It becomes troubling when one of the gatekeepers of a free market wants to install social guardrails.

There are a pair of social realities we as a nation have witnessed go through practice and subsequent failure. One is an older and essentially dissolved concept, the other a still implemented yet consummate shown to avoid success. The first is Affirmative Action, the once-touted demographic quota policy that has been all but abandoned. The other is ‘’Get Woke, Go Broke’’ a less-organized but still recognizable practice of companies engaging in social activist signaling that ultimately leads to a negative return on investment.

Despite these two clear misfires it is amazing to see that one of our largest financial systems wants to implement these very policies. The nation’s second-largest stock exchange – NASDAQ – has announced that it intends to impose diversity standards on the companies it lists on its stock tables. For companies to remain as a Tradable entity they will be required to prove that the upper management meets a minimum requirement of checked off demographic category representation.

If approved by the Securities and Exchange Commission, all companies listing on the Nasdaq exchange will have to publicly disclose “consistent, transparent diversity statistics” regarding their board of directors. And most Nasdaq companies would have to have, or explain why they don’t have, at least two “diverse” directors, including one female and one who self-identifies as either “an underrepresented minority” or LGBTQ+.

The idiocy behind this abounds. For one, the reasons that Affirmative Action died off as it did was due to the unintended consequences it provoked. For one, when you hire based on social categories you end up not hiring based on the best-qualified. One of the most blatant examples of this was shown in professional athletics. While the rosters of most major sports are populated with minority members, if Affirmative Action were instituted that would mean that large percentages of POC players would need to be cut, as they were overrepresented based on population figures. 

Imagine what the resulting product would be if an NBA roster is required to have no more than 15% black players. How much of a drop off would we see in quality if Major League Baseball had to cull its Latino representation to make room for more Caucasian players in uniform? Yet NASDAQ ignores the blatancy of this bypassed system. 

If after the two year period of compliance — four years for the larger corporations – a company still fails to meet the dictated diversity they can be threatened with becoming delisted. This is no small matter, once you look at the sheer amount of companies affected. According to the most recent survey taken of the boards of Fortune 500 corporations, women are installed in just 22% of the seats in corporate boardrooms; black membership in these position stands at around 9%.

This will be a remarkable required makeover across the trading board. If these numbers are even close to the NASDAQ participation, it means that somewhere near 2,500 companies are currently out of compliance and under the threat of being delisted. Does the exchange seriously want to risk eliminating a significant share of its participating listed stocks?

Should this policy be accepted (NASDAQ has filed its request for approval by the Securities and Exchange Commission) all companies would be required to file their diversity composite with the exchange within one year, and it will be expected to be brought into compliance with the diversity standard within a two year period. And yes, this call to activism is a result of the year we have witnessed with social protests and riots taking place.

”Anthony Romero, the executive director of the American Civil Liberties Union, said in a statement. “Nasdaq’s efforts to prod and push its listed companies is a welcomed and necessary first step.” That the composition of U.S. business leaders does not reflect the broader American population was highlighted further earlier this year during the nationwide protests for racial justice.

It is bad enough when the ACLU is weighing in on this matter, but note the subtle inference of greater action to be taken, based on the ‘’first step’’ comment. This could become an ever-deepening rabbit hole.

Of course the potential for mayhem and confusion is fertile in this era of inclusion. Will we see a version of something taking place in high school and collegiate sports, where those who choose to self-identify as another category are granted the chance to participate as they elect? What will happen if board members simply declare themselves to be in one of the required demographics in order to satisfy the mandate from NASDAQ? 

Forced acceptance is never truly accepting. The trouble sure to rear up from this will spike on a quarterly level.