https://www.sec.gov/rules/final/34-40018.htm (citing Reebok Intl Ltd. (Mar. Gorman has also tapped Reid to build Morgan Stanley's new Institute of Inclusion group to promote diversity within Morgan Stanley, which he will chair. Morgan Stanley's HBCU Scholars program provides scholarships for students at three Historically Black Colleges and Universities. [104] The proposal was submitted by Comptroller DiNapoli, as trustee of New York States Common Retirement Fund for public employees, which owns shares in Amazon. The $1.9 trillion-asset bank has hired the law firm Covington & Burling to conduct the review and plans . [52] Practitioners also stress the importance of identifying and engaging the process owners (e.g., the Chief Executive Officer, Chief Legal Officer or Chief Diversity, Equity and Inclusion Officer) as the persons who will actually drive the implementation of recommended initiatives. Concerns related to workforce diversity, treatment of minority workers, environmental justice in communities of color, surveillance, and civil rights are just some of the controversies that have troubled Amazon. [114] For example, current and former Amazon employees have accused the company of allowing racism to permeate its operations. While the majority of investors perceive the funding landscape as balanced, their actual investments in multicultural and women-owned businesses are highly skewed. (go back), Posted by Ron S. Berenblat and Elizabeth R. Gonzalez-Sussman, Olshan Frome Wolosky LLP, on, Harvard Law School Forum on Corporate Governance, on Racial Equity Audits: A New ESG Initiative, The Illusory Promise of Stakeholder Governance. [134] ISS will use the results from its Annual Benchmark Policy Survey as a key component of ISS annual policy development process to assess potential policy changes across regions and markets for 2022 and beyond. [135] While ISS has largely appeared hesitant to support Racial Equity Audits in the circumstances presented in the 2021 proxy season, the results from its Annual Benchmark Policy Survey could change its future guidance and recommendations on such audits. [127], According to SEIU, BlackRock decided that the SEIU proposal is too important to wait until they are voted on at their shareholder meetings [128] and announced its plans to voluntarily conduct an independent racial audit of its operations. [51], Practitioners also believe that the audit process can be important for companies as a way to build trust with their stakeholders. hj0_NtJ)=;nhuB)ex(X V *pwztOxqzYr22#LPL>/k~i6jEi|MR Image Two Black employees at JPMorgan said race was a constant undertone in their . Hours after CEO decried inequality, JPMorgan seeks to quash call for The increasing focus on environmental, social and governance (ESG) considerations at public companies, including this years highly publicized proxy contest at Exxon Mobil Corporation (Exxon), has demonstrated the growing importance of understanding ESG and the implications it can have for investors and companies. Prior to the ESSA, IDRA developed the Six Goals of Educational Equity (2006). The Sustainable Investments Institute reports that 28 shareholder proposals dealing with racial justice had been included in proxy statements filed with the SEC as of April 27, 2021. [90], Under Rule 14a-8(i)(3), a shareholder proposal may be excluded from a companys proxy materials if the proposal or the supporting statement accompanying the proposal is contrary to any of the federal proxy rules, including Rule 14a-9, which prohibits a company from disclosing materially false or misleading statements in its proxy materials. BlackRock pledges to conduct racial-equity audit Morgan Stanley Chairman and CEO James Gorman discusses the impact of the pandemic on minority-owned financial institutions with Carver Federal Savings Bank CEO Michael Pugh. Citigroup, Wells Fargo, Bank of America, Goldman Sachs, JP Morgan urge [115] The companys environmental impact has also been called out for allegedly disproportionately affecting minority communities. Wall Street Banks Reject Racial Equity Audits, While Professing BLM Support JPMorgan Chase CEO Jamie Dimon is urging shareholders to vote against a proposed review of the impact of bank policies and practices on racial inequality. (go back), 21Cal. Morgan Stanley is a leading global financial services firm providing a wide range of investment banking, securities, investment management and wealth management services. Amundi Asset Management, Northern Trust Investments, and PIMCO were leaders in supporting racial equity audit proposals, voting in favor of 100 percent of proposals.Morgan Stanley, UBS, Legal & General . 1, Reuters, Svea Herbst-Bayliss, Gary McWilliams, December 7, 2020, available at https://www.reuters.com/article/exxon-shareholders-engine-no-1/exxon-faces-proxy-fight-launched-by-new-activist-firm-engine-no-1-idUSKBN28H2IO. 1 launched a proxy campaign in December 2020 to effect change on Exxons board of directors. Shareholders target 'white man's world' with record - POLITICO The decision to retain an independent . State Street's support increased from 12.5 percent in 2021 to a bare majority of racial equity audit proposals (52.6 percent) in 2022. Rather, as argued by Trillium Asset Management (Trillium), a strong proponent of such audits, the point of an audit is to embrace the notion that if management is truly committed to make racial justice a critical element of its operations then in practice it can and should treat it like any other operations issue and audit it as such. [29] These proponents further argue that Racial Equity Audits should not be viewed as the end of a process for companies and/or shareholders looking to make a change; instead, they can be a stepping stone to assist companies in developing and identifying a strategic plan to advance