Nasdaq’s board diversity rules are being scrutinized as part of an inquiry from Republican attorneys general into whether state and federal anti-discrimination laws are being followed.
A group of 22 Republican attorneys general led by Iowa Attorney General Brenna Bird sent a letter to Nasdaq CEO Adena Friedman on Thursday demanding information about Nasdaq’s rules that are designed to encourage diversity on the boards of listed companies.
The rules in question require companies to disclose board diversity information. For domestic companies, the Nasdaq is also pushing for boards to have at least one female director and one who “self-identifies as either an underrepresented minority or LGBTQ+.” Nasdaq is urging companies to explain why they don’t meet that criteria.
Those strictures have faced pushback from Republicans, who say they could run afoul of anti-discrimination laws. The matter is currently being challenged in the U.S. Court of Appeals for the 5th Circuit.
“I think in here, we are making sure that Nasdaq is on notice, and they need to understand that we have concerns about illegal and discriminatory hiring quotas,” Bird told the Washington Examiner. “The laws don’t allow discriminatory hiring quotas for things like gender, sexuality, race, any of those things.”
Bird said the investigation is another way of ensuring that Nasdaq knows the group of attorneys general is monitoring the situation. The letter specifically requests a summary and documentation of Nasdaq’s rules and procedures that require its listed companies to follow federal and state anti-discrimination laws. It also requests any legal analysis about how Nasdaq’s rules comport with the law.
“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 antidiscrimination laws,” the letter says.
This is just the latest foray in a battle Republican state officials have been waging against corporate diversity, equity, and inclusion practices and the integration of environmental, social, and governance factors into businesses and investment.
Just last month, a group of Republican state treasurers accused the country’s largest proxy adviser, Institutional Shareholder Services, of having policies out of step with the market and activist in nature.
ISS is a massive proxy advisory firm that gives shareholders recommendations on how to vote on corporate matters. In a letter, the Republican officers argued that ISS’s basic benchmark policy is skewed and that ISS advised votes for ESG priorities far in excess of the market.
Also, earlier this year, West Virginia Treasurer Riley Moore announced his state was banning four more banks from state contracts over their ESG policies and “boycotts” of fossil fuel companies.
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In a cease-and-desist order from this year, Mississippi Secretary of State Michael Watson accused money manager BlackRock, a frequent target of anti-ESG ire, of making “fraudulent statements, omissions, and other misrepresentations” about its ESG strategies.
“There’s a concern that corporate America, particularly the large companies, have gone woke and that’s a very real concern,” Bird said during an interview. “They need to follow our laws and constitution and I think it’s best when they engage in their areas of expertise, which is running their businesses, and not get involved in politics.”