Awakening is receding, but the stench will be difficult to remove.
Consider the strange case of the laborious “Nasdaq diversity rule''. A stock market giant that forces all companies “listed” on the Nasdaq to elect boards that emphasize intersectionality, or racial, sexual, and gender diversity, rather than racial, sexual, and gender diversity. It is a proclamation. ability.
Yes, diversity is a worthy goal, but seeking outcomes in recruitment through practices like diversity equity and inclusion is the most counterproductive way to run a business humanity has ever conceived. . Forcing corporate boards to do so, as Nasdaq has been doing since 2020, is especially scary. And now it's illegal.
Boards of directors perform an important function of monitoring listed companies and their executives. Ensuring that CEOs aren't blindly usurping their positions is something that laws created by Great Depression-era securities laws require directors to do.
Nasdaq overturned decades of corporate law at the height of the so-called social justice movement. It was also a time in American history when the left tried to convince America that this country was inherently racist because police killed an ex-convict named George Floyd for resisting arrest. It happened during a particularly hysterical period.
That was then. Sanity is coming back these days, and those who have woken up are going backwards. Courts have ruled that DEI is illegal.
The Fifth Circuit did just that, telling Nasdaq that the madness must end.
Yes, this verdict is a sign that the awakening is coming to an end. But it's not completely dead. The rule will likely be put on the backburner due to quirks in the disclosure regime and how securities regulators interpret the court ruling, The Post has learned.
Note: Nasdaq, like its main competitor, the New York Stock Exchange, is a stock market. It was not established to function as a left-wing NGO. One of its functions is to allow people to buy and sell shares in companies that are “listed” for trading there in an orderly manner. Another is to ensure that listed companies follow basic corporate governance rules that protect investors, such as hiring competent directors.
Under CEO Adena Friedman, Nasdaq joined the social justice movement that was all the rage in 2020. She demanded that publicly traded companies put straight, white men on their boards, who were not the targets of progressive ire at the time.
“Each company shall have or have at least two diverse board members, including at least one diverse director who identifies as a woman, except as noted below. and at least one diversity director who identifies as an underrepresented minority or LGBTQ+,” Friedman's Nasdaq said in the proclamation.
As I point out in my book about progressivism running amuck, Wake Up, Break It: Inside the Radicalization of Corporate America, the stupidity of this rule is the result of securities laws and It is not limited to the practical fact that it is illegal on a fair reading of various civil rights laws.
There are also actual studies using control groups, margins of error, etc. that show there is no relationship between performance and diversity.
Additionally, this rule does not apply to all Chinese companies that Nasdaq wants to pay listing fees.
Companies from one of the world's most repressive regimes, literally controlled by the repressive Chinese Communist Party, are given a free pass. Persecuted Uyghur minorities do not need to apply, according to Friedman & Company.
Listed companies in China can avoid the problem by appointing a few women from the Chinese Communist Party on their boards.
Nasdaq insisted to me that this rule is not completely mandatory, but always reserves the right to refuse listings. He also emphasized that the rule is about disclosure, which sounds strange until you realize that companies should disclose things that investors care about, such as profits, not to protect social justice. Dew.
In addition to that, the disclosure part had an interesting enforcement element. Corporate board diversity data is contained in public disclosure documents and can be easily downloaded from the SEC's website, known as EDGAR. This prompted the powerful left-linked social activist groups running Biden's White House (Human Rights Campaign, Center for American Progress) to jump into the discussion, effectively serving as the woke president's executive staff to urge companies to step up their diversity strategies. It became possible to apply pressure. Nasdaq.
Then something wonderful happened. Someone filed a lawsuit. Not Nasdaq, but its regulator, the Securities and Exchange Commission, woke up as well and approved the move. The lawsuit argued that the stock market was not created as a left-wing political tool. A federal court agreed.
The case is solved, right? Not completely. This obligation may persist in a distorted form due to the disclosure regime that each listed company must comply with.
As Nasdaq officials explained to me, the rule was legal until a court ruled it illegal. That means the EDGAR system could continue to store records for thousands of companies that collected useless and illegal data requested by Nasdaq even after Nasdaq is set to lift its mandate in early February. They say it means expensive.
According to the securities lawyers I spoke with, they could exist forever for groups like the human rights movement to advocate for social justice.
One corporate lawyer told me: “Think about how stupid it is for stock exchanges to tell companies what slots they need to fill while giving the Chinese a pass. Then they just sit there. That would be even stupider.”
