Republican members of the Senate Banking Committee are calling on the U.S. Securities and Exchange Commission (SEC) to block the diversity requirements proposed by Nasdaq for listed companies.
The parliamentarians led by Sen. Pat Toomey
Patrick (Pat) Joseph Toomey Government used Patriot Act to collect website visitors’ logs in 2019 Court of Appeal rules illegal collection of phone data by NSA, illegal, Dunford withdraws chairman of coronavirus surveillance commission MORE (R-Pa.), Senior Member of the Committee, sent a letter SEC President Allison Herren Lee on Friday urging her not to approve the rule.
“It is not the role of NASDAQ, as a self-regulatory organization, to act as an arbiter of social policy or to impose on markets and investors a prescriptive solution of one size for all,” the letter reads.
Senators argue that the rules interfere with the board’s obligation to its shareholders, violate the principles governing the disclosure of securities, impose costs on public corporations, and discourage private corporations from becoming public.
Nasdaq presented its proposal in December, which would require listed companies to have a director who identifies as a woman and one who identifies as an underrepresented or LGBT minority. Foreign companies, or smaller companies, would have more flexibility and could meet these requirements with two female directors.
Companies that do not meet the requirements will not be deregistered if they provide a public explanation of why they could not meet the targets.
However, senators say in their letter that board members should be elected on “merit and ability to serve in corporate performance,” adding that the proposal requires prioritizing a limited concept of diversity in the board of directors rather than merit. ”.
“This weakens shareholders’ rights by undermining proper expectations that a company’s board of directors will serve the best interests of the corporation and its shareholders, complying with all applicable laws and maximizing returns,” they wrote.
“While we believe that American corporations benefit from boards that avoid group thinking and offer a variety of perspectives and praise companies that seek to increase diversity among their boards, we do not believe that NASDAQ should use its quasi-regulatory authority to impose social policies. “, Added the senators.
In a statement to The Hill, Nasdaq spokesman Joseph Christinat said: “Our proposal is a market-based solution that should simplify and standardize disclosure requirements to avoid regulatory coverage. which the committee fears ”.
The proposal came amid an expansion of “ESG investment”, which takes into account the environmental, social and governance factors of a company.