We have shown our commitment to these principles when we set and disclosed our representation goals and shared the results of our pay equity analysis. Just like its environmental and corporate governance counterparts, addressing social concerns can be equally important to companies and investors alike as this can translate into, among other things, value additive results. To contact the reporter on this story: 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. Civil rights. For 87 years, weve had a passion for whats possible. [62] Under Rule 14a-8, a company is required to include a shareholder proposal and related supporting statement in its proxy statement and list the shareholder proposal on its proxy card to be voted on with the companys proposals if: (a) the shareholder satisfies specified eligibility and procedural requirements; and (b) the proposal is not excludable under Rule 14a-8(i). The lender pledged in 2020 to spend $1 billion over four years to combat racial and economic . Hear their stories and learn about how they are redefining the terms of success. Patagonias environmental mission hasnt just been good for the planet its also boosted the bottom line, Business Insider, Richard Feloni, December 21, 2018, available at https://www.businessinsider.com/patagonia-mission-environmentalism-good-for-business-2018-12. 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. Meet one of our Financial Advisors and see how we can help you. (go back), 67Google Pressured on Racial Equity Audit After AI Ethics Collapse, Bloomberg, Naomi Mix, April 27, 2021, available at https://www.bloomberg.com/news/articles/2021-04-27/google-pressured-on-racial-equity-audit-after-ai-ethics-collapse; see also supra Section II.A. (go back), 75Goldman, Citi Stave Off Investor Calls for Racial Audits (1), Bloomberg Law, Saijel Kishan and Jeff Green, April 29, 2021, available at https://news.bloomberglaw.com/banking-law/goldman-citi-stave-off-investor-calls-for-racial-audits-1. As a firm, we can do more, and here are five steps were taking right now. Citigroup Inc. (Citi), sought "no action" relief from the Securities and Exchange Commission to exclude the requests from its 2021 proxy statements, which request was denied. [17], Improved ESG criteria is not a new area for activist investors. Most companies who may have been unsuccessful in seeking no-action relief from the SEC to exclude the proposal or in negotiating a resolution with a shareholder to withdraw the proposal have recommended that shareholders vote against the proposals. [95], Companies Recommended Voting Against Racial Equity Audit Proposals. The big Wall Street banks have all talked a good line about supporting the Black Lives Matter movement. A racial equity audit is the first step to safeguard against further harm and it's also the smart thing to do. We help people, businesses and institutions build, preserve and manage wealth so they can pursue their financial goals. We offer timely, integrated analysis of companies, sectors, markets and economies, helping clients with their most critical decisions. The goals provide a yardstick for school leaders to measure their progress and as a "lightning rod to galvanize change" (IDRA, 2006). (go back), 38See e.g., Opinion: Companies Have a Duty to Defend Democracy, NPR, Brett Bruen, July 7, 2020, available at https://www.npr.org/2020/07/07/887628306/opinion-companies-have-a-duty-to-defend-democracy (discussing corporations ability to be more responsive to critical issues to voters on the macro-level, such as gun control and climate change, as well as on a more personal level including Twitter, Uber and Blue Apron announc[ing that] they would give employees a paid day off when their country holds elections). Indeed, the House Financial Services Subcommittee on Diversity and Inclusion is currently reviewing legislation that would require banks to conduct Racial Equity Audits every two years in an effort to promote diversity and equity. UPDATE: According to a preliminary tally, 39 percent of JPMorgan shareholders voted in support of the racial equity audit proposal on May 18. Stay abreast of the latest trends and developments. A career at Morgan Stanley means belonging to an ideas-driven culture that embraces new perspectives to solve complex problems. Racial Equity Audits and similar equity and inclusion initiatives that are not robust or designed with the aid of independent third party consultants may risk being perceived as mere window dressing and invite criticism from shareholders. (go back), 116See How Amazons Emissions are Hurting Communities of Color, Amazon Employees for Climate Justice, May 26, 2020, available at