The NYSE Refrains From Adopting Diversity Requirements

NYSE Diversity for Listed Companies

On August 6th, 2021, The U.S. Securities and Exchange Commission approved the rule changes proposed by the Nasdaq Stock Market regarding board diversity. The rule stipulates that the boards of Nasdaq-listed companies must have one director who identifies as female and another who is a member of an underrepresented minority group or is LGBTQ+, reports BBC News. Otherwise, companies must provide transparency on their board selection process.

The New York Stock Exchange, however, has not followed suit. On December 9th, 2020, NYSE President Stacy Cunningham discussed diversity and other topics during an interview on Bloomberg TV. She stated that diversity requirements similar to the Nasdaq proposal at the time was not something the NYSE would consider adopting. Cunningham believes that it would be ill-advised to use NYSE’s listing standards to force their views on investors and prevent them from making the choices they want. Additionally, if companies dislike the board diversity requirements that their stock exchange establishes, they could always switch to an overseas exchange or de-list their shares. On the other hand, if the situation is left alone, progress could take decades. Recently, the New York Times found that the share of board seats filled by directors who were Hispanic, Black, Asian-American, Pacific Islander or Native American has only increased by a mere 2.5% in the last five years.

The New York Stock Exchange still considers board diversity a critical issue, despite being hesitant to require board diversity like Nasdaq has. Instead, NYSE uses its Board Advisory Council to correct the lack of diversity on corporate boards. The 19-member council is composed of distinctive CEOs who leverage their extensive personal networks to identify talented and diverse candidates to recommend to NYSE-listed companies. This method is supported by a publication by Vell Executive Search, Inc. on gender diversity within boards of technology companies, in which researchers found that 92% of those board seats are filled through personal networks. In conjunction, Vell also found that women have less access to those networks. As such, expanding personal networks to match talented and diverse candidates with boards looking for new board directors will create deliberate progress.

In addition, the NYSE intends to create an online database, reports Executive Vice Chairman Betty Liu in a Barron’s commentary article on February 5th, 2020. The database would be a directory consisting of all diverse candidates nominated by the NYSE Board Advisory Council and will be available to all NYSE-listed companies. The directory will carry the influence of the CEOs that nominated them as well as each candidates’ qualifications.

Overall, regardless of differences in method, both stock exchanges agree that diversity improves board performance and listed companies on either are looking to improve the diversity of their boards. Ultimately, for women and members of underrepresented minority groups, now more than ever is the best time to search for board positions.

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