It's not too early to call Nasdaq's rebranding a success.

 

Last Tuesday, Nasdaq filed a proposal with the SEC to introduce a diversity rule for the participants in their index.  The rule will require listed companies to have at least one woman on their boards, in addition to a director who is a racial minority or one who self-identifies as LGBTQ.  (Osipovich & Otani, 2020)

 

Traditionally, what has differentiated Nasdaq from the other exchanges was the heavy presence of tech stocks.  But the S&P 500 has been adding more tech to their mix over the past few years and on December 21st, they will add Tesla.  So they have effectively usurped Nasdaq's tech-heavy positioning.

 

That means Nasdaq needs a new way to differentiate themselves.  Wisely they chose to champion diversity. 

 

It's not just about being trendy, although it is, with the BLM and #metoo movements in the forefront these days. 

 

It's also about being more successful.  Research has shown that companies with diverse boards are more effective.  Specifically the presence of women at the top levels of management and leadership correlate with better financial performance for companies. (McElhaney & Mobasseri, 2012)

 

Boards with female directors make better acquisition and investment decisions. (Chen, Leung, Song & Goergen, 2019)

 

And a recent study from McKinsey found that the companies with the greatest ethnic diversity on executive teams outperformed those with the least by 36% in profitability. (Lee, 2020)

 

So an investment in Nasdaq will not only support diversity, but it is also likely to reap greater financial rewards.

 

And, it's a blissfully easy positioning to communicate. 

 

With all the indices breaking records these days it is a bit difficult to see if Nasdaq's bounce is due to their new brand positioning.  And with 3/4 of the 3000 listed companies not meeting the new diversity criteria it will be a while before the full results of the change are realized.  (Cutter, 2020)

 

But, I really think they are onto something.

 

 

Osipovich,A. & Otani, A. (2020, December 2)  Nasdaq Seeks Board-Diversity Rule That Most Listed Firms Don’t Meet.  wsj.com.  Retrieved December 9, 2020, from https://www.wsj.com/articles/nasdaq-proposes-board-diversity-rule-for-listed-companies-11606829244 

 

McElhaney, K. & Mobasseri, S. (2012, October) Women Create A Sustainable Future. UC Berkeley Haas School of Business.  retrieved December 9, 2020, from  https://www.eticanews.it/wp-content/uploads/2012/11/Report-Women_Create_Sustainable_Value.pdf

 

Chen, J., Leung, W., Song, W., & Goergen, M. (2019, September 12)  Research: When Women Are on Boards, Male CEOs Are Less Overconfident.  hbr.org.  Retrieved December 9, 2020, from https://hbr.org/2019/09/research-when-women-are-on-boards-male-ceos-are-less-overconfident?ab=at_articlepage_whattoreadnext

 

Lee, A. (2020, September 22)  Diversity Matters, Disclosure Works, and the SEC Can Do More.  sec.gov.  Retrieved December 9, 2020, from https://www.sec.gov/news/speech/lee-cii-2020-conference-20200922#_ftn5

 

Cutter, C. (2020, December 7)  Companies Face New Pressures to Diversify Boards. It’s Sensitive.

 wsj.com.  Retrieved December 9, 2020, from https://www.wsj.com/articles/companies-face-new-pressures-to-diversify-boards-its-sensitive-11607380004