Nasdaq has filed a proposal, Proposed Rule 5605(f), with the Securities and Exchange Commission to require each Nasdaq-listed company to have, or explain why it does not have, at minimum 2 “Diverse” directors, reflecting (a) 1 director who self‑identifies as female; and (b) 1 director who self-identifies as an Underrepresented Minority, or as LGBTQ+. Companies that don’t meet the standard would be required to justify their decision to remain listed on Nasdaq – or risk face delisting proceedings; with more flexibility provided to smaller reporting companies and foreign issuers.
The Ellig Group encourages Nasdaq-listed companies to examine their current board composition to determine if they satisfy the proposed diversity requirements set forth in proposed Rule 5605(f). Additionally, it would be prudent for Nasdaq-listed companies to consider best practices and steps necessary to maintain or obtain compliance with the diversity requirements of Proposed Rule 5605(f). Ellig Group is here to serve all Nasdaq-listed companies needing to recompose their board or add more directors to satisfy Proposed Rule 5605(f) diversity requirements. Our advisory to companies is to:
- review the company’s governing documents to evaluate the permissibility of expanding the size of the board to add more Diverse directors or recomposing the board;
- review possible stockholder approvals required for the addition of new directors and the timing thereof;
- in addition to the Board’s nominating and corporate governance committee(s), review and, if necessary, revise the criteria by which director candidates are identified and selected;
- consider whether the company will need to retain the assistance of a search firm to identify skilled director candidates meeting the Diversity criteria; and
- establish that, following any board recomposition or increase in the size, protocols and practices are adopted assuring Nasdaq Proposed Rule 5605(f)
Ellig Group is a global leader in recruiting and onboarding outstanding diverse executive talent with the backgrounds and expertise to meet the evolving needs of our clients. We offer a meaningful and holistic approach to talent identification and development through our Executive/Board advisory, assessment capabilities, and leadership development and onboarding programs. To arrange an exploratory conversation on how your organization can better achieve Nasdaq Proposed Rule 5605(f) compliance, we can be contacted here.