https://amazonemployees4climatejustice.medium.com/environmental-justice-and-amazons-carbon-footprint-9e10fab21138; Amazon workers demand end to pollution hitting people of color hardest, NBC News, April Gleiser and Leticia Miranda, May 24, 2021, available at https://www.nbcnews.com/tech/tech-news/amazon-shareholders-demand-end-pollution-hitting-people-color-hardest-n1268413. (go back), 118Id. The Staff has stated that substantial implementation under the rule does not require the company to have implemented the proposal in full or exactly as proposed by the shareholder. According to CtW, this focus is based on the belief that: the finance industry has played a critical role in perpetuating unequal wealth distribution to communities of color. Recently, Morgan Stanley and CtW Investment Group reached an agreement for the bank to conduct an internal diversity review . [121] Comptroller DiNapoli described the vote as an immense success for a first-time proposal . Our work on racial equity focuses on our commitments as a business, as a responsible member of global and local communities, and as an inclusive workplace that values diversity. (go back), 56Facebooks Civil Rights AuditFinal Report, Facebook, July 8, 2020, available at https://about.fb.com/wp-content/uploads/2020/07/Civil-Rights-Audit-Final-Report.pdf. As ESG issues garner more media attention and as younger generations move into the investing space, these issues and related disclosures may become increasingly important to consumers, investors and other stakeholders. Morgan Stanley and BlackRock, facing shareholder pressure, agreed to similar audits earlier this year. [33] The public announcement of the Racial Equity Audit and related diversity, equity and inclusion efforts appeared to not only rehabilitate Starbucks public image after the incident, but helped the company become the most popular restaurant stock on the S&P 500 with actively managed funds that are dedicated to ESG investing, according to RBC Capital Markets. . Equity audits are a leadership tool used to collect the data that informs the process of removing programmatic barriers that impede full participation, access, and opportunity for all students to receive an equitable and excellent education. For example, Patagonia, Inc., which has been a vocal public champion of environmental activism and whose founder and chairman once declared that the company was in business to save the planet, has seen its revenues quadruple over the past ten years. Civil rights advocates and proponents of social justice have long touted the moral and ethical considerations of closing the racial divide in America. endstream endobj 335 0 obj <>stream Shareholder activist Engine No. [10] On the other hand, it has been found that companies that affirmatively adopt meaningful approaches to these issues may not only help progress environmental and societal goals, but may also potentially see improved financial performance. [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. (go back), 128SEIU and Change to Wins investment funds pushing for racial diversity in financial institutions, available at https://www.seiu.org/blog/2021/4/seiu-and-change-to-wins-investment-funds-pushing-for-racial-diversity-in-financial-institutions. A fiduciarys duty is to act in the best interest of their beneficiaries and traditionally translates to acting to obtain the highest return on investment, but it can be equally important that fiduciaries seek to minimize risk. A new Morgan Stanley program spearheaded by employees in its Fixed Income Division aims to create a more diverse and inclusive workplace for experienced hires. (go back), 82See Final Rule: Amendments to Rules on Shareholder Proposals, Release No. The $1.9 trillion-asset bank has hired the law firm Covington & Burling to conduct the review and plans . New York, NY. (go back), 88See JPMorgan No-Action LetterFebruary, supra note 77. 34-40018, May 28, 1998, available at https://www.govinfo.gov/content/pkg/FR-1998-05-28/html/98-14121.htm. Id. endstream endobj 334 0 obj <>stream Our accelerator promotes financial inclusion and provides access to capital for startups led by women and multicultural entrepreneurs. Corp. Code 301.3, 301.4. Our culture of access and inclusion has built our legacy and shapes our future, helping to strengthen our business and bring value to clients. (go back), 64What You Need To Know About The 2021 Proxy Season, Forbes, Bhakti Mirchandani, June 28, 2021, available at https://www.forbes.com/sites/bhaktimirchandani/2021/06/28/what-you-need-to-know-about-the-2021-proxy-season/?sh=2e475fae7f5e. 16, 1992)). The racial equity audit would include a review of existing documents