Nasdaq is committed to achieving “inclusive capitalism,” said CEO Adena Friedman at the Fast Company Innovation Festival. What does that mean for the stock exchange? Bringing more first-time investors into the fold, creating an ecosystem to allow more companies to go public, and changing existing structures so that all stakeholders in a business share a company’s wealth.
Friedman wants everyone in America to be given equal access to the market. “It’s a matter of giving them the opportunity to raise capital around an idea, create jobs, grow their business, and succeed in the economy that they operate in,” she says. “We want to make sure that every person in this country has a sense that they can be a part of that.”
Wealth disparity continues to widen, she said, because the wealthy in American society have the means to access private company shares and amass more wealth. To help fix those imbalances, and bring more Main Street businesses into the Nasdaq, the exchange company last year released a new statement of purpose, a Blueprint for a Better Tomorrow, following on from its Revitalize project in 2017. Both largely focus on reforming outdated regulations and structural barriers, to make it “less onerous for public companies to come into markets,” and more likely for them to succeed. “That’s really the cornerstone of why Nasdaq exists,” Friedman says, asserting that the company started in 1971 as an exchange that allowed smaller companies to enter and raise capital.
These modernized proposals aim to steer toward stakeholder primacy, as opposed to shareholder primacy, whereby value is created not only for investors, but for employees, clients, and the general good of the public. The proposals met resistance from some “hard-edged investors,” who felt that their needs were being pushed down the priority chain. Friedman reinforced that the company is still dedicated to the ultimate goal of “long-term shareholder return,” but said it’s important to show investors that they’ll ultimately benefit if all the constituents—who are driving the success—are included.
Friedman wants to welcome a wave of younger and more diverse investors. About 55% to 60% of Americans own equities, she said, either directly or via pensions and mutual funds. “How do we turn that into 100%?” The key for Nasdaq is to “minimize friction and maximize access,” and to find exciting ways to engage new investors, said Friedman, 51, who started at the company at the age of 23, as a product manager.
One way could be to leverage Nasdaq’s robust trading technology, such as it’s done in a partnership with the Football Index, a soccer betting platform that works like a stock market. Alliances such as these could be a gateway for newcomers to then move into capital market investment. “They can have a lot of fun leveraging the concept of a market to bet on sports,” she said.
New investors should be given the knowledge of how to best succeed once investing, which is why the company has released a suite of educational tools. And, public policy plays a key role in inclusion. Many people in low-income communities don’t have access to banking in the first place, so if the government were to implement policies to encourage banks to enter those communities, including supporting them financially, people could start using banking services, and gradually start businesses and create jobs. Then: “We would love to have them come into markets,” she said.
But if people are simply not given the basic tools to succeed in the economy, “How can we expect all boats to rise?” she asked. “How can we expect to create a more inclusive economy?”