The Securities and Exchange Commission on Friday approved Nasdaq’s proposal to require diversity disclosures for companies’ boards in its listing rules.

Among other things, the Nasdaq
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proposal would ask companies to explain why they don’t meet race and gender targets for company boards, which will differ depending on the company’s size and other factors. For most companies in the nation, the objective would be at least two “diverse” board members: one female, plus one member of an underrepresented minority group or someone who identifies as LGBTQ.

It’s the latest effort in a widespread but controversial push for board diversity that has included legislation in California, which was the first state to mandate diversity on boards of publicly held companies but is facing legal challenges to the law.

See: Since nation’s first law requiring women on boards, the number of female directors at California companies has doubled

Other influential voices in the push include Goldman Sachs Group Inc.
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which last year said that in 2021 it would only underwrite IPOs of private companies that have at least two “diverse” board members.

The SEC approval said the Nasdaq proposal would “establish a disclosure-based framework and not a mandate.” In an interview last year, Nasdaq Chief Executive Adena Friedman called it “a comply-or-explain rule.”

The approval notes that according to the Nasdaq proposal, a company that does not want to meet diversity objectives nor explain why “may transfer its listing to a competing listing exchange.” But the proposal also provides flexibility and time for companies to explain themselves, the SEC points out.

See also: America’s most prestigious corporate boards are still being filled by mostly white men

Republicans on the U.S. Senate Banking Committee opposed the Nasdaq proposal, and ranking member Pat Toomey, R-Pa., said in a statement Friday that “By defining diversity by race, gender, and sexual orientation, Nasdaq’s mandate will inevitably pressure companies to subordinate crucial factors such as knowledge, experience, and expertise when selecting board members.”

Bonnie Hagemann, co-founder of WomenExecs on Boards, told MarketWatch on Friday that it’s a “misnomer” that critics of the diversity push say that diversifying a board means lowering standards.

“It actually forces us to find someone who fits both the criteria and who fits diversity,” Hagemann said, adding that WomenExecs on Boards is a network made up of Republicans, Democrats and more, and that she herself is a Republican.

She said progress on gender equality in boardrooms has been “extremely slow,” and that she hopes other influential organizations follow Nasdaq’s example.

For more: S&P 500 companies that performed better during the pandemic had diverse boards in common

Nasdaq’s proposal also aims to establish consistent and comparable diversity statistics, which it thinks will be useful to investors.

“These rules will allow investors to gain a better understanding of Nasdaq-listed companies’ approach to board diversity, while ensuring that those companies have the flexibility to make decisions that best serve their shareholders,” SEC Chairman Gary Gensler said in a statement.

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