A federal appeals court has struck down the Nasdaq’s diversity disclosure rules, which required companies to ensure women and minority directors were on their boards or provide an explanation for why they weren’t. The decision follows a wave of criticism from conservative groups, who argued that the rules promoted quotas and biased against white people.
The rules, implemented after George Floyd’s killing, aimed to boost representation of women and minorities on corporate boards. However, the 5th U.S. Circuit Court of Appeals ruled that the Securities and Exchange Commission did not have the power to approve the rule.
A similar board diversity law in California was struck down last year as unconstitutional. The Nasdaq’s rules touched on one of the most reviled parts of the “diversity, equity, and inclusion” (DEI) movement: quotas.
Conservative groups, including the National Center for Public Policy Research and Alliance for Fair Board Recruitment, challenged an earlier court ruling in favor of the move. Edward Blum, founder of Alliance for Fair Board Recruitment, led a successful legal fight that resulted in the Supreme Court striking down affirmative action in higher education.
The Nasdaq has stated that it respects the court’s decision and will not seek further review. However, the company’s CEO said that the rules simplified and standardized disclosure requirements to the benefit of both corporations and investors.
In response to the ruling, a group of Donald Trump’s MAGA allies launched an ETF focused on investing in companies that reject DEI initiatives. The fund aims to mirror the S&P 500 index but excludes companies with diversity quotas, including Starbucks and Best Buy.
Trump supporters see the fund as an opportunistic reflection of Trump winning the election and following through on his promises to resist DEI initiatives. Others are reviving efforts to push for “fair access” rules that would prevent certain businesses from being blocked from banking services.
The decision has significant implications for corporate America, higher education, and the wider social landscape. As the debate over DEI policies continues, it remains to be seen how companies will adapt in response to this ruling and the growing trend of conservative opposition to these initiatives.
Source: https://www.axios.com/2024/12/12/nasdaq-board-diversity-regulations-appeals-court