Critics of the rule argue that the diversity requirement violates the Constitution’s Fifth Amendment.
The Nasdaq stock exchange is moving to formally withdraw its rule mandating diversity quotas at companies after an appeals court recently struck it down.
The Nasdaq rule had required companies listed on the exchange to have at least two “diverse” board members, including “at least one director who self-identifies as a female” and one who “self-identifies as Black or African American, Hispanic or Latinx, Asian, Native American or Alaska Native, Native Hawaiian or Pacific Islander, two or more races or ethnicities, or as LGBTQ+.”
The measure was approved by the Securities and Exchange Commission (SEC) in August 2021. On Dec. 11, 2024, the Fifth U.S. Circuit Court of Appeals found the SEC acted unlawfully in approving it.
Following the court decision, Nasdaq filed a request with the SEC on Jan. 16, seeking to withdraw the rule.
“The proposed rule change will clarify Nasdaq’s rules by aligning them with the court’s decision, but will not impose any burden on any listed company or on inter-market competition with any other exchange,” it said in the filing.
The lawsuit against the rule was filed by the National Center for Public Policy Research