The U.S. Securities and Exchange Commission (SEC) has approved proposed rules by Nasdaq Inc. (NDAQ  ) that would require firms to meet diversity requirements if seeking listing.

"We are pleased that the SEC has approved Nasdaq's proposal to enhance board diversity disclosures and encourage the creation of more diverse boards through a market-led solution," Nasdaq said in response. "We look forward to working with our companies to implement this new listing rule and set a new standard for corporate governance.

Firms seeking a listing on the exchange will be required to disclose the demographics of their c-suites from now on and maintain a minimal degree of diversity along the lines of gender, race, and sexual orientation. Under Nasdaq's changes, firms will be required to have at least one woman on their board and either one board member of a racial minority or a board member who is gay, lesbian, transgender, or queer.

If companies are in violation of these requirements, they must write to Nasdaq why they have not met minimum diversity requirements.

"These rules reflect calls from investors for greater transparency about the people who lead public companies, and a broad cross-section of commenters supported the proposed board diversity disclosure rule," said SEC chairman Gary Gensler.

True to what Gensler said, the proposal by Nasdaq addresses a long-critiqued lack of diversity at the executive level. According to a 2020 study by the Alliance of Board Diversity, over 80% of directors at Fortune 500 firms were white. In a similar study, Spencer Stuart found that while more women and ethnic minorities had been assigned to board positions compared to a decade ago, the vast majority of seats were occupied by whites. According to a study Nasdaq conducted in 2020, three-quarters of companies listed at the time wouldn't have met its new requirements.