Board Diversity Disclosure After the Nasdaq Rule Fell: What Companies Still Report

Board diversity disclosure in the United States is now voluntary at the federal level: the Fifth Circuit en banc struck down Nasdaq's board-diversity disclosure rule in December 2024 (Alliance for Fair Board Recruitment v. SEC), holding the SEC lacked statutory authority to approve a rule not aimed at fraud or disclosure of financial information, and the commission did not seek Supreme Court review. What remains is a patchwork: California's statutes sit invalidated as unconstitutional after litigation, while five-plus states (including New York, Washington, Illinois and Maryland) maintain their own disclosure statutes; the SEC's board-diversity description requirement under Item 407(a) of Regulation S-K continues to apply; and investors' stewardship policies — and the Nasdaq-listed companies that adopted diversity matrices voluntarily — keep much of the practice in place.

USA Post publishes information about disclosure regulation, not legal advice.

What did the Nasdaq rule require, and how did it fall?

Approved by the SEC in August 2021, the rule required Nasdaq-listed companies to disclose board members' self-identified diversity characteristics in a standardized matrix and to have, or explain why they did not have, at least two diverse directors (one who self-identifies as female, one as an underrepresented minority or LGBTQ+); smaller companies got phase-in time and flexibility. The National Center for Public Policy Research and the Alliance for Fair Board Recruitment challenged it as exceeding the SEC's authority; a Fifth Circuit panel upheld the rule, and the en banc court reversed 9-8 in a December 2024 opinion holding that the rule's diversity targets were not disclosure rules but substance regulation beyond the commission's delegated power. The effect: listed companies no longer have to file the matrix, and Nasdaq removed it from its rules in 2025 — though companies may continue reporting voluntarily, and many do.

What survived the ruling?

Three regimes. First, the SEC's Item 407(a) proxy disclosure: since 2010 (amended 2018 to add self-identified diversity characteristics), companies choosing to have a diversity policy must describe its implementation and the consideration of diversity in nominee identification — an opt-in disclosure, not a mandate, that stayed untouched because it regulates actual disclosure. Second, state statutes: California's SB 826 (women) and AB 979 (underrepresented communities) boards mandates were both held unconstitutional under the state constitution's equal-protection principles by California courts (2022-2023), but disclosure-only statutes elsewhere — New York's reporting law for domestic corporations, Illinois', Maryland's, Washington's — continue in force, obligating disclosure rather than quotas. Third, the international layer: EU directives and national rules (France's quota, Germany's, the UK's targets) apply to subsidiaries and listed arms abroad, keeping global issuers reporting regardless of U.S. law.

What do investors now expect?

Continued voluntary disclosure at large caps. BlackRock, State Street, Vanguard and the stewardship institutional base maintained diversity-consideration policies, though 2023-2025 retrenchment — legal attacks on ESG, the anti-ESG counter-wave, and index investors' quiet withdrawal from some specific voting policies — softened the hard expectations. ISS and Glass Lewis maintain board-composition policies (gender diversity at all-male boards, some racial/ethnic considerations) but relaxed sanctions: the 2023-2025 policy cycles replaced automatic against-votes with case-by-case evaluation. The observable market fact through 2025: disclosure rates at S&P 500 companies remain near-universal — because institutional engagement asks for the data even where law does not — while smaller companies, freed from Nasdaq's mandate, disclose at lower and falling rates.

What are the legal risks in both directions?

Companies navigate a pincer. One side: discrimination claims — the 2023-2025 wave of suits by groups like the Alliance for Fair Board Recruitment and America First Legal targeted corporate diversity programs, boards included, under Title VII and Section 1981 theories after the Supreme Court's 2023 Students for Fair Admissions decision ended affirmative action in university admissions and energized challenges to corporate programs; several companies narrowed or reworded board-diversity consideration policies in response. The other side: state anti-discrimination statutes — some states require consideration of demographic representation in appointments to state-linked boards, and public pension funds press portfolio companies. The drafting response everywhere: aspirational consideration language ("the nominating committee considers diverse backgrounds including...") rather than mandates, and disclosure of process rather than targets.

How should boards govern the question now?

1. Inventory applicable law by state of incorporation, listing venue and international footprint — the patchwork applies differently to each entity.
2. Decide disclosure posture deliberately: maintaining the diversity matrix voluntarily satisfies investor data requests; dropping it should be a communicated decision, not drift.
3. Frame nominating-committee diversity consideration as one factor among skills and experience — the legally durable posture after the 2023-2025 litigation wave.
4. Track the skills matrix as the primary disclosure: the proxy's competency disclosure carries the substance of board composition whatever the demographic reporting.
5. Watch the successor regimes: SEC rulemaking authority post-Fifth Circuit is narrowed, but state legislatures and international rules continue to move.

Is board diversity disclosure fading or transforming?

Transforming from mandate to data practice. The U.S. legal mandates fell; the investor data demand and the international requirements did not, and the disclosure infrastructure — matrices in proxies, data in stewardship platforms — remains built. What changed is the compulsion's source: from exchange rules to a choice each company makes with its investor base, priced in engagement and proxy votes rather than in listing status. Boards that treat the question as "what does our ownership ask" will find the answer varies — and disclose accordingly.