The Board Diversity Rule requires all companies listed on Nasdaq’s U.S. exchange to publicly disclose board-level diversity statistics using a standardized disclosure matrix template.  Additionally, the Board Diversity Rule requires most Nasdaq-listed companies to either (i) have at least two diverse directors, including one who self-identifies as female and one who self-identifies as either an Underrepresented Minority or LGBTQ+ or (ii) explain why they do not have two diverse directors.  Foreign companies and smaller reporting companies have additional flexibility in satisfying the minimum diversity objective with two female directors, and companies with boards of five or less members can satisfy it with one diverse director. 

For more information, read Nasdaq’s Board Diversity Rule: What Nasdaq-Listed Companies Should Know.  View instructions for completing Nasdaq’s disclosure matrix template here.  Examples of acceptable (i.e., same or substantially similar) and unacceptable (i.e., substantially different) disclosures are provided here.

Companies have a transition period to meet the diversity objectives or explain their reasons for not doing so.  The timeframe to meet the minimum diversity objectives is based on a company’s listing tier: 

• Companies listed on Nasdaq Global Select Market or Nasdaq Global Market are required to have, or explain why they do not have, one diverse director by August 7, 2023, and two diverse directors by August 6, 2025.  

• Companies listed on the Nasdaq Capital Market are required to have, or explain why they do not have,  one diverse director by August 7, 2023, and two diverse directors by August 6, 2026.

• Companies with boards that have five or fewer directors, regardless of listing tier, are required to have, or explain why they do not have, one diverse director by August 7, 2023. 

If a company files its proxy statement or its information statement (or, if the company does not file a proxy, in its Form 10-K or 20-F) for the company’s annual shareholders meeting after the anniversary of the Effective Date in the calendar year for each respective year noted above, then the company will have until the date it makes such filing to meet, or explain why it does not meet, the applicable diversity objectives.

For companies that are not in a position to meet the minimum diversity objectives within the required timeframes, they will not be subject to delisting if they provide an alternative public disclosure explaining why they did not meet the applicable minimum diversity objectives.

Nasdaq is providing resources to help our listed companies and their advisors understand and achieve compliance with the Board Diversity Rule.  Nasdaq has developed a board diversity tool kit and created a dedicated mailbox to pose questions related to the Rule. Email your questions to drivingdiversity@nasdaq.com.

Nasdaq recognizes that companies want to leverage their own network to create a candidate pipeline, while also tapping into a broader community of candidates outside their immediate network through a cost effective, transparent process.  Therefore, Nasdaq-listed companies have access to a variety of free board recruiting services.  We realize one size doesn’t fit all so we are building relationships with a growing number of collaborative partners.  To date, Nasdaq has established partnerships with Equilar, Athena Alliance, and the Boardlist to aid Nasdaq-listed companies that have not yet met the diversity objectives and would like assistance doing so.  The services offered are complementary and are not mandatory.  Here’s how your company can gain free access to Equilar’s BoardEdge Platform and Equilar Diversity Network, Athena Alliance’s community of women leaders, and the Boardlist’s premium talent marketplace.

Please contact us at DL-NasdaqBoardDiversity@nasdaq.com to learn more.

Companies that choose to disclose the board diversity matrix only on their website must also submit a URL link to the disclosure through the Nasdaq Listing Center, within one business day after such posting.

For companies incorporated in the U.S., "Underrepresented Minority" means an individual who self-identifies as one or more of the following: Black or African American, Hispanic or Latinx, Asian, Native American or Alaska Native, Native Hawaiian or Pacific Islander, or Two or More Races or Ethnicities.

 “Two or More Races or Ethnicities” means a person who identifies with more than one of the following categories: White (not of Hispanic or Latinx origin), Black or African American, Hispanic or Latinx, Asian, Native American or Alaska Native, Native Hawaiian or Pacific Islander.

Smaller Reporting Companies may satisfy the minimum diversity objective by including two female directors, or by including one female director and an individual who self-identifies as LGBTQ+ or an Underrepresented Minority. 

Yes. The Board Diversity Rule exempts non-operating companies. Consistent with Nasdaq’s corporate governance rules the following types of companies are exempt:

• acquisition companies listed under IM-5101-2;
• asset-backed issuers and other passive issuers. Note while closed end funds are exempt from the rule, business development companies are not (as set forth in Rule IM-5615-4);
• cooperatives (as set forth in Rule 5615(a)(2));
• limited partnerships (as set forth in Rule 5615(a)(4));
• management investment companies (as set forth in Rule 5615(a)(5));
• issuers of only non- voting preferred securities, debt securities and Derivative Securities (as set forth in Rule 5615(a)(6)); and 
•  issuers of securities listed under the Rule 5700 Series, including exchange traded products.

If a company (i) does not meet the diversity objectives set forth under Rule 5605(f)(2) and also does not provide an explanation as set forth in Rule 5605(f)(3) (and is not otherwise subject to a grace period), then Nasdaq’s Listing Qualifications Department would promptly notify the company that it has until the later of its next annual shareholders meeting or 180 days from the event that caused the deficiency to cure the deficiency. The company can cure the deficiency either by meeting the applicable minimum diversity objectives of Rule 5605(f)(2) or providing an explanation as set forth in Rule 5605(f)(3).  If a company does not regain compliance within the applicable cure period, the Listings Qualifications Department would issue a Staff Delisting Determination Letter.  A company that receives a Staff Delisting Determination can appeal the determination to the Hearings Panel through the process set forth in Rule 5815.

