Who Should Set The Rules?
Bloomberg Markets|April - May 2021
TWO OF THE MOST powerful women in finance are at odds over how to use their power.
SONALI BASAK

In one corner is Adena Friedman. The chief executive officer of Nasdaq Inc. oversees the Nasdaq Stock Market, which pioneered electronic trading 50 years ago and is now the primary exchange for all-powerful technology companies including Amazon, Apple, and Microsoft. Nasdaq is seeking to change its listing requirements to require companies to disclose diversity on their boards—and explain themselves if they don’t have directors who self-identify as a woman or a member of an underrepresented minority. The proposal, under review by the U.S. Securities and Exchange Commission, aims to be “one step in a broader journey to achieve inclusive representation across corporate America,” Friedman, 51, said in the company’s Dec. 1 statement.

In the other corner is Stacey Cunningham, president of NYSE Group, which oversees the New York Stock Exchange, the oldest and most famous U.S. stock market. Like Friedman, Cunningham, 46, is the first woman in her role. While she says she supports Nasdaq’s goal, she doesn’t think it’s the role of exchanges to try to change society. “The data is very, very clear that businesses perform better when there’s more diversity on their board,” Cunningham told me late last year in a Bloomberg TV interview. However, she added, “When we use exchange listing standards to require things like diversity profiles or others, we’re defining the investable universe.”

It’s an increasingly difficult question for business leaders: Whose job is it to define and encourage diversity? And even more pointedly: What is the responsibility of a powerful platform like a stock exchange? These two businesses are under pressure from activists to act as a form of social police and to produce data tracking progress on topics ranging from carbon emissions to the proliferation of automatic rifles. Some critics say Nasdaq’s proposal doesn’t go far enough—New York City’s Office of the Mayor believes it should also include disclosure of board members with disabilities.

The fundamental issue here is, where do the responsibilities of the two exchanges begin and end? This question has sharply divided politicians, investors, and corporations. Some argue that elected officials are better suited to establish policies that address diversity. Yet Nasdaq’s proposal has won support from big U.S. pension funds and companies that are seeking greater accountability and clearer data.

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