US Appeals Court Overturns Nasdaq Board Diversity Rules | Insurance News
A recent U.S. appeals court decision has determined that Nasdaq cannot enforce rules that aimed to increase diversity within corporate boards. This ruling came from the New Orleans-based 5th U.S. Circuit Court of Appeals in a 9-8 decision. The court found that the rules proposed by Nasdaq and approved by the U.S. Securities and Exchange Commission were not in line with federal securities law.
This judgment stands as a legal win for those who oppose initiatives designed to enhance racial and gender diversity within corporations. The rules were challenged by the National Center for Public Policy Research and the Alliance for Fair Board Recruitment, a group led by Edward Blum, known for challenging race-conscious college admissions policies.
The decision, written by U.S. Circuit Judge Andrew Oldham, appointed by former President Donald Trump, questioned the SEC’s authority to regulate this aspect of corporate governance. While the SEC is reviewing the ruling and they can appeal to the Supreme Court if they wish, Nasdaq has decided not to appeal, respecting the court’s decision.
Nasdaq’s rule, which required companies to have at least one woman, racial minority, or LGBTQ person on their boards or explain why they do not, aimed to address the lack of diversity seen in corporate boards historically. Companies were also required to disclose annually how board members identified in those categories.
The 5th Circuit had initially, in October 2023, upheld the SEC’s approval of Nasdaq’s rules with a three-judge panel composed of Democratic presidential appointees. But after reconsideration, the full court, with a majority of judges appointed by Republican presidents, overturned the previous decision.
While opinions on the ruling differed, with eight judges dissenting, this case brings up important questions around the SEC’s regulatory reach. It remains to be seen how this ruling will impact future corporate governance practices concerning diversity.
