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Nasdaq's Adena Friedman on the Importance of Advancing of Boardroom Diversity

During a recent webinar with the @30PercentCo, @Nasdaq President & CEO @AdenaTFriedman spoke about the importance of diversity in the boardroom and the role exchanges play in advancing diversity.

Addressing and improving boardroom diversity has been a top priority for corporate boards for several years, especially as some states, like California, implement laws requiring public companies to increase female and minority representation. During a recent webinar with the Thirty Percent Coalition, Nasdaq President and Chief Executive Officer Adena Friedman spoke about the importance of diversity in the boardroom and the role exchanges play in advancing diversity.

“One of the things we’ve really been focused on, as a partner to companies, is helping them understand the benefits of diversity on boards,” Friedman said during an interview with the Thirty Percent Coalition Co-Founder and Executive Director Charlotte Laurent-Ottomane. “Having women and people of color on boards gives companies the opportunity to have more accurate representation in leadership of the communities where they operate, the employees that are driving their success, and, of course, the customers that they’re serving.”

“If you don’t have those diverse voices that are helping lead the company, then, frankly, it can impede your progress, can impede your success, and you can make mistakes,” Friedman continued.

As Freidman noted, recent research shows how diversity can create real value. Greater board diversity is correlated with lower stock price volatility, more investment in research and development projects, and better innovation, according to a 2017 report, “Board Diversity, Firm Risk and Corporate Policies,” by Professors Gennaro Bernile, Vineet Bhagwat, and Scott Yonker. Furthermore, research institution FCLTGlobal’s analysis of MSCI ACWI firms between 2010 and 2017 found that “the most diverse boards added 3.3% to return on invested capital (ROIC) as compared to their least diverse peers.”

In recent years, amid some new legislation and heightened awareness around social inequalities, many companies have accelerated their efforts to add diverse board members, Laurent-Ottomane said. Given this focus, Friedman encouraged boards to broaden their networks to find great candidates.

“The one thing I always hear is that it’s a supply problem,” said Friedman. “It’s not a supply problem. There are so many qualified candidates out there, so many of what I call hidden assets inside of companies or organizations that are ready to have that experience.”

Some organizations, such as the Thirty Percent Coalition member organizations, provide resources to help companies identify board candidates, but firms can also leverage “technology tools that have an entire network of qualified candidates [as well as] advisory services like ours that can help you tap into your organization, [and] others that allow you to broaden your network enough to be able to find more diverse candidates and extremely qualified candidates,” Friedman said.

In addition to providing board solutions and advisory services, Nasdaq also operates a stock exchange, a venue that allows companies to tap into the public markets filled with millions of investors.

“When we think about governance, that’s one of the core criteria that we focus on in our review of companies,” Friedman said. “We look at the integrity of the board members, and we look at the independence of the board members to make sure that the board that will ensure the financial integrity of the company and will be a good voice and a fiduciary to the shareholders.”

“So, we’ve become a partner to our companies in helping them understand those benefits and lean into diversity as a core differentiator and then, of course, to communicate that benefit and diversity out to their shareholders,” said Friedman.

For additional insights about increasing diversity in senior leadership from Thirty Percent Coalition, watch Charlotte-Laurent-Ottomane on TradeTalks.

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