Wokeness is in retreat, but its stench will be hard to eliminate.
Consider the curious case of the bone-headed “Nasdaq diversity rules” — edicts by the stock market giant to force every company that “lists” there to choose a board of directors that stresses intersectionality — racial, sexual and gender diversity — as opposed to competence.
Sure, diversity is a worthy goal, but demanding outcomes in hiring through practices such as Diversity Equity and Inclusion is the most counterproductive way to run a business that woke mankind ever thought of. Forcing it on corporate boards as Nasdaq has been doing since 2020 is particularly scary. And now it’s illegal.
Boards perform a vital function of oversight of public companies, and the C-suite. Making sure the CEO isn’t robbing the place blind is what the law — established through the Depression-era Securities and Exchange Act — demands from directors.
Nasdaq turned decades of corporate law on its head at the height of the so-called social justice movement. It came at a particular hysterical time in American history, when the left tried to convince the country it was inherently racist because of the police killing of an ex-con named George Floyd as he was resisting arrest.
That was then. These days, sanity is returning and woke is in retreat. Courts are ruling that DEI is illegal.
The Fifth Circuit federal court did just that, telling Nasdaq it will have to end the insanity.
Yes, the ruling is a sign wokeness is dying. But it’s not quite dead. The rules will likely find an afterlife because of a quirk in the disclosure system, and the way the securities regulators might interpret the court finding, The Post has learned.
Reminder: Nasdaq, like its main competitor, the New York Stock Exchange, is a stock market; it wasn’t created to serve as a lefty NGO. One of its functions is to make sure people can buy and sell shares, in an orderly fashion, of the companies that “list” to trade there. Another is to ensure that listed companies follow basic corporate-governance rules that protect investors, including hiring competent directors.
Under CEO Adena Friedman, Nasdaq joined the social justice movement that was all the rage in 2020. She demanded that listed companies stock their board with directors who were not the target of progressive ire during that eerie time, aka straight white men.
“Each Company, except as described below in, must have or explain why it does not have, at least two members of its board of directors who are Diverse, including at least one Diverse director who self-identifies as Female; and at least one Diverse director who self-identifies as an Underrepresented Minority or LGBTQ+,” the Friedman-led Nasdaq said in its edict.
As I point out in my book on progressivism run amok, “Go Woke Go Broke; The Inside Story of the Radicalization of Corporate America,” the idiocy of this rule isn’t confined to the very real fact that it’s illegal by any fair reading of the securities laws or various civil rights acts.
There are also very real studies with control groups, margins of error, etc., that show that there’s no link between performance and diversity.
Plus, this rule doesn’t apply to all those Chinese companies that Nasdaq lusts for to pay its listing fees.
Companies hailing from one of the world’s most oppressive regimes — that are literally controlled by the repressive Chinese Communist Party — get a free pass. No members of the persecuted Uyghur minority need apply, according to Friedman & Co.
Chinese listings can get away with placing a couple of women from the CCP to be directors.
Nasdaq has argued to me the rules weren’t totally mandatory — though it always reserves the right to reject a listing. It also stressed that the rules were about disclosure, which sounds quaint until you realize that companies are supposed to disclose stuff investors care about like earnings, not their social justice preening.
On top of that, the disclosure part had an interesting compulsory element. A company board’s diversity data, listed in its public disclosure filings, could be easily downloaded on the SEC’s website known as EDGAR. This enabled powerful social activist groups with ties to the lefties who run the Biden White House — the Human Rights Campaign, the Center for American Progress — to jump into the debate and pressure companies to up their diversity game as a de facto woke enforcement staff of the Nasdaq.
Then something brilliant happened. Someone sued. Not Nasdaq, but its regulator, the equally woke Securities and Exchange Commission, which approved the measure. The lawsuit argued that stock markets weren’t created as political tools of the left. A federal court agreed.
Case closed, right? Not quite. The mandates could live on in a perverse way because of the disclosure system that each public company must comply with.
The way the people at the Nasdaq explained it to me, the rules were legal until the courts ruled they weren’t. That means the EDGAR system likely continues to keep a record of thousands of companies that compiled the useless and illegal data the Nasdaq asked for, they tell me, even after the Nasdaq is supposed to vacate the mandates in early February.
They could be around well into perpetuity for the likes of the Human Rights Campaign to enforce their brand of social justice, securities lawyers I speak to say.
As one corporate lawyer told me: “Just think how dumb it was to have a stock exchange telling companies what slots you have to fill while giving the Chinese a pass. Then they will just sit there, which is even dumber.”
