You only need to stand a few minutes at 43rd and Broadway to get a sense of the diversity in this great land of ours and in the world today. You will hear a half a dozen languages in the course of a few minutes, and see people of all races and nationalities.
This is one of the strengths of our country- - its great diversity. At Nasdaq, we help put that diversity to work. For one, we are obligated by law to provide access to our market without discrimination or bias, and we take that obligation very seriously.
As the first electronic market in the world, we are built on a foundation of impartial technology; we do not see ourselves as a comfy old boys club like some of our competitors might.
We believe that the boards of public companies should be as diverse as their investors and customers because that makes good business sense: Over time, diverse boards will have more robust debates, make sounder decisions, understand customers better, and
attract higher performing employees.
As argued in Bloomberg in a well-noted 2014 editorial, while “[e]quality is a worthy goal on its own terms, of course….for the
corporate world, the better rationale for gender diversity is financial….Companies with at least one female director had better returns for six straight years.”
And when we say diverse at Nasdaq we mean all types of diversity: gender, race and skills. Strong boards must face the challenge of a global, rapidly changing economy with a full set of talents and experiences. Achieving gender diversity is but one step
in the process of building a strong board.
Of course, gender diversity is an area that has received particular focus by our global organization.
We can report some visible progress. For example, Nasdaq owns and operates the stock exchanges in Sweden, Finland, and Denmark. In those countries, women make up 31%, 30% and 23.4% of public company boards, respectively.
These results are supported by a public focus and dialogue on the need for diversity throughout the Nordic countries. These discussions often occur at Nasdaq conferences and events in the region. At Nasdaq Stockholm this May we sponsored an all-day program
titled, “Gender Equality in the
C-Suite and Boardroom”.
And, the Nasdaq Holding Company and Exchange Boards have improved their representation of women and minorities.
As you know, progress among public companies here in the U.S. has been considerably slower and less dramatic than in the Nordics. To get a better sense of what is happening, we recently collected and analyzed June 2016 data from our listed companies and combined
it with NYSE data. We found signs of progress in looking at these 4,397 companies:
- 5,195 board seats are held by women. That is a 3% increase in the total number of board seats over 2015. Year-over-year increases in the percentage of board membership do not show the full picture of the progress that is being made.
- The board experience among women is being spread throughout a wide group of women. For example, only 34% of the women on boards sit on multiple boards.
- And some of these women directors are starting their careers as board members at a young age. 81 women serving on public boards were under the age of 40. This is in comparison with the average board member whose age is 60.
- In our research, we found 366 companies have at least 30% female board membership and an additional 895 companies have reached the 20% threshold. Fourteen Nasdaq companies have even reached 50-50 gender parity.
While progress is still slower than we would all like, we believe these numbers are encouraging nonetheless.
But to make real progress, change has to be made with the conviction that not only is it the right thing to do but that a diverse board will allow my company to compete more effectively and outperform the competition. In my 17 years as a public company executive,
I can tell you that the search for that competitive edge is relentless and constant. The data indicates that diversity brings a performance edge.
But attention must be paid. And Nasdaq will continue to shine a light on this topic for our 3600 globally-listed companies.
Our Nasdaq Governance Clearinghouse website devotes considerable attention to the topic of diversity and inclusion on public company boards. Over the past year, we’ve written and promoted numerous articles through Nasdaq’s vast social media channels, discussing
best practices in developing diverse boards.
More public disclosure will allow us to keep the topic front and center, so like the U.S. Chamber of Commerce, we support Congresswoman Carolyn Maloney’s modest legislation to improve diversity disclosure in financial reports.
We will continue to urge our companies to start the board selection process with a diverse slate of candidates. Janice
Ellig, named by Business Week as one of "The World's Most Influential Headhunters”, has suggested following the “Rooney Rule plus” when looking to fill an open board seat. Modeled after the NFL’s Rooney Rule of selecting head coaches, candidate pools would
be comprised of at least 50% women and people of color. If, for instance you had a slate of 10 candidates, the pool would include at least 3 women and 2 people of color.
And the practice of regularly refreshing boards must be followed to make more diverse boards possible but equally important to maintain a competitive edge.
Ultimately, boards take their character and composition from their leadership. CEOs and the boards themselves must drive the change from within and for economic, competitive reasons as much as to meet public pressure. In this regard, there is room for more
CEOs to step up and make diversity across the corporate world a reality.
Forced change imposed from the outside has been shown to be the least effective way to change public companies. Public companies must be and are designed to deal with economic realities and the need to compete as their top priorities.
Fortunately, diversity in board composition clearly meets those priorities, and Nasdaq is focused on highlighting that to its companies.
As Anders Thorendahl, the Chief Investment Officer of the Church of Sweden, told the audience at the Nasdaq diversity conference in Stockholm earlier this year: “investors need not choose between diversity goals and competitive returns…diversity outperformance
creates market outperformance.”