their goals. Legislative or regulatory requirements are not without their own risks, and compliance with any such minimum standards would not be fool proof to insulate a company from potential ESG proposals and proxy campaigns. Yesterday, the audit proposal also went to the vote at Wells Fargo, the result has not yet been disclosed. As discussed further below, several financial institutions, including Citi, JPMorgan Chase & Co. and Goldman have resisted shareholder proposals requesting Racial Equity Audits, stating that they would either fold such measures into their existing human rights assessments or that they didnt believe it was the appropriate time for such an endeavor. (go back), 90See e.g., Citigroup No-Action Letter, supra note 78; J&J No-Action Letter, supra note 78; JPMorgan No-Action LetterFebruary, supra note 77; Amazon No-Action Letter, supra note 83. Multicultural and women entrepreneurs are the cutting-edge leaders of businesses that power markets. (go back), 20Proxy Voting Guidelines Benchmark Policy Recommendations, ISS, effective for meetings on or after February 1, 2021, available at https://www.issgovernance.com/file/policy/active/americas/US-Voting-Guidelines.pdf. Companies advised to be alert to racial equity audit proposals (go back), 47The Best ESG Funds for Great Returns & Low Costs, Forbes, Rob Berger and Benjamin Curry, July 1, 2021, available at https://www.forbes.com/advisor/investing/best-esg-funds/. Below is a chart listing the shareholder proposals submitted at various companies during the 2021 proxy season, the proponent, the regulatory basis to exclude the proposal invoked by the company and the SECs response to the companys request for exclusion. Published Dec. 21, 2022 Gabrielle Saulsbery Reporter Companies that sought to exclude Racial Equity Audit proposals from their 2021 proxy statements by requesting no-action relief from the SEC argued that the exclusions set forth in sections (i)(3), (i)(7) or (i)(10) of Rule 14a-8 applied. BlackRock Breaks Wall Street Ranks With Planned Racial Audit endstream endobj 334 0 obj <>stream Shareholder activists have advocated for increased diversity in corporate boardrooms for a number of years. Recently, a former head of global diversity at Morgan Stanley, a Black woman, sued the bank for discrimination. The Firm's employees serve cl . (go back), 27Racial Equity Audit Proposal Q&A CtW Investment Group and the Service Employees International Union, available at https://static1.squarespace.com/static/5d374de8aae9940001c8ed59/t/605cdec4e6861277202f0b46/1616699076603/Racial+Equity+Audit+QA_CtW_SEIU+%28002%29.pdf. The banks are fighting back., Markets Insider, Marguerite Ward, April 7, 2021, available at https://markets.businessinsider.com/news/stocks/bank-leaders-buck-shareholder-call-third-party-racial-equity-audit-2021-4 (We believe our progress on the issue of racial equality, and our regular reporting of that progress, make the proposals requested audit unnecessary, a Bank of America spokesperson told Insider.). [12] Governance has long been a key focus of shareholder activists as corporate governance best practices, including accountability of a companys board of directors to its shareholders, robust disclosure on executive compensation and independence of a board of directors from management, have been found to have a readily apparent correlation with increased returns to shareholders. Risks to shareholder value associated with diversity, equity, and inclusion (DEI) remain a top engagement priority for Vanguard with our funds' portfolio companies. [137] The proposed Diversity and Inclusion Data Accountability and Transparency Act would require such audits by independent third parties of the subject companies policies and practices pertaining to civil rights, equity, diversity and inclusion. [138] The initial debates on the draft legislation also considered adding to the draft bill penalties for non-compliance, including fines of up to $20,000 a day for failure to engage in such audits. Equity Audits: A Powerful Tool to Transform Teaching and Learning SEC interpretations of this rule provide that proposals that concern ordinary business matters but focus on significant social policy issues would not be excludable because the proposals would transcend the day-to-day business matters. [82] In seeking to exclude Racial Equity Audit proposals, companies argued that these audits concerned day-to-day aspects of their ordinary business operations, including: (i) product sales and advertising; [83] (ii) customer relationships; [84] (iii) the nature of the companys public relations, messaging, and communications with its shareholders and other constituents; [85] (iv) workforce management; [86] (v) relationships with suppliers; [87] (vi) community impacts; [88] or (vii) decisions regarding the products and services [the company] offers. [89] Furthermore, these companies contended that the proposals did not focus on a significant policy issue that transcended their ordinary business. We have the experience and agility to partner with clients from individual investors to global CEOs. [58] The audit produced three reports, which ultimately described how Facebook utilized the audit process to listen, plan and deliver on various consequential changes that will help advance the civil rights of its users in a number of categories and also recommended implementation of specific action items, including to (1) continue to onboard expertise, (2) build out the civil rights leaders team, (3) expand civil rights product review processes, (4) require civil rights perspectives in escalation of key content decisions and (5) prioritize civil rights. [59] The thoroughness of the audit and the response and subsequent actions taken by the company have led to the Facebook audit being heralded by many as a big success.