
Furthermore, the letter expressed skepticism regarding Nasdaq’s commitment to ensuring that the companies listed on its exchange comply with anti-discrimination statutes. The attorneys general demanded clarity on the policies Nasdaq has instituted to monitor and uphold compliance among these firms, reflecting their obligation to uphold civil rights. The concern extends to how the exchange’s aggressive push for diversity may inadvertently undermine principles of equality, risking systemic bias against certain demographics, which is antithetical to the principles enshrined in U.S. law.
Will Hild, the executive director of Consumers’ Research, echoed the sentiments of the attorneys general, characterizing Nasdaq’s actions as an attempt to bypass legal standards against discrimination by lobbying the SEC for the adoption of diversity quotas. Hild condemned the rule as not only illegal but also morally objectionable, especially considering Nasdaq’s role as a platform for capital formation and allocation. He argued that rather than enhancing the corporate landscape, such quotas detract from an organization’s fiduciary responsibilities to its shareholders and customers, leading to potential harm to both workers and consumers.
Amid these tensions, public sentiment appears to be shifting against corporate political activism, as indicated by recent polling data. Research conducted by Rasmussen revealed that a substantial portion of Americans believe that diversity, equity, and inclusion (DEI) programs discriminate against white men. Additionally, a survey from Gallup highlighted a growing fatigue among consumers toward corporations that engage in political commentary. This trend raises further implications for Nasdaq and other corporations that prioritize such agendas, hinting at potential backlash from the public and a demand for a return to traditional corporate governance focused on delivering value to stakeholders.
