Nasdaq on Tuesday moved to require that companies on its exchange include a woman and a person of a minority racial background or sexual orientation on their boards of directors.
"This proposal and partnership gives companies an opportunity to make progress toward increasing representation of women, underrepresented minorities and the LGBTQ+ community on their boards," said Nelson Griggs, president of Nasdaq Stock Exchange, in announcing the proposal.
Listed companies would have to include "one who self-identifies as female and one who self-identifies as either an underrepresented minority or LGBTQ+," according to the company's press release.
This rule would not apply to foreign companies or smaller reporting companies, but they would have to include at least two female directors.
Nasdaq filed the proposal with the U.S. Securities and Exchange Commission for approval.
If approved, all companies will be expected to have one director from the specified categories within two years of the SEC's approval. These companies would have between four and five years to announce their second such director.
Companies that do not comply with the rule, if approved, will not be delisted from the exchange, but they will have to publicly explain why they are not following the rule.
"Our goal with this proposal is to provide a transparent framework for Nasdaq-listed companies to present their board composition and diversity philosophy effectively to all stakeholders; we believe this listing rule is one step in a broader journey to achieve inclusive representation across corporate America," said Adena Friedman, Nasdaq's president CEO.