Will Nasdaq's Diversity Rules Harm Investors?

15 Pages Posted: 26 Mar 2021 Last revised: 9 Apr 2021

See all articles by Jesse M. Fried

Jesse M. Fried

Harvard Law School; European Corporate Governance Institute (ECGI)

Date Written: March 31, 2021


In December 2020, Nasdaq asked the Securities and Exchange Commission to approve new diversity rules. The aim is for most Nasdaq-listed firms to have at least one director self-identifying as female and another self-identifying as an underrepresented minority or LGBTQ+. While Nasdaq claims these rules will benefit investors, the empirical evidence provides little support for the claim that gender or ethnic diversity in the boardroom increases shareholder value. In fact, rigorous scholarship—much of it by leading female economists—suggests that increasing board diversity can actually lead to lower share prices. Adoption of Nasdaq’s proposed rules would thus generate substantial risks for investors.

Keywords: NASDAQ, SEC, corporate governance, boards, diversity

JEL Classification: G30, G34, G38, K22

Suggested Citation

Fried, Jesse M., Will Nasdaq's Diversity Rules Harm Investors? (March 31, 2021). European Corporate Governance Institute - Law Working Paper No. 579/2021, Available at SSRN: https://ssrn.com/abstract=3812642 or http://dx.doi.org/10.2139/ssrn.3812642

Jesse M. Fried (Contact Author)

Harvard Law School ( email )

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HOME PAGE: http://www.law.harvard.edu/faculty/directory/10289/Fried

European Corporate Governance Institute (ECGI) ( email )

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