regarding program information and evaluation, member surveys, human resource policies and procedures, marketing materials, GIA website, and other pertinent documents in order to develop a more comprehensive picture of the organizational climate in relation to its goal of . Investors want Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, Goldman Sachs, Morgan Stanley, J&J and Amazon to conduct racial equity audits to ensure they can fulfill promises. Image Two Black employees at JPMorgan said race was a constant undertone in their . [48] New York State Comptroller Thomas F. DiNapoli, a staunch advocate of Racial Equity Audits, has stated that such an audit should ascertain at least three things: First, whether a companys policies, practices, and products are equitable and nondiscriminatory for employees, customers, and the communities in which they operate. - March 24, 2022. [14], ISS and others have published a number of reports that have found that addressing social and environmental concerns correlates with companies either currently experiencing or having the potential to experience increased growth and profitability. Restoration: The Role Stakeholder Governance Must Play in Recreating a Fair and Sustainable American EconomyA Reply to Professor Rock, https://www.esg.adec-innovations.com/about-us/faqs/what-is-esg/, https://investor.vanguard.com/investing/esg/, https://www.issgovernance.com/library/esg-matters-part-ii/, https://www.sec.gov/rules/final/2020/33-10825.pdf, https://corpgov.law.harvard.edu/2021/02/06/new-human-capital-disclosure-requirements/. A Racial Equity Audit is, at its core, an independent, objective and holistic analysis of a company's policies, practices, products, services and efforts to combat systemic racism in order to end discrimination within or exhibited by the company with respect to its customers, suppliers or other stakeholders. [1] Secondsocial criteria, which considers how a company engages with all of its stakeholders (including employees, customers and suppliers) rather than just shareholders, including the treatment and diversity of its employees on the frontline, management and boardroom levels, the effects of a company on the surrounding community, and whether a company is working with suppliers who share similar socially desirable values. Equity audits guide schools in conducting a critical review of their data to inform ways of addressing systemic inequities. Our board of directors and senior executives hold the belief that capital can and should benefit all of society. . (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. (go back), 36Johnson & Johnson, 2021 Notice of Annual Meeting & Proxy Statement, Schedule 14A, filed with the SEC on March 10, 2021, available at https://www.sec.gov/Archives/edgar/data/200406/000020040621000011/jnjproxy2021.htm [hereinafter J&J Proxy Statement]. JPMorgan's racial-equity audit falls short for some shareholders SOC Investment accused the bank and its auditor of approaching the process with a "narrow perspective," and said the report fails to look at any internal diversity, equity and inclusion issues. By offering such guidance, companies may find it easier to voluntarily implement Racial Equity Audit policies. [16] Enhanced performance in these areas can lead to less scrutiny from environmental regulators, increased customer loyalty, more productive employees, reduced employee turnover, more lucrative business partnerships and increased profitability. Like the other companies that received shareholder proposals on Racial Equity Audits in the 2021 proxy season, SEIUs proposal urged BlackRock to assess its behavior through a racial equity lens to identify how it contributes to systemic racism, including where its stated values are misaligned with the impact of its actions. [6] Since then, SEC leadership has signaled that more comprehensive ESG-related disclosure could be mandated in the near future, with SEC Commissioner Allison Herren Lee issuing statements earlier this year directing the Division of Corporation Finance to enhance its focus on climate-related disclosure in public company filings [7] and inviting input from investors, registrants, and other market participants on climate change disclosure. [8] Former Acting Director of the SECs Division of Corporation Finance John Coates also stated earlier in the year that the SEC should help lead the creation of an effective ESG disclosure system so companies can provide investors with information they need in a cost-effective manner. [9] Based on these statements, we believe there is a strong likelihood that the current SEC-mandated human capital management disclosures will soon be