The 5th Circuit Court of Appeals, a Republican-dominated court, ruled on Dec. 11 that the Securities and Exchange Commission did not have the authority to approve rules requiring Nasdaq-traded companies to have at least one woman, a person of color, or LGBTQ+ on their boards or explain why they do not.
According to USA Today, the lawsuit was filed by the National Center for Public Policy Research,
a conservative think tank, and the Alliance for Fair Board Recruitment, an organization led by anti-affirmative action activist Edward Blum. The conservative groups argued that the boardroom diversity requirements infringe on civil rights laws and promote racial and gender discrimination.Although Nasdaq indicated it would not seek a further review, it also stood by its rule in a statement to USA Today.
“We maintain that the rule simplified and standardized disclosure requirements to the benefit of both corporates and investors.”
In a joint letter, 22 attorneys general said they are investigating whether Nasdaq has violated anti-discrimination laws.
“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 anti-discrimination laws,” they wrote.
Although a wave of DEI initiatives and proclamations were initiated in 2020 after the deaths of George Floyd and Breonna Taylor at the hands of police, in recent years, those initiatives have been walked back despite a marked disparity in the boardrooms of corporate America.
Business leaders like JPMorgan Chase’s Jaime Dimon have repeatedly said that diversity is good for business.
In 2021, a three-judge panel ruled
that Nasdaq’s rules fell within the SEC’s authority. However, in the recent full review of the appeal filed by conservative groups, the conservative judges overturned the earlier decision.RELATED CONTENT: Nasdaq’s New Rule Could Elevate Black Corporate Board Representation