When the Nasdaq started requiring listed companies to include members of underrepresented groups on their boards of directors by 2026, LGBTQ+ executives gained unprecedented insight into their representation. Now, legal and regulatory challenges threaten the initiative. Fabrice Houdart and Wouter Torsin write that members of this community face significant hurdles as they rise through the ranks, resulting in a “lavender ceiling” that keeps them from ascending to the board.
The number of people identifying as LGBTQ+ in the US has grown to 7.6 per cent, but their representation on corporate boards is stagnating at around one per cent this year. Only 1.3 per cent of all board seats in companies listed in the Nasdaq stock exchange and 0.9 per cent of board seats in the Fortune 500 list are occupied by members of this community. The underrepresentation persists despite the presence of highly qualified candidates across corporate America, as illustrated by the members of the Association of LGBTQ+ Corporate Directors featured in the “75 LGBTQ+ Board Members Making a Difference” inaugural list published this past June.
Nasdaq’s board diversity rule
In 2021, the Nasdaq introduced a diversity rule requiring the boards of listed companies to include at least one female director and one other board member from an underrepresented group by 2026 or to explain non-compliance. Companies must also disclose the demographic breakdown of their boards, including LGBTQ+ membership. The underpinning behind the comply-or-explain approach is to help establish a culture of transparency and inclusion within corporate governance.
No effort of that amplitude has ever taken place globally. Yet, for LGBTQ+ people, this disclosure requirement finally brought unprecedented insight into their representation, helping uncover valuable information, as about 90 per cent of the exchange’s directors decided to disclose their sexual orientation and gender identity in the non-nominative disclosure format. In contrast, the data from Fortune 500 is based on an iterative process by the Association based on the public identification of board members.
However, the future of the Nasdaq board diversity rule is highly uncertain as legal and regulatory challenges loom, which could hamper further progress in understanding and fostering LGBTQ+ representation within the corporate landscape.
The “lavender ceiling” in practice
The low representation of LGBTQ+ individuals on corporate boards suggests that significant and distinct hurdles exist for members of this community as they rise through the ranks, resulting in what is commonly referred to as the “lavender ceiling.” Recent interviews conducted by Wouter Torsin and Vincent Compagnie with board directors reveal a range of pressing issues that impact their professional journeys. These conversations underscore the social and institutional biases that LGBTQ+ individuals experience throughout their careers. In many cases, these biases have created significant obstacles to networking opportunities, which remain the single most crucial factor in securing a board position.
As people navigate their career progression, they often encounter stigmatisation that can hinder their professional growth. Another barrier is the absence of LGBTQ+ champions within their organisations—mentors and advocates who can provide essential support, guidance, and visibility. Without such allies, LGBTQ+ directors may struggle to find their footing in environments that are not fully inclusive or welcoming. The cumulative effect of these challenges can lead to a frustrating and isolating experience, making it increasingly difficult for talented individuals to thrive professionally.
Another insight that emerged from the interviews is that the lived experiences of navigating the professional world as an LGBTQ+ individual often result in self-selection effects. Many community members move to friendlier metropolitan areas or actively seek careers in friendlier industries.
The data from Nasdaq’s board diversity disclosures illustrate this self-selection effect through notable industry-level differences. For example, while LGBTQ+ individuals hold only 0.2 per cent of all board seats in the manufacturing industry, they occupy 1.3 per cent of board seats in tech and 1.9 per cent in life sciences and pharmaceuticals. In fact, roughly 40 per cent of all board positions held by members of this community are in the life sciences and pharmaceuticals sector.
Positive market reactions
Despite the relatively low number of LGBTQ+ leaders in corporate America, other research by Wouter Torsin and Timothée Waxin highlights a more positive aspect: capital markets tend to value LGBTQ+ leadership.
When a firm announces the appointment of an LGBTQ+ executive, the market responds more positively than it does to similar announcements from other executives with an otherwise comparable background. This market premium only occurs for LGBTQ+ leaders whose sexual orientation is publicly known and visible to investors. Such responses reflect that investors not only value the skills and qualifications of these executives but also recognise the considerable challenges they have faced on their journey to leadership roles. When turning to board positions, the stock market reaction to new board members’ announcements is not statistically different from that of their non-LGBTQ+ counterparts. Markets thus do not appear to discriminate against board members on the basis of their sexual orientation.
These findings can encourage current and aspiring executives, directors, hiring committees, and executive search firms, as LGBTQ+ candidates can confidently be considered in their hiring processes without the fear of negative repercussions from the capital markets.
Also, understanding that investors could receive their appointments positively may help alleviate people’s concerns about the potential consequences of being openly out at work. This knowledge can empower them to embrace their authentic selves, fostering a more inclusive workplace culture where diversity is celebrated and valued.
Looking ahead
With initiatives such as the Nasdaq board diversity rule under scrutiny, community and corporate-level advocacy efforts have never been more critical if we want to remove the lavender ceiling that has historically impeded LGBTQ+ individuals from reaching corporate boards.
Further, growing and fostering formal and informal supportive networks is paramount to providing LGBTQ+ professionals with the mentorship and guidance necessary to navigate their careers successfully.
Yet, the structural biases and limitations within the current corporate governance landscape must be addressed. It is not only about increasing the numbers; it’s about a concerted effort to create an environment where LGBTQ+ voices are not only heard but valued: it’s about empowerment. Amplifying these voices is vital, as it encourages a more inclusive dialogue, enriches corporate culture, and enhances the overall workings of our boards.
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- This blog post represents the views of the author(s), not the position of LSE Business Review or the London School of Economics and Political Science.
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