1 grew impatient with Exxon after years of declining financials and long-continued dependency on fossil fuels, with no indication of future change. Morgan Stanley's HBCU Scholars program provides scholarships for students at three Historically Black Colleges and Universities. Other external forces that may prompt public companies to adopt Racial Equity Audit policies are the SEC and the securities exchanges. Wells Fargo agrees to racial equity audit | American Banker BlackRock, with $8.7 trillion of assets under management, said in a memo to employees Thursday that an external review of how its diversity, equity and inclusion policies impact stakeholders will. Everything we do at Morgan Stanley is guided by our five core values: Do the right thing, put clients first, lead with exceptional ideas, commit to diversity and inclusion, and give back. (go back), 30Webinar, Cyrus Mehri, Founding Partner of Mehri & Skalet, PLLC, supra note 23. The firm's $10 million grant will help expand financial literacy, workforce development and access to capital programs in communities where the civil rights organization operates. 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), 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 report on the audit, prepared at reasonable cost and . US pension giants among 37% support for pioneering 'racial equity audit . (go back), 122NYS Comptroller DiNapoli Statement on Major Support for Racial Equity Audit at Amazon, Office of the New York Comptroller, May 28, 2021, available at https://www.osc.state.ny.us/press/releases/2021/05/nys-comptroller-dinapoli-statement-major-support-racial-equity-audit-amazon. Morgan Stanley CEO moved by protests to promote two black staffers For the sixth consecutive time, Morgan Stanley Bank has been recognized with the highest rating from the Office of the Comptroller of the Currency for its work meeting the credit needs of the communities it serves. Morgan Stanley team with $715 million joins . Our insightful research, advisory and investing capabilities give us unique and broad perspective on sustainability topics. [24] However, many advocates believe that without objective means to identify areas of improvement and monitor companies progress, these commitments may be illusory and confirmation that these companies have in fact met their commitments could be difficult. 16, 1992)). However, on August 6, 2021, the SEC approved new listing rules proposed by The Nasdaq Stock Market LLC (Nasdaq) requiring each Nasdaq-listed company to disclose certain information about the diversity of its board of directors and generally include a minimum number of members of its board of directors who are Diverse (as defined within the new listing rules). Shareholder Proposal of CtW Investment Group Securities Exchange Act of 1934Rule 14a-8, Gibson Dunn, January 25, 2021, available at https://www.sec.gov/divisions/corpfin/cf-noaction/14a-8/2021/nyscrfamazon012521-14a8-incoming.pdf [hereinafter Amazon No-Action Letter]; J&J No-Action Letter, supra note 78. (go back), 90See e.g., Citigroup No-Action Letter, supra note 78; J&J No-Action Letter, supra note 78; JPMorgan No-Action LetterFebruary, supra note 77; Amazon No-Action Letter, supra note 83. While the majority of investors perceive the funding landscape as balanced, their actual investments in multicultural and women-owned businesses are highly skewed. hW[oSI+B"!vThKA}4J~-c2)75x>qfg\ Z2X$gp-78Yz|Z8X|^^_&fdrrv1s*Cj=Wo/y>?NW&xUJKW Andrew Santini on LinkedIn: I am very proud to announce that I have See how you can continue your career journey at Morgan Stanley. Companies Negotiated with Shareholders to Withdraw the Racial Equity Audit Proposal.BlackRock, the world's largest asset management firm, and CoreCivic Inc. ("CoreCivic"), an operator of private prisons, have agreed to conduct independent Racial Equity Audits after receiving shareholder proposals for such audits, resulting in the proponents withdrawing their proposals. Some companies are turning to law firms like Covington to do the work. public statements. [125]. Companies advised to be alert to racial equity audit proposals BlackRock Breaks Wall Street Ranks With Planned Racial Audit - March 24, 2022. 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 . Input from civil rights organizations, employees, and customers should be considered in determining the specific matters to be analyzed. In SEC filings,. (go back), 18BlackRock Investment Stewardship, Proxy voting guidelines for U.S. securities, BlackRock, effective January 2021, available at https://www.blackrock.com/corporate/literature/fact-sheet/blk-responsible-investment-guidelines-us.pdf. 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. (go back), 78Rule 14a-8 No-Action Letter re: Stockholder Proposal to Citigroup Inc. from CtW Investments Group, Citigroup Inc., December 23, 2020, available at https://www.sec.gov/divisions/corpfin/cf-noaction/14a-8/2021/ctwcitigroup022621-14a8.pdf [hereinafter Citigroup No-Action Letter]; Rule 14a-8 No Action Letter re: Johnson & Johnson2021 Annual Meeting, Omission of Shareholder Proposal of Christopher and Anne Ellinger and co-filers, Skadden, Arps, Slate, Meagher & Flom LLP, December 16, 2020, available at https://www.sec.gov/divisions/corpfin/cf-noaction/14a-8/2021/ellingeretaljohnson021221-14a8.pdf [hereinafter J&J No-Action Letter]. Bank of America said last week that an audit is unnecessary given its progress on racial equality. 