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16 December 2024 / Quick Take
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Copy LinkThe US Court of Appeals for the Fifth Circuit’s December 11 overturning of NASDAQ’s board diversity rule—which had been approved by the US Securities and Exchange Commission and required listed companies to have at least one female director and one director from an underrepresented group or to publicly explain noncompliance—presents both opportunities and challenges for companies. On the one hand, it alleviates compliance obligations; on the other, it is likely to spur additional legal scrutiny of corporate diversity, equity & inclusion (DEI) efforts.
In practice, compliance with the NASDAQ rule was already widespread. Only 2.2% of Russell 3000 companies—which largely overlap with NASDAQ-listed firms—lacked a female director in 2024, and overall board diversity levels are at record highs. However, the recent decline in the share of newly appointed non-White directors may also indicate that momentum is slowing. The removal of the NASDAQ rule—and the exchange’s assertion that it would “not seek further review”—will likely heighten scrutiny of corporate DEI programs, both at the board level and more broadly. To effectively navigate this shifting landscape, companies can:
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