For Diverse Boardrooms

Neither boardrooms nor C-suites have been widely represented by women, minorities or LGBTQ+. This long-standing culture of board composition stems from structural cultural barriers to unconscious bias.  

The thinking that women are not supposed to be in those roles and that for a group of people to be effective and successful, there must be the type of chemistry achieved only when you put a homogenous group of people in the same table is far from gone.  

Tackling unconscious bias is essential to level the playing field and leaders at every level have power, platforms and resources to do so. The National Association of Securities Dealers Automated Quotations offers a powerful example.  

Earlier this month, on Dec 1, 2020, Nasdaq filed Proposed Rule 5605(f) with the U.S. Securities and Exchange Commission (SEC) to drive diversity in the boardroom. This proposal for new listing rules promises to measure every company’s commitment to diversity. 

If Proposed Rule 5605(f)  is approved, companies listed on The Nasdaq Global Select Market or the Nasdaq Global Market must have at least one director who self-identifies as: (i) Female,  (ii) an Underrepresented Minority, or (iii) LGBTQ+. Companies would have to demonstrate compliance with this rule by the second year of the proposal’s approval date or provide explanation as to why they have not been able to comply with the ruling. No later than four calendar years after the proposal’s approval date, companies are expected to have at least two diverse directors. 

“Disclosure is really the foundation of our markets and our economies so we rely on companies to make full and accurate disclosures to inform investors so that investors can make their own decisions as to which companies they want to invest in and what they expect of the companies where they’re an investor.” -Adena Friedman, Nasdaq CEO 

Rule 5605(f) intends to promote disclosure about boards’ make up and provide investors with a clear understanding of whether companies are taking diversity seriously.  

The approval of this proposal marks a significant shift in traditional board composition in the U.S. Today over  75% of the companies listed under NASDAQ would not meet this diversity requirement.   

While the surge in new director appointments can be attributed to both the boom in ESG investing, and the emphasis on board gender diversity, the new SEC rule is still exemplary of how the private sector can lead the way in driving social change. This proposal being approved may not drastically change boards composition, but it will push companies to question possible unconscious bias. Having at least one woman and one member of a minority group in their board can have a trickle-down effect in the way we think about recruitment and hiring practices at every level.  

You can read the full article here. 

Curious about unconscious bias? 

Project Implicit  by Harvard offers this free assessment to help identify areas where we are biased. You can take the test here.  Most assessments are under 10 minutes.