In a pivotal turn, the conservative-backed challenge against Nasdaq’s mandate for companies to disclose board diversity faces reconsideration by a federal appeals court in New Orleans. The decision comes after a prior panel of the court upheld the requirement, setting the stage for a contentious legal battle.
The conservative-leaning 5th U.S. Circuit Court of Appeals recently voted to have the full court reevaluate the case, overturning the previous ruling by a three-judge panel in October. Tentative arguments are slated for mid-May, marking a critical juncture in the ongoing debate surrounding corporate governance and diversity initiatives.
With over two-thirds of the court’s active judges appointed by Republican presidents, the 5th Circuit serves as a preferred battleground for conservative and industry groups contesting regulations enacted during the Biden administration.
At the heart of the dispute lies a rule sanctioned by the U.S. Securities and Exchange Commission (SEC) in August 2021, compelling listed companies to appoint at least one director from underrepresented groups, including women, racial or ethnic minorities, or LGBTQ+ individuals. Companies are mandated to articulate their compliance or rationale for non-compliance, with a stipulation for two diverse directors by 2026.
Legal challenges to the rule have been mounted by conservative activists such as the Alliance for Fair Board Recruitment, led by Edward Blum, known for his opposition to affirmative action. Echoing sentiments from past legal battles, Blum denounces the mandate as “intrusive and illegal,” calling for its abolition across Nasdaq-listed entities.
Nasdaq, however, remains tight-lipped amidst the legal skirmish, declining to offer commentary on the matter.
Conservative litigants argue that the rule infringes upon constitutional principles, alleging violations of equal protection and free speech rights. They contend that Nasdaq, as a quasi-governmental body subject to SEC oversight, is bound by the same constitutional constraints as public entities.
Despite the fervent opposition, a three-judge panel previously rebuffed these arguments, asserting Nasdaq’s status as a private entity exempt from constitutional scrutiny. Notably, the panel comprised judges appointed by Democratic administrations, underscoring the impartial nature of judicial assignments.
As the legal saga unfolds, the fate of Nasdaq’s diversity mandate hangs in the balance, emblematic of broader societal debates concerning equity, representation, and the role of private entities in fostering inclusive corporate environments.
