(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. (go back), 125Rule 14a-8 No Action Letter, CtW Investment Group, November 12, 2020, available at https://www.sec.gov/divisions/corpfin/cf-noaction/14a-8/2021/ctwjpmorgan032621-14a8.pdf. BlackRock plans racial audit, in break with Wall Street peers S7-11-19, available at https://www.sec.gov/rules/final/2020/33-10825.pdf; New Human Capital Disclosure Requirements, Harvard Law School Forum on Corporate Governance, Margaret Engel, February 6, 2021, available at https://corpgov.law.harvard.edu/2021/02/06/new-human-capital-disclosure-requirements/. (go back), 77Rule 14a-8 No Action Letter re: JPMorgan Chase & Co.2021 Annual Meeting, Supplemental Letter dated January 11, 2021, Relating to Shareholder Proposal Submitted by CtW Investment Group, Skadden, Arps, Slate, Meagher & Flom LLP, February 16, 2021, available at https://www.sec.gov/divisions/corpfin/cf-noaction/14a-8/2021/ctwjpmorgan032621-14a8.pdf [hereinafter JPMorgan No-Action LetterFebruary]. [108] Amazon argued that, regardless of the proposal being framed in the form of a request for a report, this did not change the fact that the subject matter of the proposed report is within [Amazons] ordinary business and thus excludable under Rule 14a-8(i)(7). Last week, the duo achieved a significant win at BlackRock and Morgan Stanley when both agreed to undertake diversity reviews, prompting a withdrawal of the proposals. (go back), 48Webinar, Pamela Coukos, Co-Founder of Working Ideal, supra note 23; supra note 27. [31] Following an audit, some companies have used the findings to develop a strategic plan to capitalize on opportunities to address racial equity moving forward. As the ESG movement gains momentum, and as the new wave of investors who factor ESG concerns into their investment decisions gain a larger share of the market, companies are being advised to revisit their current policies and practices under the ESG lens. Using Equity Audits to Assess and Address Opportunity Gaps - IDRA September 14, 2022, 1:19 p.m. EDT 3 Min Read. (go back), 10ESG Activism Becomes the Norm, ESG Activism, Insightia, 2021, available at https://www.activistinsight.com/wp-content/uploads/dlm_uploads/2021/06/InsightiaESGActivism-1.pdf?utm_source=newsletter&utm_medium=email&utm_campaign=greenfin&utm_content=2021-06-30. Companies that dismiss these concerns or lag behind their peers in addressing ESG matters may find themselves in the crosshairs of investors and proxy advisory firms, or even state legislatures and federal agencies. Racial Equity Audits could emerge as a critical tool for companies to evaluate their current social impact and provide an objective method for investors to monitor their investments and potentially identify new companies that could benefit from increased social and economic engagement. Companies advised to be alert to racial equity audit proposals called upon to navigate the challenges presented by climate change, racial injustice, economic inequality, and numerous other issues that are fundamental to the success and sustainability of companies, financial markets, and our economy. [72] After the May 2020 killing of George Floyd, 66% of S&P 500 companies posted statements on their websites or social media accounts, 36% made financial contributions to racial justice organizations and 14% stated in their communications that Black Lives Matter. [73] While it has been observed that these companies were quick to issue statements supporting Black Lives Matter and promis[ed] to do more to be responsive to non-white consumers, employees and communities, [74] most companies on the receiving end of a Rule 14a-8 proposal to implement a Racial Equity Audit have actively resisted such proposal by seeking no-action relief from the SEC to exclude the proposal from their 2021 proxy statements, negotiating with proponents to withdraw their proposals, and, when the company had been unsuccessful with the foregoing, recommending that shareholders vote against the proposals. . At Morgan Stanley, we lead with exceptional ideas. 16, 1992)). Beyond the moral case and business case for conducting Racial Equity Audits, and fighting systemic racism in general, is the democracy case espoused by social justice advocates [37] and that corporations can at times act more swiftly and have a more profound effect on current social issues than the government; therefore, these advocates argue that corporations have a responsibility to address issues affecting our democracy. Citi to conduct racial equity audit | IR Magazine To that end, they believe companies should clearly disclose and explain the processes and personnel roles within a Racial Equity Audit and undertake to publicly share the results of the audit. Specifically, SEIU stated that Goldman underwrites municipal bonds whose proceeds pay police brutality settlements. [35] Similarly, Trillium, on behalf of Christopher and Anne Ellinger, submitted