On December 1, the Nasdaq Stock Market LLC (Nasdaq) filed a rule proposal (the Proposal) with the Securities and Exchange Commission that, if approved by the SEC, would require all Nasdaq-listed issuers to comply with listing rules concerning board diversity and related disclosure. Specifically, the Proposal would require all Nasdaq-listed issuers (subject to the exceptions for “smaller reporting companies” and foreign private issuers described below) to (1) have, or explain why its board of directors does not include, at least two diverse directors, including one who self-identifies as female and one who self-identifies as either LGBTQ+ or an underrepresented minority, and (2) publicly disclose, on an annual basis (either in the issuer’s proxy statement for its annual shareholder meeting or on its website), board-level diversity data using the “Board Diversity Matrix” that is accessible here or a substantially similar format. If the Proposal is approved, a smaller reporting company or foreign issuer would be required to have at least one female director, and a smaller reporting company would be permitted to satisfy the requirement to have a second diverse director with a director who is female, LGBTQ+ or an underrepresented minority. A foreign private issuer would be able to satisfy the requirement to have a second diverse director with a director who is female, LGBTQ+ or a minority based on national, racial, ethnic, indigenous, cultural, religious or linguistic identity in the issuer’s home country jurisdiction.

The SEC will provide at least 21 days from the time the Proposal is published in the Federal Register for public comment. After publication in the Federal Register, the SEC has between 30 and 240 calendar days to approve the Proposal. If the SEC approves the Proposal, a Nasdaq-listed issuer would be required to (1) disclose board-level diversity statistics within one year of the SEC’s approval and (2) comply with the board diversity requirements on a timeline based on the issuer’s listing tier — all Nasdaq-listed issuers would be required to have one diverse director within two years of the SEC’s approval of the Proposal and two diverse directors within four years (if the issuer is listed on the Nasdaq Global Select Market or the Nasdaq Global Market) or five years (if the issuer is listed on the Nasdaq Capital Market). Companies that are not able to meet the composition requirements within the timeframes under the Proposal would not, however, be subject to delisting based upon such failure, if they provide a public explanation of the reasons for their noncompliance.

The full text of the Proposal is available here, and the press release is available here. Nasdaq has also made available related FAQs and a summary of the Proposal that are available here and here, respectively.