If a company does not disclose board diversity matrix as set forth in Rule 5606, Nasdaq will notify the company that it is not in compliance with a listing requirement, and the company will be allowed 45 calendar days to submit a plan sufficient to satisfy Nasdaq staff that the company has adopted processes and procedures designed to identify and disclose the information required under Rule 5606 in the future. If the company does not do so, it would be issued a Staff Delisting Determination, which the company could appeal to a Hearings Panel pursuant to Rule 5815.

Nasdaq does not assess the substance of the company’s explanation, but verifies that the company has provided one.  Nasdaq believes these disclosures provide stakeholders with a better understanding of the company’s current board composition and its philosophy regarding diversity.

The following are examples of such disclosures:

• If a company is listed on Nasdaq Global Select or Global Market but believes that it is similarly situated to companies listed on Nasdaq Capital Market in terms of its annual revenues and public float, it may explain that for these reasons it therefore has chosen to meet the objectives of Rule 5605(f)(2)(C) applicable to companies listed on the Nasdaq Capital Market in lieu of Rule 5605(f)(2)(A). 

• A U.S. company may disclose that it chooses to define diversity more broadly than Nasdaq’s definition by considering national origin, veteran status or individuals with disabilities when identifying nominees for director because it believes such diversity brings a wide range of perspectives and experiences to the board.

• If under Israeli law regarding board diversity, an Israeli company is required only to have a minimum of one woman on the board and such Israeli company chooses to comply with Israeli home country law in lieu of meeting the diversity objectives of Rule 5605(f)(2)(B), it may choose to disclose that “the Company is incorporated in Israel and required by Israeli law to have a minimum of one woman on the board, and satisfies home country requirements in lieu of Nasdaq Rule 5605(f)(2)(B), which requires each Foreign Issuer to have at least two diverse directors.”

Yes, a company that is considered a SRC under Rule 12b-2 under the Exchange Act is treated as a SRC under Nasdaq’s Board Diversity Rule, whether or not it applies the scaled disclosure requirements available to SRCs.

No. However, a company in this situation that does not meet the applicable timeline could provide an explanation, such as the below example, as to why it does not:

Under Nasdaq’s Board Diversity Rule, a company with a board of directors of five or fewer members must have, or explain why it does not have, at least one member of its board of directors who is diverse.  However, such companies are not automatically subject to a higher threshold by virtue of adding a diverse director that expands their board beyond five members.  Specifically, if a company had a five-member board before it was subject to Rule 5605(f), and then the company adds a diverse board member once it becomes subject to Rule 5605(f), this company is still subject to the lower one-diverse board member objective despite the fact that it now has a six person board.  However, the rule makes clear that a company would become subject to the two-diverse board member objective if it subsequently expands its board, or if it already had one diverse board member at the time it added the sixth board member.

Yes.  Under Nasdaq’s Board Diversity Rule, a company with a board of directors of five or fewer members, even if the company is otherwise a foreign company or a smaller reporting company, must have, or explain why it does not have, at least one member of its board of directors who is diverse.

All Nasdaq-listed operating companies, including business development companies, are required to publicly disclose director self-identified board-level diversity statistics using a standardized disclosure matrix template by the later of: (1) August 8, 2022; or (2) the date the Company files its proxy statement or its information statement for its annual meeting of shareholders (or, if the Company does not file a proxy or information statement, the date it files its Form 10-K or 20-F) during the calendar year of the 2022.

If a Company files its 2022 proxy or information statement (or its Form 10-K or 20-F) before August 8, 2022 and does not include the matrix, the Company will have until August 8, 2022 to disclose its matrix. Such disclosure can either be made on the Company’s website or provided in an amended annual report, such as on Form 10-K or 20-F.

If a company files its 2022 proxy or information statement (or its Form 10-K or 20-F) on or after August 8, 2022, then the Company must either include the matrix in its proxy or information statement (or its Form 10-K or 20-F), or post the Matrix on its website within one business day of filing its proxy or information statement (or its Form 10-K or 20-F).

Yes. A company may supplement its disclosure by providing additional information below the matrix or in a separate table. Please refer to the board diversity matrix examples provided here.

To the extent a company elects to provide supplemental information in any year, it is not required to continue to provide the same disclosure in disclosures in subsequent years. 

The following companies may satisfy the diverse director objective with two female directors:

• Foreign companies and smaller reporting companies that qualify for additional flexibility under the Rule; and
•  Companies that have two directors who self-identify as female where one of the females also identifies as either an underrepresented minority or LGBTQ+.

Directors and nominees are typically required to complete a directors’ and officers’ (D&O) questionnaire and attest to the accuracy of their responses. The D&O questionnaire requires the directors and nominees to provide their name, age, and other relevant information. A company would then use the director’s information provided in the D&O  questionnaire to ensure that the company has accurately disclosed information in its SEC filings. Companies may want to consider including voluntary board diversity questions in their annual D&O questionnaire. Sample diversity questions a company may want to consider including in their D&O questionnaire are available here. 

Directors may choose to opt out rather than reveal their diversity characteristics to the company.  In that case, the company would identify these directors in the “Did Not Disclose” category in the board diversity matrix.  If a company is unable to meet the applicable diversity objectives as a result, the company may provide an alternative public disclosure under Rule 5605(f)(3) explaining that the company has directors who do not wish to be identified or counted as diverse in order to satisfy the Rule. Please see FAQs 1768 and 1778.

There is no specific milestone for the an issuer newly listing on Nasdaq Capital Market to have at least one diverse director.  After August 6, 2021 an issuer newly listing on Nasdaq Capital Market has until August 6, 2026 to have, or explain why it does not have, two diverse directors. After August 6, 2026, an issuer newly listing on Nasdaq Capital Market will have two years from the time of listing to meet the objective to have two diverse directors or explain its reasons for not doing so.