NASDAQ-listed companies, including truckers, face new rules on diversifying their boards

The NASDAQ stock exchange, home to numerous publicly traded trucking and logistics firms, is seeking government approval of a rule that would require more diversity on the corporate boards that govern companies traded on it.

The proposal made to the Securities and Exchange Commission (SEC) would require the companies trading on NASDAQ to have “at least two” directors described as diverse. One would need to be a female. The second would need to be part of what NASDAQ calls an “underrepresented minority.”

The proposal to the SEC defines that as a person who is “Black or African American, Hispanic or Latinx, Asian, Native American or Alaska Native, Native Hawaiian or Pacific Islander, or Two or More Races or Ethnicities.” The requirement for a second person also could be met by having a person from the LGBTQ+ community, defined as “an individual who self-identifies as any of the following: lesbian, gay, bisexual, transgender or a member of the queer community.”

A quick check of the list of directors of several of the trucking-related companies that trade on NASDAQ finds that all of them have one or more female directors.

What is less clear is whether the companies have directors who meet the requirement for that second director. Some of them, at a glance, do not appear to meet that requirement at present though the ethnic background or sexuality of a company’s directors can obviously not be determined just by reading their names or looking at a picture. 

NASDAQ conceded as much in its filing with the SEC. It referred to “the extremely limited disclosure of race and ethnicity information — an information gap the proposed rule addresses.”

The requested change in the rule would also require NASDAQ-listed companies to supply the exchange with data on diversity. 

While the number of trucking companies traded on the more prominent New York Stock Exchange is relatively small (J.B. Hunt, Knight Swift and U.S. Xpress, among others), the trucking and logistics companies listed on NASDAQ make up a far larger list. It includes truckload carriers (Werner, Heartland, Marten, Schneider), LTL carriers (ArcBest, YRC) and 3PL companies (C.H. Robinson, Echo Logistics, Expeditors). But that is only a partial list. 

“The goal of the proposal is to provide stakeholders with a better understanding of the company’s current board composition and enhance investor confidence that all listed companies are considering diversity in the context of selecting directors, either by including at least two diverse directors on their boards or by explaining their rationale for not meeting that objective,” NASDAQ said in announcing its filing with the SEC.  

The requirement, if enacted, has a long runway. Companies trading on NASDAQ will be expected to have “one diverse director” within two years of the rule’s enactment, though with virtually all companies FreightWaves looked at having one or more female directors, compliance with that rule is essentially completed. The time requirement on the second diverse director would be four years. 

Companies that don’t meet the requirement can be delisted unless they can explain to the NASDAQ why they can’t meet the rule, the exchange said. The small companies listed as part of the NASDAQ Capital Market will have five years to comply.

Additionally, the clock on complying won’t start ticking until one year after SEC approval of the proposal. 

Director compensation varies among companies. For example, according to proxy statements filed with the SEC, the base compensation for Werner directors is $50,000, before certain payments made for individual board roles, like head of the compensation committee. C.H. Robinson compensation for its directors ranged from $110,000 to just under $140,000 last year. The base compensation for most directors at Landstar is $75,000.

“While gender diversity has improved among U.S. company boards in recent years, the pace of change has been gradual, and the U.S. still lags behind other jurisdictions that have imposed requirements related to board diversity,” NASDAQ said in its filing with the SEC. “Moreover, progress toward bringing underrepresented racial and ethnic groups into the boardroom has been even slower.”

The move by NASDAQ can be seen as another step in implementing Environmental Social and Governance (ESG) principles. Last month, Werner touted its ESG credentials in a press release and concurrent report. The truckload carrier cited significant gains in energy efficiency as well as the diversity of its workforce, saying that 44% of its management is female or “ethnically diverse,” along with 57% of its associates. Its 12% female driver force is twice the national average, Werner said. 

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