15 Jun 2021 Nasdaq Trades in Deception By Mishandling Question Critical of its Board Diversity Scheme

Washington, D.C. – At the Nasdaq, Inc. annual shareholder meeting today, CEO Adena Friedman dodged a question from the Free Enterprise Project (FEP) about the Nasdaq stock exchange’s proposed requirement that all Nasdaq-listed companies make board director decisions – or explain why they don’t – under a diversity paradigm that looks at race, sex and sexual orientation but not viewpoint diversity.

Nasdaq executives used a dodge tactic perfected by corporations during the COVID pandemic. Due to shareholder meetings moving to a virtual format, executives require all questions to be submitted online, which allows them to cherry-pick which ones they will answer and to rewrite them to suit their own agenda. In this case, Nasdaq executives transformed FEP’s critical question into a setup for Friedman to simply praise her company’s proposal.

Scott Shepard

Scott Shepard, who serves as FEP deputy director at the National Center for Public Policy Research, submitted this question:

Nasdaq has asked the Securities & Exchange Commission to permit it to require that companies either have at least one woman director and one from a narrow set of ethnic and sexual-orientation groupings, or explain why they do not. But your proposed rule appears to be poorly constructed and based on shoddy research. In supporting your proposed rule, for instance, you relied on research that claims to demonstrate that “diverse boards perform better,” but that does not hold independent variables (such as viewpoint diversity) constant, thus eliminating the value of the research as support for the proposed rule.

So two questions for you: Could you give us a coherent and complete definition of the “queer community,” one of the self-identifying categories that you feel must be represented on corporate boards? And can you explain why skin, sex and sexual-orientation diversity is vital while viewpoint and intellectual diversity is not?

Nasdaq staff stripped the substance of the question, asking Friedman: “We have received two questions on our board diversity proposal and the politics behind it – in particular, whether we support racial quotas in our businesses, and the importance of equality and equity in society. Additionally, why does Nasdaq feel diversity, whether racial or sex, is vital to the governance of a company?”

Friedman responded:

Thank you. Our board diversity proposal is a disclosure framework to provide greater transparency and clearer data on board composition. It is not a quota or a numeric mandate. Nasdaq is proposing this framework under its responsibility as a listing market in the matters of governance. Companies can elect to meet the diverse director objective or to disclose why they do not, and the explanation can include a description of a different approach.

The overwhelming majority of feedback is supportive of our proposal, including comments representing every constituency of corporate stakeholders. We have also submitted amendments that strengthen our proposal in response to comments from Nasdaq-listed companies and other stakeholders. We have also observed in recent weeks both Nasdaq- and NYSE-listed companies voluntarily published more diversity data in their annual proxy using our proposed diversity metrics template while we await a decision from the SEC.

Our culture is built around respect and inclusivity. We are committed to advancing equality in our own workplace by striving to attract and retain diverse talent. At Nasdaq, our purpose is to champion inclusive growth and prosperity. While the capital markets are a fundamental engine of prosperity, economic growth, job creation and innovation, there are structural factors across society that have created challenges for women and underrepresented minorities to achieve equal access to capital. We pledge to use our industry expertise, renewed sense of purpose, and philanthropic focus to advance investor engagement and to provide increased support to minority and female entrepreneurs.”

The mishandled question, and Friedman’s response, can be heard here.

After the meeting, Shepard responded to Nasdaq’s stealth revision of his question:

Nasdaq knows full well that its proposal to the SEC is constitutionally suspect, badly researched and internally incoherent, and that it impermissibly ignores the value of viewpoint diversity. Forcing companies to undertake race- and sex-based discrimination or to explain why they refuse to do so potentially violates two separate constitutional provisions. Research that shows the value of diversity without controlling for the effects of viewpoint and background diversity will not, under American constitutional law, justify race- and sex-based discrimination, regardless of whom that discrimination is ostensibly defined to help.

And including the category “self-identified member of the queer community” in its requirements is incoherent, as Nasdaq does not define the term, and as it is a distinctly and very purposefully fluid concept.

By misleading its shareholders by secretly rewriting a shareholder question to remove concerns about these vital points, Nasdaq has engaged again in potentially illegal behavior – made all the more appalling as this is a company that exists to oversee a stock exchange.

Conservative investors can learn how to oppose leftism in corporate America by downloading FEP’s 2021 Investor Value Voter Guide and Balancing the Boardroom voting guide. The new website Stop Corporate Tyranny also provides tools for engagement with corporate leaders.

Today’s meeting marks the 43rd time FEP has participated in a shareholder meeting in 2021. To schedule an interview with a member of the Free Enterprise Project on this or other issues, contact Jenny Kefauver at (703) 850-3533.

Launched in 2007, the National Center’s Free Enterprise Project focuses on shareholder activism and the confluence of big government and big business. Over the past four years alone, FEP representatives have participated in over 100 shareholder meetings – advancing free-market ideals about health care, energy, taxes, subsidies, regulations, religious freedom, food policies, media bias, gun rights, workers’ rights and other important public policy issues. As the leading voice for conservative-minded investors, it annually files more than 90 percent of all right-of-center shareholder resolutions. Dozens of liberal organizations, however, annually file more than 95 percent of all policy-oriented shareholder resolutions and continue to exert undue influence over corporate America.

FEP activity has been covered by media outlets including the New York Times, Washington Post, USA Today, Variety, the Associated Press, Bloomberg, Drudge Report, Business Insider, National Public Radio and SiriusXM. FEP’s work is prominently featured in Stephen Soukup’s new book The Dictatorship of Woke Capital: How Political Correctness Captured Big Business (Encounter Books) and Kimberley Strassel’s 2016 book The Intimidation Game: How the Left is Silencing Free Speech (Hachette Book Group).

The National Center for Public Policy Research, founded in 1982, is a non-partisan, free-market, independent conservative think-tank. Ninety-four percent of its support comes from individuals, less than four percent from foundations and less than two percent from corporations. It receives over 350,000 individual contributions a year from over 60,000 active recent contributors.

Sign up for email updates here. Follow us on Twitter at @FreeEntProject and @NationalCenter for general announcements. To be alerted to upcoming media appearances by National Center staff, follow our media appearances Twitter account at @NCPPRMedia.