August 17, 2021

Nasdaq’s Board Diversity Rule: Updated FAQs Emphasize Matrix Disclosure Is Required Next Year

We’ve been posting a ton of good memos in our “Nasdaq” Practice Area about the new listing rule that will require listed companies to:

1. Annually provide matrix (or substantially similar) disclosure of board diversity characteristics in the company’s proxy, Form 10-K or on the website, and

2. “Comply or explain” in regards to a new board composition requirement to have at least two “diverse” directors, including one director who self-identifies as female and one who self-identifies as an “underrepresented minority” or part of the LGBTQ+ community

If you’re trying to sort through when exactly you’ll be required to comply with these requirements and whether you’re subject to any exemptions, you’d do well to keep an eye on Nasdaq’s FAQs – which, as our friends at Goodwin pointed out, are now in their third or fourth iteration since the rule was approved. The FAQs:

– Emphasize that companies need to make the initial matrix disclosure in 2022:

If a company files its 2022 proxy BEFORE August 8, 2022 and DOES NOT include the Matrix, then the company has until August 8, 2022 to provide the Matrix.

If a company files its 2022 proxy ON or AFTER August 8, 2022, then it must either include the matrix in its proxy or post the Matrix on its website within one business day of filing its proxy.

If a company only posts the Matrix on its website, then the company has until August 8, 2022 to provide the Matrix. Companies that elect to provide the Matrix on its website must also complete a short form through the Listing Center that includes the URL link to the disclosure.

– Continue to say that companies have until August 7th, 2023 to have at least one “diverse” director on the board (or explain why they don’t) – and a longer transition period for having two diverse directors

– Continue to explain the flexibility for smaller reporting companies, the SPAC exemption, etc.

Nasdaq has also invited listed companies to a series of webcasts – including one at noon eastern today – to help companies understand the listing rules and access free board recruiting services. The webcasts are also available for replay.

Liz Dunshee