The Latino Corporate Directors Association (LCDA) has issued a letter in strong support of Nasdaq’s recent proposal to diversify boards, which will help to increase the severe under-representation of Latinos on boards.
Despite Hispanics being the fastest growing consumer and workforce in the US, they are severely under-represented on corporate boards. Even in California, where almost 40% of the population are Hispanic, only 2% of company directors are Latino. Nasdaq’s proposed rule change (a9SR-NASDAQ-2020-081), however, would help change that. If approved Nasdaq’s listed companies will need to have at least one director who self-identifies as female; and at least one director who self-identifies as Black/African American, Hispanic/Latinx, Asian, Native American/Alaska Native, Native Hawaiian/Pacific Islander, two or more races or ethnicities, or as LGBTQ+.
Failing to meet this criteria will result in having to explain why the company does not meet the requirement (subject to certain exceptions), as reported. The proposed changes would also require Nasdaq-listed companies to disclose statistical information on the company’s board diversity.
“We support these rule changes because for too long SEC rules have permitted inadequate disclosure of directors’ diversity backgrounds; despite investor demand for this kind of information,” stated Roel Campos, LCDA Chair; and former Commissioner of the US Securities and Exchange Commission (SEC). “This regulatory indifference has helped sustain the exclusion of American Latinos and other racial/ethnic minorities from boards and the C-suite, despite the existence of an adequate pipeline of qualified candidates. The gap between the labour force and executive representation is widest among Latinx than any other under-represented group. And it must end now.”
SEVERE UNDER-REPRESENTION OF LATINOS
Latinos have been severely under-represented among both Fortune 500 and 1000 boards and other public companies; and often forgotten when assessing director diversity. They make up nearly 18% of the US Population; yet less than 2% hold board seats on the 1,000 largest Nasdaq-listed companies. Nasdaq’s diversity proposal comes at a time in history when America’s Latinx community is increasingly wielding significant importance; both in the economic and political sectors. Latinos are making substantial contributions to the American economy, according to LCDA. In just five years, Latinos will comprise 20% of the entire American workforce; and 30% by 2050. Additionally Latinos spend $2.6 trillion annually.
If the US Latino population were a country, its GDP growth rate would be third highest among all global economies, noted LCDA. Studies also reveal that if it wasn’t for strong growth in the Latinx market, the US economy could have contracted (2017-2018).
DISCLOSING RACIAL & ETHNICITY BOARD COMPOSITION
LCDA also supports the new disclosure requirements in Nasdaq’s diversity proposal. Current requirements make it difficult for investors to ascertain whether there are any Latinx board members. Investors need improved disclosures and transparency to gauge a company’s commitment to the Latinx community and market. Other finance organisations, such as State Street Global Advisors have called on companies to disclose the racial and ethnic composition of their boards.
“The Latinx community is the fastest growing labour and consumer force in the United States; yet severely underrepresented among Fortune 500 and 1000 boards and often forgotten when assessing director diversity,” Campos added. “Nasdaq’s Proposal will assist significantly in ensuring that diversity statistics are transparently disclosed; and in providing extremely important information to inform all investors in their decision making. Additionally, for those corporations that seek to improve the quality of their board diversity with Latinx representation, the Nasdaq Proposal will assist in that goal being accomplished. We urge the SEC to approve this proposal.”
LCDA recently challenged corporate America to triple Latino representation on their boards by 2023. “The Latino community is applying pressure because the number of Latinos has stayed exceedingly low; and hasn’t changed in a decade,” confirmed LCDA President & CEO, Esther Aguilera. LCDA also launched a Boardroom Equity Scorecard and Tracker to help Californian firms increase the number of Latinos on their boards.
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