(Bloomberg) — Nasdaq Inc.’s effort to promote diversity on corporate boards discriminates against men and White people, a group of Republican-led states said in a court filing.
Texas Attorney General Ken Paxton on Thursday said Nasdaq-listed companies would have to “overlook a person’s relevant qualifications under the guise of promoting diversity” if forced to follow the rule requiring that their boards must have at least one self-identified female and one underrepresented minority or LGBTQ person.
“It is unconscionable to see discrimination so blatantly put on display by requiring these companies to hire employees based solely on race, sex, and sexuality,” Paxton said in a statement.
Texas was one of 17 states this week that submitted a brief in the federal appeals court in New Orleans supporting a legal challenge filed against the U.S. Securities and Exchange Commission over its approval of the rule in August.
The SEC lacks authority to issue the “crude and odious” rule, the GOP-led states said in their brief supporting the lawsuit, adding, “The law is blind — the same legal standards and protections apply regardless of the race, ethnicity, or sex that is treated differently.”
In its approval of the rule, the SEC said the rule wouldn’t impose “any burden on competition that is not necessary or appropriate.”
The challenge is being led by the Alliance for Fair Board Recruitment, a group led by Edward Blum, who has also led several lawsuits over affirmative action in college admissions.
Nasdaq’s plan is the most significant diversity requirement in the U.S. since California passed laws in 2018 and 2020 that mandated diverse boards for companies headquartered in the state. The California rule has also been challenged by the Alliance for Fair Board Recruitment.
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