A court has ruled against a proposal by the Nasdaq market index to impose diversity, equity, and inclusion standards on company boards.

The proposal would have been the first of its kind and would have required that the 3,000 companies listed on the index have at least one woman on their boards of directors, one person who is a minority, and one LGBTQ person.

'We respect the court’s decision and do not intend to seek further review.'

On Wednesday, the U.S. Court of Appeals for the Fifth Circuit in New Orleans ruled against the Securities and Exchange Commission accepting the DEI proposal from Nasdaq.

“It is not unethical for a company to decline to disclose information about the racial, gender, and LGTBQ+ characteristics of its directors,” read the ruling. “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.”

The Nasdaq index released a statement defending the standard.

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

The SEC said it was still determining its next steps in light of the ruling.

A group of Republican attorneys general questioned the standards in a letter to Nasdaq CEO Adena Friedman in October.

“Given Nasdaq’s zealous desire to impose quotas on companies, several of which are headquartered in our states, we are interested in learning what policies Nasdaq has in place to ensure its listed companies are following federal and state anti-discrimination laws,” they wrote in the letter.

Democrats in Congress issued a letter in October asking companies to continue implementing DEI policies after pressure from conservative activists forced many to drop the controversial standards. John Deere, Molson, Harley-Davidson, and Ford were among those companies to reject DEI after initially caving to demands from the left.

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