Home Finance & Investing Business Nasdaq diversity rule survives challenge in federal appellate court

Nasdaq diversity rule survives challenge in federal appellate court

Nasdaq diversity rule survives challenge in federal appellate court


A panel of the U.S. Court of Appeals for the 5th Circuit on Wednesday denied a pair of challenges to a Nasdaq rule aimed at bolstering corporate board diversity, dealing a blow to conservatives seeking to tamp out diversity, equity and inclusion efforts in the private sector.

In August 2021, the Securities and Exchange Commission approved Nasdaq rules that require companies listed on the exchange to disclose the race, gender and sexual orientation of their board members, as well as a requirement for corporate boards to have — or explain why they don’t have — at least two “diverse” board members, including at least one female board member and one member who is from an underrepresented minority or identifies as LGBTQ+.

Days after the approval, the Alliance for Fair Board Recruitment, a group led by affirmative-action opponent Edward Blum, petitioned the 5th Circuit to review the rules’ legality, arguing that they were unconstitutional, and that they violated the Exchange Act and the Administrative Procedure Act. The National Center for Public Policy Research, a right-wing think tank, also challenged the rules.

“We are pleased that the U.S. Court of Appeals for the Fifth Circuit has upheld the U.S. Securities and Exchange Commission’s (SEC) approval of Nasdaq’s rule to enhance board diversity disclosures through a market-led solution,” Nasdaq said in a statement. “We look forward to working with our companies in continuing to implement this listing standard for corporate governance.”

Blum, whose lawsuits against Harvard and the University of North Carolina culminated in the Supreme Court in June overturning race-conscious college admissions, signaled that his group’s efforts to challenge the stock exchange’s board diversity rules are not over.

“This organization is disappointed by the Court’s decision in this case, and we will continue the fight to eliminate race discrimination in corporate America,” he said in a statement to The Washington Post. “An appeal to a higher court will be filed shortly.”

The panel of judges — Stephen A. Higginson, Carl E. Stewart and James L. Dennis — were all nominated by Democratic presidents. The Alliance for Fair Board Recruitment and the National Center for Public Policy Research “have given us no reason to conclude that the SEC’s Approval Order violates the Exchange Act or the APA,” the panel wrote.

This is a developing story and will be updated.



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