A federal appeals court in Louisiana has ruled Nasdaq’s DEI initiative to boost the number of women, racial minorities, and LGBTQ+ people on U.S. corporate boards is unconstitutional.

The Wall Street exchange’s proposed policy would have required most of the nearly 3,000 companies listed on Nasdaq to include at least one woman on their board of directors, as well as one racial minority or a person who identifies as LGBTQ+. The plan also required companies to publicly disclose the demographic composition of their boards.

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The proposal was approved by the Securities and Exchange Commission in 2021.

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On Wednesday, the Fifth U.S. Circuit Court of Appeals in New Orleans said the SEC shouldn’t have agreed to the policy.

“It is not unethical for a company to decline to disclose information about the racial, gender, and LGTBQ+ characteristics of its directors,” the ruling stated. “We are not aware of any established rule or custom of the securities trade that saddles companies with an obligation to explain why their boards of directors do not have as much racial, gender, or sexual orientation diversity as Nasdaq would prefer.”

Nasdaq said they stood by the proposed policy but has no plans to appeal.

“We maintain that the rule simplified and standardized disclosure requirements to the benefit of both corporates and investors,” Nasdaq said in a statement. “That said, we respect the Court’s decision and do not intend to seek further review.”

The SEC said in a statement they were “reviewing the decision.”  

The policy would have been the first of its kind for a U.S. securities exchange. Several members of Nasdaq have been at the vanguard of diversity policy in corporate America, including Apple, Google, and Microsoft.

The decision comes amid a rollback of corporate DEI initiatives in the face of right-wing boycotts and a determinative Supreme Court ruling in 2023 that banned affirmative action in college admissions.

Walmart, Harley-Davidson, Jack Daniel’s parent company Brown-Forman, Ford Motor Co., Lowe’s, Tractor Supply Co., John Deere, beverage company Coors, and large-equipment manufacturer Caterpillar Inc have all curtailed or eliminated inclusive initiatives with public declarations. 

Florida, Alabama and Utah are among the states that have eliminated DEI initiatives on state college campuses, leading to the shut-down of Pride centers and diversity discussions in classrooms.

In October, Democrats in Congress, led by out Rep. Robert Garcia (D-CA), appealed to leaders of Fortune 1000 companies to resist far-right calls to dismantle their DEI initiatives.

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