Nasdaq Board Diversity Rule Boosted LGBTQ Policies, Report Says

Expected Nasdaq rules requiring companies listed on the exchange to add more board members from underrepresented groups have spurred the rapid adoption of LGBTQ-inclusive board policies in the past year, a new report says.

Approximately 50% of the 3,743 companies listed on the Nasdaq exchange now have policies to include LGBTQ members on their boards, up from just 3% a year ago, according to a report released Wednesday by Out Leadership. The past year also has brought large gains in board diversity policies on gender, race, ethnicity, national origin and age, the report said.

Out Leadership is an LGBTQ advocacy, research and technology firm. Bloomberg LP Chairman Peter Grauer is a member the Out Leadership Global Advisory Board. Bloomberg Law is operated by entities controlled by Michael Bloomberg, the founder and majority owner of Bloomberg LP.

“We are confident that the increase in LGBTQ+ specific board diversity policies in the Nasdaq exchange is, in part, a result of the new Nasdaq Board Diversity Rule,” the report said.

The Nasdaq rule was blessed by the Securities and Exchange Commission in 2021. It requires companies on the exchange to generally include at least one woman and at least one minority or LGBTQ member on their boards—or explain why they can’t.

Conservative groups have mounted a legal challenge in the U.S. Court of Appeals for the Fifth Circuit, saying the rule violated First and Fifth Amendment protections for free speech and against discrimination.

The Out Leadership study said the increased scrutiny on board diversity has nonetheless had a major impact on corporate policies. It reviewed public proxy statements, annual reports and other diversity statements from every Nasdaq-listed company and found “exponential growth” in LGBTQ-inclusive policies.

The report also said that increased LGBTQ focus has had an “intersectional impact” on other types of diversity. Companies that invest in LGBTQ diversity also invite more women and people of color to the boards, according to the research.

While the Nasdaq rule has spurred policy changes, hiring for board diversity still has a long way to go, Out Leadership founder and CEO Todd Sears said.

But widespread change starts with policy changes, and increased minority representation on boards will follow soon, he said.

“All of these things are changing the structural pieces,” Sears said. “Once you change the structures, then you start to see the momentum.”