Nasdaq Board Diversity Compliance Guide 2025: Implementation Strategies

In August 2021, the U.S. Securities and Exchange Commission (SEC) approved Nasdaq's proposal to enhance board diversity among its listed companies.

Key Requirements:

• Board Diversity Matrix: Companies are required to annually disclose board diversity statistics using a standardized matrix. This matrix includes the total number of board members and their self-identified gender, race, ethnicity, and LGBTQ+ status. Foreign issuers can apply a broader definition of diversity based on their home country's context.
• Diverse Board Composition: Companies must have at least two diverse directors—one who identifies as female and another who identifies as an underrepresented minority or LGBTQ+. If a company does not meet this criterion, it must publicly explain the reasons for non-compliance. Smaller companies with five or fewer directors can satisfy the requirement with one diverse director.

Implementation Timeline:

Companies were given transition periods to comply with these requirements, with specific deadlines based on their listing tier and size. The initial disclosure of the board diversity matrix was required by August 2022 or the date of the company's annual meeting proxy statement during that year.

Recent Legal Developments:

In December 2024, the Fifth U.S. Circuit Court of Appeals vacated (Nasdaq's board diversity rules)[https://www.ca5.uscourts.gov/opinions/pub/21/21-60626-CV0.pdf], ruling that the SEC exceeded its authority in approving them. This decision means that Nasdaq-listed companies are no longer mandated to comply with these specific diversity disclosure requirements. However, many companies may continue to voluntarily disclose board diversity information to align with investor expectations and corporate governance best practices.

Nabu's Role in Supporting Compliance:

In light of these regulatory changes, Nabu's AI-driven compliance solutions can assist companies in navigating the evolving landscape of corporate governance. Nabu automates the collection and reporting of board diversity data, ensuring that disclosures are accurate, timely, and aligned with current legal requirements. By streamlining these processes, Nabu enables companies to maintain transparency and uphold best practices in board composition, even as regulatory standards evolve.