Recently, America’s second-largest stock exchange Nasdaq said that it will be setting necessary gender and diversity targets for its listed companies.
Hence, tech giants such are Apple and Tesla will have to have at least two diverse directors. And if not, then they have to explain.
Moreover, the directors should consist of one person who identifies as female and another as an understated minority or LGBTQ+.
It follows complaints about the lack of diversity in corporate America.
Last year, Nasdaq reported more than 75% of its listed companies to not have met its projected targets.
The US Securities and Exchange Commission, which regulates financial markets, approved the plan on Friday, meaning it will be binding.
Furthermore, it would be necessary for the firms to release diversity statistics about their boards.
“These rules will allow investors to gain a better understanding of Nasdaq-listed companies’ approach to board diversity,” SEC chair Gary Gensler said.
“These rules reflect calls from investors for greater transparency about the people who lead public companies, and a broad cross-section of commenters supported the proposed board diversity disclosure rule,” he added.
Nasdaq is based in the heart of America – New York City.
The Nasdaq index tracks 3,300 stocks and is ranked second on the list of US stock exchanges by market capitalisation of shares traded, behind the New York Stock Exchange.
Its operator has received praise from Democrats and some companies – including Goldman Sachs – for its plan.
However, Republicans have criticised the initiative, which was first unveiled in December, with Senator Pat Toomey saying it would create a “one-size-fits-all quota”.
In a statement, a spokesman for Nasdaq said:
“We are pleased that the SEC has approved Nasdaq’s proposal to enhance board diversity disclosures and encourage the creation of more diverse boards through a market-led solution.”
On the contrary, the UK’s Financial Conduct Authority also proposed a similar plan last week.
It stated that the companies would have to issue annual “comply or explain” statements that reveal whether they have reached certain diversity targets.
The regulator wants boards to comprise at least 40% women – including those who self-identify as female – with a woman occupying at least one senior board position.
It also wants at least one member to come from a non-white ethnic minority background.