a Racial Equity Audit proposal that was included in Johnson & Johnsons proxy statement for its 2021 annual meeting of shareholders, in which Trillium expressed concerns with claims that the company continues to market its talc-based baby powder to Black and Brown women after its talc supplier included the WHOs possibly carcinogenic label on shipments. [36] Proponents of Racial Equity Audits argue that a reassessment of internal policies and practices via such audits can identify the right levers to pull to begin to shrink these racial divides. (go back), 33On the Progress of its Efforts to Promote Civil Rights, Equity, Diversity, and Inclusion, Starbucks, February 24, 2020, available at https://stories.starbucks.com/uploads/2020/02/Starbucks-Civil-Rights-Assessment-2020-Update.pdf; supra note 27. Our accelerator promotes financial inclusion and provides access to capital for startups led by women and multicultural entrepreneurs. [51], Practitioners also believe that the audit process can be important for companies as a way to build trust with their stakeholders. 34-40018; IC-23200; File No. Get the latest insights, analyses and market trends in our newsletter, podcasts and videos. [139] The draft legislation would also require banks to investigate what ties they may have to slavery and disclose steps such institution would take to reconcile profits it may have received from slavery. [111] Despite the laundry list of examples Amazon cited in its No-Action Letter, the SEC did not concur that the proposal was excludable under Rule 14a-8(i)(7). A racial equity audit is the first step to safeguard against further harm and it's also the smart thing to do. [26] For example, following a racially-tinged incident at a Philadelphia Starbucks in 2018 where two African-American men who were waiting for a business meeting to begin were arrested, the company performed a Racial Equity Audit, which found that, among other things, racial sensitivity and the elimination of implicit biases are correlated to Starbucks core business plan of creating an inclusive and equitable working environment, as well as a welcoming third place between home and work for customers. [27] In addition, the W.K. JPMorgan Chase Engages Third-Party for Racial Equity Audit UPDATE: According to a preliminary tally, 39 percent of JPMorgan shareholders voted in support of the racial equity audit proposal on May 18. Source: SEC Filings. BlackRock Breaks Wall Street Ranks With Planned Racial Audit (1) I am very proud to announce that I have been named in Morgan Stanley's prestigious 2023 Pacesetter's Club, a group of the Firm's successful Financial Advisors. Civil rights advocates and proponents of social justice have long touted the moral and ethical considerations of closing the racial divide in America. 20091 (August 16, 1983)). 94 . - March 24, 2022. NEW YORK-- ( BUSINESS WIRE )--Citi and the Citi Foundation announced today the Action for Racial Equity initiative has already invested $1 billion in strategic initiatives to help close the. [142] Accordingly, as Racial Equity Audits become an increasingly important area for investors, it is possible that the SEC and the major exchanges may eventually require companies to make further diversity, equity and inclusion disclosures, which may include the existence and frequency of a companys Racial Equity Audits. The correlation between gender-balanced teams and improved decision-making, innovation and performance aligns with our core value Commit to Diversity and Inclusion. 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. Recently, Morgan Stanley ( MS +0.65%) and CtW Investment Group reached an agreement for the bank to conduct an internal diversity review, and to meet shareholders on next steps before its 2022 annual meeting. (go back), 112Shareholder Proposal No-Action Responses, SEC, Staffs Response, April 7, 2021, available at https://www.sec.gov/divisions/corpfin/cf-noaction/14a-8/shareholder-proposal-no-action-responses.htm; see also U.S. SEC blocks Amazon effort to stop shareholder votes on racial equity audit, Reuters, April 7, 2021, available at https://www.reuters.com/article/us-amazon-com-sec-vote/u-s-sec-blocks-amazon-effort-to-stop-shareholder-votes-on-racial-equity-audit-idUSKBN2BU38U. [22]. (go back), 4ESG investing: Discover funds that reflect what matters most to you, The Vanguard Group, Inc., available at https://investor.vanguard.com/investing/esg/. (go back), 82See Final Rule: Amendments to Rules on Shareholder Proposals, Release No. Morgan Stanley Launches the Institute for Inclusion Input from civil rights organizations, employees, and customers should be considered in determining the specific matters to be analyzed. In general, Racial Equity Audit proposals ask the board of directors of a company to oversee such audits analyzing the companys business modelsfrom policies to products and servicesto determine whether they cause, reinforce or perpetuate