In December, the NASDAQ proposed new listing rules that—if implemented—would require companies to (i) disclose information about the diversity of their directors on an annual basis and (ii) have at least two diverse directors, or else provide an explanation why they do not.

By “diverse directors,” the rules contemplate “one [director] who self-identifies as female and one who self-identifies as either an underrepresented minority or LGBTQ+.”  In turn, underrepresented minorities, as defined by the proposed rules, encompass as individuals who self-identify as: 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.

Companies have a significant runway before these rules would be implemented.  The current proposal is subject to a public comment period and must be approved by the SEC.  If approved, companies would then have: (a) one year to comply with the reporting requirement, and (b) two years to garner one director from an underrepresented group, or else explain their failure to do so.  The three tiers in the NASDAQ Stock Market will be given different time frames to comply.  Companies on the NASDAQ Global Select Market and NASDAQ Global Market would need two diverse directors within four years, while companies on the NASDAQ Capital Market would have five years to attain this benchmark.  Further, the rules incorporate allowances for small and foreign companies, permitting them to comply with the rules through two female directors on their Boards (as opposed to one who self-identifies as either an underrepresented minority or LGBTQ+).

These rules, if adopted, would represent the first rules, on a stock exchange or otherwise, requiring companies to retain diverse board members.  On a broader scale, they could also herald a shift towards the manifestation of ESG priorities into formal law.  While legislation and regulation to this end could lead to novel compliance issues for companies, it could also provide much needed clarity and codify where de facto ESG liability already exits.

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Photo of Erica T. Jones Erica T. Jones

Erica Jones is an associate in the firm’s Litigation Department, where her practice encompasses a range of business, regulatory, and corporate governance matters. She has worked extensively in defense of securities class actions, derivative suits, and white collar criminal matters involving investigations by…

Erica Jones is an associate in the firm’s Litigation Department, where her practice encompasses a range of business, regulatory, and corporate governance matters. She has worked extensively in defense of securities class actions, derivative suits, and white collar criminal matters involving investigations by the SEC, DOJ, and state attorneys’ offices. In addition, Erica has advised on antitrust matters involving allegations of price fixing, restraint of supply, monopolization, group boycott, bid rigging, and collusion across industries that include agriculture and health care. She is also a member of the litigation team representing the Financial Oversight and Management Board in the Commonwealth of Puerto Rico’s bankruptcy proceedings.

Erica maintains an active, diverse pro bono practice, with a focus on immigration law, compassionate release and habeas corpus, and racial justice. She is an associate trustee with the Washington Lawyers’ Committee for Civil Rights and Urban Affairs and has been recognized by the District of Columbia Courts’ Capital Pro Bono Honor Roll. Erica was also one of a few women selected to be a Protégée for Proskauer’s Women Sponsorship Program, an initiative for high performing midlevel lawyers that champions emerging leaders.

Erica strives to stay on the cutting edge of developing areas of law through her membership in Proskauer’s COVID-19 Task Force, ESG Working Group, and Private Credit Litigation Group.  Erica’s ability to advocate for her clients is further bolstered by her recent Master’s Degree in Accounting from the University of North Carolina’s Kenan-Flagler Business School with a concentration in Financial Reporting and Analysis.

Prior to joining Proskauer, Erica was an intern with the Department of Justice in the Constitutional and Specialized Tort Litigation Section. Outside of her career in the law, Erica has been featured on Fox’s So You Think You Can Dance, teaching ballroom dance to students at Lighthouse for the Blind.