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SEC approves Nasdaq board diversity rules

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Dive Brief:

  • A new rule will require companies traded on the Nasdaq Composite stock market index to meet requirements for diversity among their boards of directors, including the index’s many construction-related firms.
  • The U.S. Securities and Exchange Commission approved a Nasdaq rule change on Aug. 6 that requires its listed companies to have diverse boards or release a statement on why they do not. 
  • The new rule will require Nasdaq-listed companies to have at least two diverse directors, including one who identifies as a woman and another as an underrepresented minority or LGBTQ+. For companies with five or fewer directors, the rule requires only one diverse director. Nasdaq-listed companies will also be required to release board-level diversity statistics using this disclosure format.

Dive Insight:

Nasdaq found in a 2020 study that more than 75% of its listed companies did not meet the new proposed requirements, according to CNBC. The announcement received criticism from Republicans on the Senate Banking Committee, while Democrats on Capitol Hill and corporations such as Goldman Sachs and Microsoft have lauded the proposal.

Under the new rules, Nasdaq Global Select Market companies must have, or explain why they do not have, one diverse director by Aug. 6, 2023, and two diverse directors by Aug. 6, 2025, or the date the company files its proxy or information statement. Some of the largest Nasdaq-listed companies in the construction industry include:

  • TuSimple Holdings
  • ChampionX Corporation
  • Nikola Corporation
  • Latham Group Inc.
  • Hyzon Motors

TuSimple, ChampionX and Hyzon Motors have both at least one woman and one minority or LGTBQ board member. All of the top five biggest market cap Nasdaq-listed companies have at least one woman board member.

But the construction industry as a whole is already struggling with diversity in its workforce. Approximately 10.9% of construction industry members are women, while 6% are Black and 2% are Asian. About 30% are Latino, a demographic category of ethnicity, not race, according to 2020 Bureau of Labor statistics.

Around 72% of Black or African-American respondents and 66% of women respondents said they have experienced discrimination or prejudice in the commercial and residential building industries, according to a National Institute of Building Sciences survey.

The push for diversity in boardrooms comes at the same time as companies also focus on environmental, social and governance (ESG) related investments. ESG is an investment approach that screens publicly traded companies for predefined objectives based on environmental, social and corporate governance criteria, and has been an increased focus of major institutional investors, such as BlackRock.   

For example, Dallas-based construction giant AECOM announced in April a target for women to comprise at least 20% of senior leadership roles and at least 35% of the overall workforce. Other publicly-traded construction firms, such as Jacobs, Fluor, Balfour Beatty and Lendlease have also announced diversity and inclusion initiatives.

Hundreds of construction companies have also signed onto the Associated General Contractors of America’s (AGC) Culture of CARE initiative, which promotes diversity and inclusion in the construction industry.

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