Nasdaq’s Wish Is the U.K.’s Command

Nikhil Rathi in 2018.


Stephen Chung/Zuma Press

Readers will recall the many problems with Nasdaq’s recent proposal to add a board diversity provision to its listing rules for companies. Now comes the United Kingdom to see Nasdaq and raise its woke obligations.

The Nasdaq plan would encourage companies listed on the exchange to maintain a quota of board members who are women or ethnic or sexual minorities. The U.S. stock exchange is trying to sweeten this unpopular pill by promising it would be optional. A company would either hit the quota or explain to shareholders why it hadn’t.

Britain’s financial regulator, the Financial Conduct Authority, now wants to go one worse. “As part of our regulatory work on diversity and inclusion and the listings framework, we will be exploring whether we should make similar requirements part of our premium listing rules,” FCA chief executive

Nikhil Rathi

said Wednesday of the Nasdaq plan.

The FCA primarily regulates financial firms so any new rule would apply to banks, insurers, asset managers and the like. Mr. Rathi suggests a diversity mandate could be shoehorned into existing rules under which the FCA vets the suitability of senior leaders at regulated firms. He says this would be appropriate based on research purporting to show diverse boards are better at risk management, although such research is highly debatable.

Mr. Rathi also argues that more diverse leadership would somehow help financial institutions better serve minority communities. Expect this point to resonate in Washington, where the Biden Administration and Jerome Powell’s Federal Reserve say they want to use their regulatory powers over the financial system to achieve diversity goals.

Investors and company managers in the U.S. as well as U.K. are soon likely to discover that there’s no such thing as a “voluntary” mandate. Nasdaq says it will let companies opt out of its plan—at least until regulators decide to opt everyone in anyway.

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Appeared in the March 20, 2021, print edition.

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