In our recent survey, we found by just how much. On July 28, 2021, ISS launched its Annual Benchmark Policy Survey, which included requests for feedback on Racial Equity Audits. 14B, September 15, 2004, available at https://www.sec.gov/interps/legal/cfslb14b.htm. [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. 20091 (August 16, 1983)). [55], Some companies have independently engaged in Racial Equity Audits or similar internal reviews, usually in response to external pressures. Morgan Stanley did not respond to a request for comment. Financial institutions and asset management firms have become the focus of Racial Equity Audit shareholder proposals. (go back), 5ESG Matters (Part II), ISS EVA, Dr. G. Kevin Spellman and David O. Nicholas, May 18, 2021, available at https://www.issgovernance.com/library/esg-matters-part-ii/. In addition, there has also been a rise in ESG-specific funds as well as a growing number of ESG-specific products at mutual funds and other financial institutions. 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. We leverage the full resources of our firm to help individuals, families and institutions reach their financial goals. (go back), 21Cal. We all want to do something to try to change the course we find ourselves on. Our culture of access and inclusion has built our legacy and shapes our future, helping to strengthen our business and bring value to clients. Ron S. Berenblat and Elizabeth R. Gonzalez-Sussman are partners at Olshan Frome Wolosky LLP. Today, we're demonstrating . The New York-based firm said it will start the audit in 2022. Global Financial Crimes: Program Execution Director - New York - Morgan Rachel Wilson became the first head of cybersecurity for Morgan Stanley Wealth Management in the spring of 2017. 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. CtW dropped the Morgan Stanley proposal after the bank agreed to conduct a racial equity audit. This is all while donating the greater of 1% of sales or 10% of profits to environmental activism, working to be 100% carbon neutral by 2025 and allowing employees to spend up to two fully-paid months of working time on supporting environmental conservation projects. At Morgan Stanley, we lead with exceptional ideas. [40] As illustrated in the study, companies with the highest degrees of ethnic/cultural diversity were 33% more likely to outperform their less diverse peers and companies with the most ethnically/culturally diverse boards of directors are 43% more likely to experience higher profits than their less diverse peers. These three employees, alums of Historically Black Colleges and Universities, are helping the firm support the next generation of Black students through our Morgan Stanley HBCU Scholars Program. In light of the protests sparked by the murder of George Floyd in June 2020, the CtW Investment Group has requested systemically important financial institutions to conduct a racial equity audit that identifies, prioritizes, and remedies the adverse impacts of the bank's policies and practices on non-white stakeholders and communities of color. Racial equity audit votes At least 19 proposals calling for a racial equity audit at S&P 500 companies garnered an average of 44% support among shareholders last year, an increase from. SEIU report slams BlackRock, Vanguard, Fidelity and State Street Equity in the Boardroom: How Asset Manager Voting Shaped Corporate The America First Legal Foundation is accusing the IRS of using "racial equity" for audits targeting White and Asian taxpayers. 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. The Future Generation Scholarship initiative will support 25 ethnic-minority and/or socially mobile students every year with a goal to kick-start their careers in financial services. These votes follow a 2021 season in which eight racial equity audit proposals were proposed . [109], Amazon argued the proposals call to review its impact on civil rights, equity, diversity and inclusion is a broad survey on the impact of the Companys policies, practices, products and services on societal issues, which implicates routine business issues, such as the products and services that the Company offers to its customers, the Companys business practices and operations, the Companys strategic decisions, and the Companys choice of technologies. [110] Similarly, according to Amazon, such an audit would necessarily implicate[] a multitude of ordinary business matters relating to the Companys day-to-day operations, which Amazon argued included decisions relating to, among other things, its charitable donations, hiring decisions, diversity and recruitment initiatives, customer relations, advertising, public relations and communications with its shareholders and the kinds of products it sold. (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. (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. [24] However, many advocates believe that without objective means to identify areas of improvement and monitor companies progress, these commitments may be illusory and confirmation that these companies have in fact met their commitments could be difficult. To contact the reporter on this story: Companies Negotiated with Shareholders to Withdraw the Racial Equity Audit Proposal. The audit was led by Laura W. Murphy, a civil rights advocate, with help from a civil rights law firm. (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), 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. (go back), 100Goldman Sachs Proxy Statement, supra note 35. Corp. Code 301.3, 301.4. Increased focusfrom companies, regulators, investors, and employeeson racial and ethnic discrimination has heightened scrutiny of public companies' DEI-related risks and opportunities, as have the COVID-19 pandemic and . Bank of America said last week that an audit is unnecessary given its progress on racial equality. (go back), 104Amazon.com, Inc., Notice of 2021 Annual Meeting of Shareholders and Proxy Statement, Schedule 14A, filed with the SEC on April 15, 2021, available at https://www.sec.gov/Archives/edgar/data/1018724/000110465921050333/tm2035374-1_def14a.htm [hereinafter Amazon Proxy Statement]. Some companies are turning to law firms like Covington to do the work. (go back), 25Remarks by New York State Comptroller Thomas P. DiNapoli at SEIU Capital Stewardship Program and CtW Investment Group Webinar Entitled Racial Equity Audits: A Critical Tool for Shareholders, NYS Comptroller, Thomas P. DiNapoli, April 13, 2021, available at https://nyscomptroller.medium.com/remarks-by-new-york-state-comptroller-thomas-p-397b006d1d5c. While we witnessed an increase in shareholder proposals related to Racial Equity Audits in the 2021 proxy season, all such proposals were either withdrawn or defeated. See how you can continue your career journey at Morgan Stanley. [126] The resolution included in SEIUs proposal also noted that: A 2020 report on proxy voting found that BlackRock did not use its clout as a significant owner to advance racial justice. Image Two Black employees at JPMorgan said race was a constant undertone in their . ESG considerations can be broken down into three categories. IS s+i-T"sl7fMIa0d4` #? . In SEC filings,. Source: SEC Filings. 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. For example, such guidelines may provide for a minimum frequency of Racial Equity Audits and indicate parameters on what attributes an audit must possess to be considered sufficient. (go back), 65All things (not) being equal, IR Magazine, Ben Maiden, Summer 2021, available at https://content.irmagazine.com/story/ir-magazine-summer-2021.pdf. September 14, 2022, 1:19 p.m. EDT 3 Min Read. CtW and US labour union SEIU filed racial equity audit proposals at eight US financial giants this year. The Black Leaders Forum brought together senior leaders from Wealth Management for targeted conversations, development and actions to achieve success. In the U.S. market there are now over 600 ESG funds and exchange-traded funds for investors to choose from with approximately $161 billion in assets under management (AUM), which is more than double the AUM of ESG funds in 2010. 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. 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. Using Equity Audits to Assess and Address Opportunity Gaps - IDRA [129] As a result, the shareholder proposal was withdrawn and SEIU announced that it was currently working with BlackRock to bring about needed change within the company and the financial services industry. [130] Commentators anticipate that BlackRocks commitment to a Racial Equity Audit could sway other financial services companies to follow in its footsteps. [131]. In 2020, partners at the Interfaith Center on Corporate Responsibility(ICCR) filed 12 resolutions calling for racial equity audits. Learn from our industry leaders about how to manage your wealth and help meet your personal financial goals. A complicated past The financial institutions in question have recently made diversity, inclusion, and racial equity a significant. (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. [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.
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