[Editor’s note: This blog was written by Meredith Ervine Senior Editor of TheCorporateCounsel.net and is syndicated here for your convenience.]
A recent post on the HLS Blog claims that most Nasdaq-listed companies had no trouble disclosing that they met Nasdaq’s minimum number of diverse directors. But the blog goes on to describe what it calls the “interesting cases” — “the small number that have instead opted to explain why they do not meet” the minimum diverse director requirement. It shares example disclosures from 2024 proxy statements identified by Bloomberg’s Andrew Ramonas that you may find helpful if you find yourself with a client in this position.
Below are examples from the blog where a company finds itself temporarily without diverse directors and where company-specific factors might make director recruitment more difficult:
“Groupon’s Transitional Phase. Groupon’s situation highlights a common issue where a company may temporarily fall short of diversity goals due to turnover. It “acknowledges and supports the general principles behind the diversity objectives,” but lost its one diverse board member this year. The company’s acknowledgment of the principles behind diversity objectives suggests a willingness to align with NASDAQ’s vision, yet it underscores the reality that board composition is dynamic and subject to change.
Red Rock Resorts’ Particular Constraints. The company says there is a:
relatively limited pool of potential directors who are willing to subject themselves, as well as their families, to the rigorous and intrusive process necessary to obtain a gaming license and the demand for qualified diverse candidates will continue to impact our ability to attract certain categories of diverse directors to serve on our Board.
Red Rock Resorts’ explanation illustrates challenges faced by companies in certain industries, such as gaming, where the process of obtaining a license can be a deterrent for potential directors. This highlights how external factors and industry-specific demands can significantly impact the ability to attract certain kinds of board members.”
On the other end of the spectrum are boards that exceed the Nasdaq rule and are looking to promote and highlight the diversity of their board. For a standout example, check out e.l.f. Beauty’s social impact page “Changing the Board Game” highlighting their board diversity and their efforts to promote board diversity even outside the company — for example, by partnering with NACD to sponsor 20 diverse candidates through NACD’s Accelerator Program. The company’s proxy statement (page 2) doesn’t have the Nadaq table (it’s NYSE listed) but touts, “We are proud to be one of only four public companies in the U.S. (out of nearly 4,200 public companies) with a board of directors that is at least two-thirds women and at least one-third diverse.”
– Meredith Ervine
Our members can learn more about diversity disclosures here.
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Photo credit: Heorshe – stock.adobe.com
