Republicans in the Senate Banking Committee are urging the U.S. Securities and Exchange Commission (SEC) to block Nasdaq’s proposed diversity requirements for publicly traded companies.
The lawmakers led by Sen. Pat Toomey
Patrick (Pat) Joseph Toomey Government Used Patriot Act To Collect Website Visitor Logs In 2019 Appeals Court Rules NSA’s Bulk Phone Data Collection Illegal Dunford Withdraws From Consideration To Lead Coronavirus Monitoring Panel (R-Pa.), Alternate member of the committee, sent a letter against acting SEC Chairman Allison Herren Lee on Friday, urging her not to approve the rule.
“It is not NASDAQ’s role, as a self-regulatory organization, to act as a social policy arbitrator or to impose a prescriptive one-size-fits-all solution on markets and investors,” the letter reads.
The senators argue that the rules disrupt a board’s duty to its shareholders, violate the principles governing the disclosure of securities, impose fees on public companies and discourage private companies from going public.
Nasdaq explained his proposal in December, for which listed companies must have one director who identifies as a woman and one who identifies as an under-represented minority or LGBT. Foreign companies, or smaller companies, would have more flexibility and could meet these requirements by having two female directors.
Companies that fail to meet the requirements will not be scrapped if they provide a public statement of why they could not meet the targets.
However, the senators say in their letter that board members should be elected on the basis of “merit and ability to serve in the performance of the company,” adding that the proposal “forces one to prioritize a narrowly defined concept of diversity in board membership. above merit “.
“This weakens the rights of shareholders by wavering the right expectation that a company’s board of directors will serve the best interests of the company and its shareholders by complying with all applicable laws and maximizing returns,” they wrote.
“While we think US companies benefit from boards of directors that avoid groupthink and offer a diversity of perspectives and award companies that want to increase the diversity of their boards, we don’t think NASDAQ should use its quasi-regulatory authority to socially impose policies, “senators added.
In a statement to The Hill, Nasdaq spokesperson Joseph Christinat said, “Our proposal is a market-driven solution that should simplify and standardize disclosure requirements to prevent the type of regulation beyond the committee’s fears.”
The proposal came amid an expansion of “ESG investing,” which takes into account a company’s environmental, social and governance factors.