Board Diversity: A Response to Professor Fried

50 Pages Posted: 12 Apr 2021 Last revised: 13 May 2022

Date Written: January 11, 2022


In December 2020, Nasdaq asked the Securities and Exchange Commission (SEC) to approve a new rule requiring most Nasdaq-listed companies to have at least one director self-identifying as a woman and another self-identifying as an underrepresented minority or LGBTQ+ or explain why not in their securities disclosure filings. For boards with five or fewer members the benchmark is that they have one diverse member, not two, or explain why not.

Shortly after Nasdaq released its revised rule, Professor Jesse Fried of Harvard Law School posted on SSRN an eight-page paper strongly criticizing the rule, accusing Nasdaq of misrepresenting empirical studies of the impact of board diversity on firm value to support its proposed rule, and claiming that the proposed rule could destroy shareholder value. This paper responds to Fried.

Statistical studies of the effect of boardroom diversity on stock price end in a draw for reasons explained in this paper including difficulty controlling for other factors affecting stock price during the event windows. Statistical studies of market reaction to legally mandated board diversity in California and Norway have little explanatory value in predicting the impact on investors of Nasdaq’s more flexible comply or explain rule. This paper concludes that there is no evidence to support Fried’s claim that the Nasdaq rule could harm shareholder value. Instead, overwhelming evidence from studies of boardroom monitoring of management supports the value of boardroom diversity for shareholders. The positive value of boardroom diversity for corporations, shareholders, and society in general is also supported by observations rooted in historical experience, management economics and ethics.

Keywords: diversity, boardroom. shareholder

JEL Classification: K22, J15, J16, L22, M14

Suggested Citation

Painter, Richard W., Board Diversity: A Response to Professor Fried (January 11, 2022). Stanford Journal of Law, Business, and Finance, Forthcoming, Available at SSRN: or

Richard W. Painter (Contact Author)

University of Minnesota Law School ( email )

229 19th Avenue South
Minneapolis, MN 55455
United States
612-626-9707 (Phone)

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