Nasdaq Adopts New Requirements for Board Diversity

Sullivan & Worcester

On August 6, 2021, the SEC approved Nasdaq’s proposed rule regarding board diversity and disclosure. This rule will require companies listed on Nasdaq to have at least two diverse directors or to explain why it failed to do so.


The new rule will require all Nasdaq-listed companies to have at least two diverse directors, including

  • one director who self-identifies as female and
  • one director who self-identifies as an LGBTQ+ or an underrepresented minority.

A company that does not meet the rule must explain why it failed to do so. The explanation can include a description of an alternative approach the company chooses to undertake. The company also needs to include this explanation in its proxy statement or information statement for its annual shareholder meeting (or annual report if it does not file a proxy statement or information statement), or on its website.


By the later of August 8, 2022, or the date the company files its proxy statement or information statement for its 2022 annual shareholder meeting, all listed operating companies will have to disclose board level diversity data annually in their proxy statements or information statements, or on the company’s website. If a company discloses on its website, it will also need to publish this disclosure concurrently with the filing of its proxy statement or information statement. The annual board level diversity disclosure must be titled “Board Diversity Matrix” and use the Nasdaq-prescribed format. The matrix will require the number of directors under each prescribed category of gender identity and demographic background (according to definitions provided by Nasdaq).

Alternative Rule and Exemption

For the following three types of companies, the new rule provides some flexibility by allowing for these alternatives:

Diverse Director 1

Diverse Director 2

Smaller Reporting Companies



Foreign Issuers


Female, LGBTQ+, or Underrepresented Minority*

Companies with five or fewer directors

Female, LGBTQ+, or Underrepresented Minority


*For Foreign Issuers, an underrepresented minority includes a minority who is underrepresented based on “national, racial, ethnic, indigenous, cultural, religious or linguistic identity in the company’s principal executive officers.”

In addition, SPACs are exempt from the new rule until their business combination (namely, merger with a target company). Following the business combination, such companies are required to comply with the rule by the later of two years after the business combination or the second annual shareholders meeting.

Compliance Date

The new rule provides different compliance date based on a company’s listing tier:

One Diverse Director

Two Diverse Directors

Nasdaq Global Select Market or

Nasdaq Global Market companies

August 7, 2023

August 6, 2025

Nasdaq Capital Market companies

August 7, 2023

August 6, 2026

Companies with five or less directors

August 7, 2023


The compliance dates are the later of the above applicable date or the date the company files it proxy statement or information statement for its annual shareholder meeting in the applicable year.

Free Recruiting Services

Last but not least, Nasdaq has partnered with several recruiting agencies to help companies in the search of their qualified, diverse, board candidates.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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