Nanxi Liu knows she isn’t the typical director on the board of a publicly traded company.
At 30 years old, she’s the youngest board member of CarParts.com, a digital marketplace for auto parts. She’s also Chinese American and a woman.
Traditionally, boards of directors at public companies are composed of current or former chief executives and chief financial officers. And more often than not, those people are older White men.
In her “day job,” Liu is the chief executive and co-founder of digital signage software company Enplug. But in 2018, her home state mandated a corporate cultural shift. After #MeToo scandals destroyed and damaged companies, California passed a law requiring public companies headquartered in the Golden State to have at least one woman on their boards by the end of 2019.
On Tuesday, the Nasdaq composite index introduced a similar mandate in a move that would have considerably further reach. If approved by the Securities and Exchange Commission, most companies would, over time, be required to ensure at least one board director identifies as a woman and one identifies as LGBTQ or as part of an underrepresented minority.
Companies that don’t meet the criteria would have to explain why or face possible delisting. They would also have to regularly report on the diversity of their boards.
While many cheered the announcement as a move toward more-inclusive boardrooms, there was also pushback. Almost immediately, social media started flooding with accusations that the mandates are racist, sexist and an example of political correctness gone one step too far.
Sarah Zapp, who recruited Liu for the CarParts.com board position and is the chief executive of Beyond Board, said the notion that such appointments are “token” choices is false. Instead, she says, opening the search criteria beyond traditional choices widens the field to include a greater number of qualified candidates, like Liu.
“It’s not like they’re lowering their standards. They got an absolutely unique contribution to what was an all-male board,” said Zapp, of Liu.
Liu was not the first woman to serve on the company’s board, she said. And currently, she is one of two.
Liu, who served on the boards of a small bank in her 20s and was recruited for an advisory board seat at wealth advisory firm Covington Capital Management when she was 24, said she’s been able to provide an important perspective to the company.
As they overhauled their website, she was able to offer guidance on how the company’s interface and user experience could appeal more to women.
In that way, diversity on a corporate board — either in age or backgrounds or gender — could bring in more business, she noted.
“A big buyer right now of cars and car parts are millennials. … They preferred somebody who was running things rather than somebody who’s a professional board member. There are lots of folks who are retired, and they become board members,” Liu said.
That tendency, she added, is part of what leads to boards full of older White men.
“That’s why I think there’s a lack of diversity, people who were running companies in the past who retired — it’s not the most diverse group,” Liu said.
The Nasdaq includes many of the largest publicly traded companies, including Apple, Microsoft and Amazon. Companies would have two years to partially meet the new inclusivity benchmarks. Top-tier companies would be expected to meet the full requirements within four years.
The Nasdaq said the decision is based on more than two dozen studies that found a significant link between diverse boards and better corporate governance and financial performance.
“Nasdaq’s purpose is to champion inclusive growth and prosperity to power stronger economies,” Adena Friedman, the Nasdaq’s president and chief executive, said in a statement. “We believe this listing rule is one step in a broader journey to achieve inclusive representation across corporate America.”
For women who were interested in serving on corporate or advisory boards, Liu suggests serving on the boards of nonprofits and learning how to get more involved in organizations that you feel strongly about.
“For younger folks or for women — they’re really focused on just their job and executing and perfecting the work, their main job and doing that. Allocating time to pursue their own interests, it actually helps,” she said.
Corporate governance expert and vice chair of ValueEdge Advisors Nell Minow said the proposed Nasdaq rules are just one step in the right direction.
“It’s about time that the exchanges started stepping up to the plate on some of these issues. They’re in a much better position to address all kinds of corporate governance issues than the SEC or the states,” she said.
“All the studies show that companies that do have more diverse boards do better because you know who else is diverse? Customers. Shareholders. Employees.”