C. Boyden Gray and Jonathan Berry published an editorial in the Wall Street Journal on April 29, 2021 arguing Nasdaq’s recent diversity push is not evidence based. They write,
Progressive approval apparently means a lot to Nasdaq, which has officially proposed to its regulator—the Securities and Exchange Commission, newly chaired by Gary Gensler—to increase boardroom diversity through a “regulatory approach.” This proposal would require that Nasdaq-listed companies not only disclose the diversity characteristics of their existing boards, but also retain “at least one director who self-identifies as female,” and “at least one director who self-identifies as Black or African American, Hispanic or Latinx, Asian, Native American or Alaska Native, two or more races or ethnicities, or as LGBTQ+.” Noncompliant firms must publicly “explain”—in writing—why they don’t meet Nasdaq’s quotas.
But such a quota system is, “unlawful, unconstitutional, and unsupported by the evidence.” Gray and Berry write,
Nasdaq claims board diversity protects investors because it might reduce the likelihood of “fraudulent and manipulative acts and practices” and increase shareholder value. But social scientists agree only that there is no agreement: Academic research hasn’t established a positive correlation between female board directors and firm performance. Even ambivalent studies that find a weak correlation aren’t evidence that having one or more women as directors improves shareholder value, which is what Nasdaq must prove. Nasdaq is also suspiciously silent about many other studies that undermine its argument. As Harvard professor Jesse Friedhas pointed out, some of the best evidence suggests that pushing for increased diversity at the expense of other priorities hurts shareholder value.
To read the full editorial visit the Wall Street Journal.