15 August 2022 |

What Nasdaq’s Diversity Rule Means


“You can’t hit a goal without a target set.”

Mellody Hobson, president & co-CEO of Ariel Investments, Chair of the board of Starbucks

I’ll never forget meeting Mellody Hobson at the height of 2020 (right after the murder of George Floyd, amid a significant racial recocking in America). 

As a top businesswoman who has committed her career to advance diversity in corporate America, she’s always an inspiring figure I look to when the battle for equity in our industry feels like we’ll never get past a tipping point. 

But her words remind me that every step we take in the right direction matters. 

Last summer, the Securities and Exchange Commission approved the new Nasdaq Board Diversity Rule, which requires all companies listed on their exchange to disclose board-level diversity statistics. 

If a company doesn’t have at least one woman and one member who identifies as non-white or LGBTQ+ on their board, the company has to issue a statement explaining why.

And Monday, August 8, marked the deadline for all Nasdaq-listed companies to fill out a board diversity matrix that includes the total number of company board members and how those board members self-identify regarding gender, race, ethnicity, and LGBTQ+ status. 

The results will be publicized through annual meeting proxy statements or company websites. 

With new rulings like this, it’s clear that companies prioritizing inclusion and equity at the board level will be the ones that increase profits while best serving and representing their executives, employees, and customers. Plus, 

We need measurable intentionality. 

Companies with a competitive edge also strive for an overall culture of inclusion, where the voices of all — especially traditionally silenced voices of women and underrepresented groups — are heard and matter. 

And it’s not just me saying it.

Research has repeatedly demonstrated that companies with diversity outperform those with less diversity: 

  • When acquired or going public, companies with diverse founders earn 30% higher multiples on invested capital.
  • 69.2% of top-performing U.S. funds and angel groups included females in decision-making, while only 30.8% had all-male leadership.
  • There is a 35% greater likelihood that companies in the top quartile for racial and ethnic diversity financially outperform those in the bottom quartile.

“But Nicole! The fintech market is filled with new ideas and innovations to give everyone access to equity, so our internal operations must reflect that, right?”

Not quite.

Black-founded startups still received just 1.3% of all venture and growth equity financing to U.S. startups last year. 

Women in fintech are still just: 

  • 30% of the employee base.
  • 20% of executive positions.
  • 6% of CEOs. 

According to the Fintech Diversity Radar by Findexable, global board gender diversity looks like this:

  1. Men only: 58.1%
  2. Women and men: 40.9% 
  3. Women only: 1%

In North America:

  1. Men only: 48.8%
  2. Women and men: 50.8%
  3. Women only: 0.4%

But how do board members impact funding? 

  • No women board members: $48 billion(49.3%)
  • At least one woman board member: $48.3 billion (49.57%)
  • All woman board members: $1.1 billion (1.13%)
  • Total funding: $97.4 billion

Nasdaq-listed fintech companies are already facing the new rule.

Still, as fintech companies continue to grow and enter public markets, leadership teams need to consider diversifying their boards —now. 

In fact, racial and gender diversity are being prioritized by board directors looking for a change, according to PwC’s 2021 Annual Corporate Directors Survey.

Half (51%) of all current directors support tying executive compensation to diversity and inclusion goals. 47% of directors say that at least one fellow board member should be replaced

And of those directors, 18% would replace two or more fellow directors. 

To see real change in industries, we have to apply pressure

As a result of these pressures, board searches are changing

And the Nasdaq listing standards have emphasized the need for boards to have not just gender diversity but racial and ethnic diversity as well. 

I’d love to hear: What does diversity mean to you? 

To me, diversity means not one single person’s perspective rules the decision-making room. 

We’ve barely scratched the surface of what fintech can genuinely be. 

And the more perspectives we bring to fintech, the more we can make complex systems simple. 

The more openness we can give.