December 15, 2024
The court ruled the SEC lacked authority to approve Nasdaq’s board diversity requirements.
The 5th Circuit Court of Appeals, an appeals court dominated by Republicans, ruled on Dec. 11 the Securities and Exchange Commission did not have the authority to approve rules requiring Nasdaq traded companies to have at least one woman, person of color, or LGBTQ+ to their boards or explain why they do not.
The lawsuit was filed by the National Center for Public Policy Research, a conservative think tank, and the Alliance for Fair Board Recruitment, an organization led by anti-affirmative action activist Edward Blum, according to USA Today. The conservative groups argued that the boardroom diversity requirements infringe on civil rights laws and promote racial and gender discrimination.
Although Nasdaq indicated it would not seek a further review, they also stood by their rule in a statement to USA Today.
“We maintain that the rule simplified and standardized disclosure requirements to the benefit of both corporates and investors.”
A group of 22 attorneys general said in a joint letter that they are probing whether or not Nasdaq has violated anti-discrimination laws.
“Given Nasdaq’s zealous desire to impose quotas on companies, several of which are headquartered in our states, we are interested in learning what policies Nasdaq has in place to ensure its listed companies are following federal and state anti-discrimination laws,” they wrote.
Although a wave of DEI initiatives and proclamations were initiated in 2020 after the deaths of George Floyd and Breonna Taylor at the hands of police, in recent years, those initiatives have been walked back, despite a marked disparity in the boardrooms of Corporate America.
Business leaders like JP Morgan Chase’s Jaime Dimon have repeatedly said that diversity is good for business.
In 2021, a three-judge panel ruled that Nasdaq’s rules fell within the SEC’s authority. However, in the recent full review of the appeal filed by conservative groups, the conservative judges overturned the earlier decision.
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