discrimination. [67]. (go back), 70Citigroup Proxy Statement, supra note 69; JPMorgan Chase & Co., 2021 Notice of Annual Meeting of Shareholders and Proxy Statement, Schedule 14A, filed with the SEC on April 7, 2021, available at https://www.sec.gov/Archives/edgar/data/0000019617/000001961721000275/a2021proxystatement.htm [hereinafter JPMorgan Proxy Statement]. Wells Fargo agrees to racial equity audit | American Banker In this case, failure to have a Racial Equity Audit policy or refusal to implement such a policy after shareholders have approved a proposal to implement one may become a criteria an advisory firm would consider in making a recommendation for or against the re-election of a companys chairperson of the governance committee and/or the re-election of other directors at the companys annual meeting. We offer scalable investment products, foster innovative solutions and provide actionable insights across sustainability issues. News, John Biers, May 22, 2011, available at https://news.yahoo.com/big-us-companies-pushed-tally-014418300.html. The lender pledged in 2020 to spend $1 billion over four years to combat racial and economic. [30], The impact a Racial Equity Audit may have on a company may be felt in many ways. (go back), 66Bank of America Corporation, 2021 Notice of Annual Meeting and Proxy Statement, Schedule 14A, filed with the SEC on March 8, 2021, available at https://about.bankofamerica.com/annualmeeting/static/media/BAC_2021_ProxyStatement_ADA.612694a6.pdf. Racial Equity Audits may also find that a companys existing policies and practices are not sufficient to address or may be perpetuating systemic social issues. In a recent letter to employees, Blackrock announced that they would conduct an. SOC Investment Group (then known as CtW Investment Group) filed a proposal seeking a racial equity audit in Citi's proxy statement this year. We lead with exceptional ideas, prioritize diversity and inclusion and find meaningful ways to give backall to contribute to a future that benefits our clients and communities. . US pension giants among 37% support for pioneering 'racial equity audit In light of the anticipated increase in the number of Racial Equity Audit proposals in the coming proxy seasons, we may see a corresponding rise in the number of companies that follow BlackRocks lead and voluntarily conduct their own Racial Equity Audits. Equity Audits: A Powerful Tool to Transform Teaching and Learning [18] Concurrently with shareholder activists nominating an increasing number of diverse director candidates, the voting policies of many institutional investors, such as BlackRock, Inc. (BlackRock), have been updated to reflect a desire to enhance boardroom diversity, [19] as have the voting guidelines of many prominent proxy advisory firms, such as ISS. The $10 million Fund for Racial Equity builds upon more than $200 million Goldman Sachs has granted over the last decade to organizations serving . (go back), 6Final Rule: Modernization of Regulation S-K Items 101, 103 and 105, 17 CFR 229, 239 and 240, Release Nos. The Firm's employees serve cl . Amid a pandemic and social unrest, we gathered senior multicultural business leaders to focus on the challenges and opportunities of this indelible moment in history. (go back), 142SEC Approves Nasdaqs New Listing Rules Designed to Advance Greater Boardroom Diversity, Elizabeth Gonzalez-Sussman and Ron Berenblat, August 2021, available at https://www.olshanlaw.com/resources-alerts-Nasdaq-SEC-boardroom-diversity-rule.html. [136] As the general publics views evolve on ESG issues, public pressure for certain actionsin this case, increased diversity in public boardroomsoften influence not just shareholder advocacy but legislative action. [21] Most shareholder activists are cognizant of the stance of institutional investors and proxy advisory firms on ESG issues and have increasingly incorporated ESG factors into their proxy campaigns. Racial equity audits started catching on after the events of 2020 prompted a racial reckoning in the U.S. Morgan Stanley, and Citigroup have conducted audits in the financial world. (go back), 85See Amazon No-Action Letter, supra note 83. But that was never going to be enough for racial justice advocates. [68] Several of the supporting statements for Racial Equity Audit proposals stated that: High-profile police killings of black peoplemost recently George Floydhave galvanized the movement for racial justice. [76] To demonstrate that they had substantially implemented the audit proposals, companies argued they had (i) made pledges and commitments towards racial justice initiatives and made such information publicly available; [77] (ii) issued ESG and/or diversity focused reports; [78] (iii) issued press releases and public disclosures addressing racial inequality; [79] (iv) implemented initiatives to advance racial equity; [80] or (v) financially committed to racial justice initiatives and causes.