From their press release:
On August 9, 2021, the Alliance for Fair Board Recruitment (AFFBR), a nonprofit membership organization incorporated in the state of Texas, filed a Petition for Review in the United StatesCourt of Appeals for the Fifth Circuit seeking a review of the approval by the Securities and Exchange Commission (SEC) of the corporate board diversity quotas proposed by the Nasdaq stock exchange. ...
As AFFBR explained in a comment submitted to the SEC, Nasdaq's discriminate-or-explain rule also exceeds its role and the authority granted by federal securities law and also violates core Bill of Rights guarantees against compelled speech and discrimination based on sex and race by stereotyping all people of the same skin color or sex as being alike and interchangeable. Further, the rule will not deliver the promised benefits. As Harvard law professor Jesse Fried has explained, numerous studies have shown "that stock returns suffer when firms are pressured to hire new directors for diversity reasons."
NASDAQ offers a summary of the listing standard here. SEC Commissioners Lee and Crenshaw's statement in support of the standard is here. SEC Commissioner Peirce's statement in opposition to the standard is here.
Andrew Stuttaford comments here. In a comment on the original draft proposal, Stuttaford observed:
NASDAQ, a private institution, is, of course, entitled to set its own rules, just as (to quote the Journal) “banks and asset managers” are entitled to try to push their clients or portfolio companies to change their ways. Nevertheless, it is hard to miss the mission creep that is currently occurring across a wide range of institutions, some private, some parastatal (take a look at the effort centralbanks are increasingly making with regard to climate change) to impose different aspects of a “progressive” agenda on private companies without the bother of going through the usual democratic mechanisms.
In my view, this is a legitimate concern.
Asking corporate executives to take on governmental functions not only asks them to undertake tasks for which they are untrained and for which their enterprise is unsuited, it also subverts the basis of a liberal democracy. Government efforts to solve social problems are inherently limited by the checks and balances baked into the American political system. "Woke capitalism" bypasses those checks and balances by asking unelected executives to undertake solving social ills.
As Milton Friedman explained, back in 1970, liberals of that era argued that society was plagued by a host of ills that were "too urgent to wait on the slow course of political processes, that the exercise of social responsibility by businessmen is a quicker and surer way to solve pressing current problems.” Accordingly, Sixties-era liberals seized on using CSR as “a quicker and surer way to solve [these] pressing current problems.”
Friedman rejected this line of argument as fundamentally anti-democratic:
What it amounts to is an assertion that those who favor the taxes and expenditures in question have failed to persua de a majority of their fellow citizens to be of like mind and that they are seeking to attain by undemocratic procedures what they cannot attain by democratic procedures. In a free society, it is hard for “good” people to do “good,” but that is a small price to pay for making it hard for “evil” people to do “evil,” especially since one man's good is another's evil.
Why was the challenge to the Nasdaq diversity rule Filed in the federal court of appeals instead of a district court? Keith Paul Bishop examines the question. https://t.co/5c2OO3v813
— Steve Bainbridge (@PrawfBainbridge) August 20, 2021
