As we recently blogged about, the US Court of Appeals for the Fifth Circuit vacated the SEC’s approval of Nasdaq’s board diversity disclosure rules last week. As a result, these rules no longer apply to proxy and information statements filed by Nasdaq-listed companies.
Cooley’s Beth Sasfai told me she is fielding a lot of questions about what this means for Nasdaq-listed companies. Beth notes it means that these companies don’t need to include the board diversity matrix specified by Nasdaq Rule 5606 in their proxy – and that Nasdaq Rule 5605(f) will no longer require companies to have the specified numbers of diverse directors or explain why they do not.
Beth also notes that, as a practical matter, companies now have more options for handling board diversity disclosure in the proxy statement. They can keep the Nasdaq format for diversity disclosure or choose to gather and present board diversity information in a different format, removing categories or using different ones that were not included in the Nasdaq format.
Despite the change in Nasdaq requirements, companies should continue to proceed with collecting diversity data for the current year, as many companies will continue to include board diversity data in their upcoming proxy statements to satisfy investor, ISS/Glass Lewis or other stakeholder expectations.
Beth anticipates that many companies will not change their diversity-related questions in D&O questionnaires this year, as they are getting ready to send questionnaires imminently and would prefer to have more time to see how the diversity disclosure landscape evolves given the Nasdaq development.
She recommends keeping the same diversity-related questions in your D&O questionnaire and simply removing any references to “Nasdaq” – unless you know you will be adding categories in this year’s proxy disclosure and need to gather additional information.
Now may be a good time to work with your counsel or proxy solicitor to inventory the board diversity policies of your top institutional investors so you understand their expectations.
Authored by
Broc Romanek