Nasdaq recently asked the Securities and Exchange Commission (SEC) to approve new diversity rules. To avoid forced delisting, a firm must “diversify or explain”: either have a certain number of “diverse” directors or say why it does not. In its proposal, Nasdaq tips its hat to the social justice movement.
But investors should be nervous. Rigorous scholarship, much of it by leading female economists, suggests that increasing board diversity which Nasdaq’s rules will likely pressure firms to do can actually lead to lower share prices.
The rules aim at ensuring Nasdaq-listed firms with six or more directors have at least one self-identifying as female and another self-identifying as an underrepresented minority or LGBTQ+. Nasdaq CEO Adena Friedman says “there are many studies that indicate that having a more diverse board… improves the financial performance of a company.” But while Nasdaq’s 271-page proposal cites studies finding a positive link between boar
Nasdaq s arguments for diversity and effect on financial performance
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Nasdaq s arguments for diversity and effect on financial performance
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