expanded to require additional disclosures covering environmental and other social initiatives and metrics, further supporting a view that ESG awareness, stewardship and reporting at public companies are here to stay. Speaking at the recent Corporate Secretary Forum, Rose Marie Glazer, senior vice president, corporate secretary and deputy general counsel at AIG, described the proposals as 'an . Will Corporations Deliver Value to All Stakeholders? [105] Comptroller DiNapoli was joined by other Amazon shareholders [106] in requesting Amazons board of directors to commission a Racial Equity Audit that would analyze two main issues: (1) Amazons impacts on civil rights, equity, diversity, and inclusion, and (2) the impacts of those issues on Amazons business. [107] In response, Amazon sent a letter to the SEC seeking to exclude the proposal from its 2021 proxy materials. 333 0 obj <>stream Source: SEC Filings. We offer scalable investment products, foster innovative solutions and provide actionable insights across sustainability issues. [2] Thirdcorporate governance, which considers how a company governs itself and holds itself accountable taking into account the structure and diversity of a companys board of directors, the separation between management and the board of directors, executive compensation, equal and fair pay amongst employees, and the extent to which a company or its management or board of directors are undertaking lobbying efforts, making political and charitable donations, or engaging in corruption or bribery. Even with an increase in the number of shareholder proposals requesting Racial Equity Audits, it is possible that companies may not adopt them as quickly or as widely as the public and/or certain legislative bodies would prefer. [97] Wells Fargo Co. (Wells Fargo) said it is conducting a human rights impact assessment, and that it will update its Human Rights Statement to better align with the expectations of companies under the United Nations Guiding Principles on Business and Human Rights. (go back), 31Webinar, Susan Baker, Director of Shareholder Advocacy, Trillium Asset Management, supra note 23; supra note 27. If a company lags behind in this quickly developing area, we believe shareholders may become more willing to launch shareholder campaigns focused on ESG issues, including demanding objective results through Racial Equity Audits. And lastly, whether a company has sufficient mechanisms in place to monitor effectiveness. As . BlackRocks response to the Racial Equity Audit proposal that SEIU submitted for inclusion in its proxy statement was an outlier among the other financial and asset management firms that faced similar proposals. (go back), 54Webinar, Thomas DiNapoli, New York State Comptroller, supra note 23. In 2020, we created the Goldman Sachs Fund for Racial Equity to support the vital work of leading organizations addressing racial injustice, structural inequity and economic disparity. At Morgan Stanley, we put our beliefs to work. 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), 40Delivering through Diversity, McKinsey, Vivian Hunt, Sara Prince, Sundiatu Dixon-Fyle and Lareina Yee, January 2018, available at https://www.mckinsey.com/~/media/mckinsey/business%20functions/organization/our%20insights/delivering%20through%20diversity/delivering-through-diversity_full-report.ashx. A racial equity audit is an evaluationusually conducted by an external law firmof an employer's policies, procedures and practices to identify and address systemic bias and discrimination. Wells Fargo plans to conduct a racial equity audit, asking an outside law firm to assess the bank's workforce diversity and determine how its business practices are affecting communities of color. New York, November 22, 2022 - JPMorgan Chase & Co. (NYSE: JPM) released today a comprehensive report outlining the results of an independent attestation examination of its reported progress of $18.2 billion toward its $30 billion Racial Equity Commitment ("REC").. JPMorgan Chase retained PricewaterhouseCoopers (PwC) to perform the examination. The $10 million Fund for Racial Equity builds upon more than $200 million Goldman Sachs has granted over the last decade to organizations serving . In SEC filings,. (go back), 37Webinar, Cyrus Mehri, Founding Partner of Mehri & Skalet, PLLC, supra note 23. 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. (go back), 24Heres What Companies Are Promising to Do to Fight Racism, The New York Times, Gillian Friedman, August 23, 2020, available at https://www.nytimes.com/article/companies-racism-george-floyd-protests.html.
Marlboro County Shooting,
Portland High School Football,
Articles M
