February 12, 2021

Toomey, GOP Banking Members Urge SEC to Block NASDAQ’s Proposed Diversity Quota

Washington, D.C. – U.S. Senate Banking Committee Ranking Member Pat Toomey (R-Pa.) and all Republican members of the committee are urging the Securities and Exchange Commission (SEC) to reject a proposed rule from NASDAQ that requires publicly traded corporations adopt new racial and gender diversity standards for boards of directors.

In the letter to acting SEC Chair Allison Herren Lee, the lawmakers wrote:

“While we think America’s corporations benefit from boards that avoid groupthink and offer a diversity of perspective, and commend firms that look to increase diversity among their boards, we do not think NASDAQ should be using its quasi-regulatory authority to impose social policies.”

The letter details multiple concerns about the proposed rule, including that NASDAQ has not demonstrated that its proposal advances investor protection, fosters the public interest, or is otherwise consistent with securities laws.

“It interferes with a board’s duty to follow its legal obligations to govern in the best interest of the corporation and its shareholders. It violates central principles of materiality that govern securities disclosures, and finally, it harms economic growth by imposing costs on public corporations and discouraging private corporations from going public.”

Ranking Member Toomey commented on this proposal in December 2020, saying:

“A quasi-regulatory body like NASDAQ should not be creating and enforcing social policy in America. This is the realm of democratically-elected representatives who are accountable to the public. As Berkshire Hathaway CEO and Democrat Warren Buffett has said, corporate board members should be chosen by merit – not quotas. The responsibility of a corporate board is to oversee management and govern in the best interests of the people who hire them — shareholders. America’s corporate boardrooms are not the place for social engineering. Ultimately, these kinds of initiatives decrease the number of companies going public, reduce access to capital, and slow economic growth, which means fewer jobs and missed opportunities for retail investors.”

The letter to acting SEC Chair Lee is available online here.