Washington, DC | The National Legal and Policy Center (NLPC) blasted the Securities and Exchange Commission (SEC)’s for its recent approval on Friday, August 6, of the so-called “board diversity rule” by the National Association of Securities Dealers Automated Quotations (Nasdaq). That rule requires all Nasdaq listed companies to have at least two self-identified “diverse” persons, including self-identified women, Black, Latinix (a woke term used in place of Latino), and the LGBTQ+ community if the board composition is more than five members and at least one diverse member if the Board composition is five or less members.
In its comments filed in January with the SEC, NLPC demonstrated that, among other defects, the diversity rule “will impose arbitrary racial and gender quotas without showing a compelling governmental interest, and thus violate the Constitution’s equal protection clause of the Fifth Amendment and as well as statutory provisions prohibiting discrimination. The SEC cited to NLPC’s comments over a half-dozen times in its ruling but rejected its arguments. NLPC is considering legal action to challenge the new diversity rule.
“The responsibility of the corporation is to defend and advance the interests of the people who own the company, the shareholders, not someone else’s political and social agenda that can be easily satisfied by tokenism,” said Peter Flaherty, NLPC’s Chairman.
While it is laudable to encourage companies to explore the talent pool for qualified directors, regardless of their skin color, sex, or ethnic backgrounds, at the end of the day, requiring an arbitrary quota for Board membership is inimical to our Constitution and civil rights laws, not to mention the federalization of corporate governance, which is a matter for state law, “ said Paul Kamenar, NLPC’s counsel who drafted NLPC’s comments.
NLPC’s position was echoed by Senator Pat Toomey of the Senate Finance Committee: “I’m disappointed SEC Chairman Gensler is turning a financial regulator into a laboratory for progressive social engineering.”
NLPC has a Corporate Responsibility Project that promotes integrity in corporate governance, including honesty and fair play in relationships with shareholders, employees, business partners and customers. NLPC places special emphasis on the responsibility of the corporation to defend and advance the interests of the people who own the company, the shareholders, not someone else’s political agenda. In that regard, NLPC has over the years attended stockholder meetings as a shareholder to advocate the interests of shareholders and oppose petitions by activists to advance one-sided special interests that are often hypocritical.