Appeals court quashes NASDAQ’s woke race and gender quotas

The Fifth U.S. Circuit Court of Appeals in New Orleans decided Wednesday that the Securities and Exchange Commission (SEC) was in error when it okayed two NASDAQ listing rules that allowed DEI policies to apply to the boardroom. The ruling is in harmony with decisions across America to reverse DEI mandates and environmental, social and governance (ESG) factors in corporations that have angered and alienated their clientele.

NASDAQ was a glaring exception to that trend and had actually mandated its listed companies to reveal the racial and gender composition of their board members. Another mandate would have forced companies to meet ad hoc race and gender quotas or justify in written correspondence why such action had not occurred. The regulations would have forced boards to have at least one female director and another who was non-white or identifying as LGBTQ.

In striking down the NASDAQ mandates, the Fifth Circuit agreed with two groups that filed a lawsuit against the SEC for agreeing to NASDAQ’s DEI “targets” when they were in fact quotas. The SEC “has intruded into territory far outside its ordinary domain,” Judge Andrew Oldham ruled in his written statement representing the majority of the Fifth Circuit.

The SEC announced that it would be assessing the ruling and would have to decide whether to take the case to the Supreme Court, where it would likely be shot down again, the WSJ maintained. In a statement, NASDAQ indicated it would be dropping the issue, saying, “We maintain that the rule simplified and standardized disclosure requirements to the benefit of both corporates and investors. That said, we respect the Court’s decision and do not intend to seek further review.”

Sheng Li, counsel for the New Civil Liberties Alliance that had sued the SEC, expressed relief over the ruling, saying the DEI policies “strip people of their individuality and force companies to classify them based on gender, race, ethnicity, and sexuality.” She said the court “correctly recognized that neither SEC nor NASDAQ has any business regulating the composition of corporate boards along these controversial demographic dimensions.”

NASDAQ has argued that targets aren’t necessarily quotas because companies had the option of ignoring the instructions and then justifying that non-compliance in a letter of explanation. The SEC had suggested that imposed diversity was good for business because some studies had linked DEI rules to a stronger corporate profile.