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. CtW dropped the Morgan Stanley proposal after the bank agreed to conduct a racial equity audit. However, not all companies have been as eager and willing to comply with these requests. [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. BlackRock Breaks Wall Street Ranks With Planned Racial Audit (1) (go back), 93See J&J No-Action Letter, supra note 78. 333 0 obj <>stream Our latest initiative combines the resources and reach of Morgan Stanley with the knowledge and experience of our distinguished nonprofit partner organizations to help deliver positive, tangible impact on the challenges of stress, anxiety, and depression in children, adolescents and young people. Shareholder proposals come from a variety of proponents, including individual investors, labor unions, public pension funds, shareholder activists and institutional investors and such proposals often focus on the environment, corporate governance, executive compensation and social issues. (go back), 80See J&J No-Action Letter, supra note 78. hj0_`%A (?BY*JFwiPRNB` H&@& cTL2Vc$`p 1q) 19IB9HA$..Ey?/ANWez][{{iK.5&QZ"]EF'v?}^L7u?F$9 r4-{2`|4E@$VH`&JxCz9 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. (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. We rely on our technologists around the world to create leading-edge, secure platforms for all our businesses. (go back), 23Racial Equity Audits: A Critical Tool for Shareholders, CtW Investment Group, available at https://www.socinvestmentgroup.com/critical-tool-for-shareholders [hereinafter Webinar]. ESG considerations can be broken down into three categories. This report is based on a survey conducted on behalf of Morgan Stanley by Brunswick Group between August 5 and 8, 2020, in the U.S. With offices in more than. September 14, 2022, 1:19 p.m. EDT 3 Min Read. Racial Equity Audits can focus on various aspects of a companys business, including the treatment of customers at a companys physical locations, the diversity of senior management, the targeting of products, and even political contributions. [57] The aspects of Facebook that the audit focused on were informed by the aforementioned interviews, which led to a holistic review of the entire company and not just a single aspect such as employment practices. We grieve with our colleagues, friends and families, and believe that we have the power to create long-lasting social, educational and economic change. Citi's Action for Racial Equity Initiative Invests $1 Billion to (go back), 86See J&J No-Action Letter, supra note 78. The two leading proxy advisory firms, ISS and Glass Lewis & Co. LLC (Glass Lewis), have generally taken opposing views on Racial Equity Audits. 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. 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. Governance teams and boards have been warned to stay alert to the prospect of facing shareholder proposals in 2022 urging them to commission racial equity audits. JPMorgan Chase Releases $30 Billion Racial Equity Commitment Audit Report These votes follow a 2021 season in which eight racial equity audit proposals were proposed . Bank of America said last week that an audit is unnecessary given its progress on racial equality. These companies have asserted that they disagree with the approach of Racial Equity Audit proposals, but are aligned with [their] stated goal of addressing racial inequity in the financial sector. [96], For example, the board of directors of Citi recommended a vote against the Racial Equity Audit proposal included in its 2021 proxy statement, noting that [a]s recently as September 2020, Citi released a 104 page report on the economic cost of Black inequality in the United States titled Closing the Racial Inequality Gaps, and said its efforts on these issues are available to the public. (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), 91See SEC, Division of Corporate Finance Staff Legal Bulletin No. Morgan Stanley did not respond to a request for comment. As . [44] Advocates of Racial Equity Audits believe that they are essentially intended to be implemented in furtherance of risk management and risk tolerance, criteria that fiduciaries may choose to measure in order to protect their investments. Risks to shareholder value associated with diversity, equity, and inclusion (DEI) remain a top engagement priority for Vanguard with our funds' portfolio companies. By offering such guidance, companies may find it easier to voluntarily implement Racial Equity Audit policies. [63] If the company determines that it is not in the best interests of the company to include a Rule 14a-8 shareholder proposal in its proxy materials, it can (i) seek no-action relief from the SEC staff (the Staff) that, if granted, would allow the company to exclude the proposal without the threat of Staff recommendation of an enforcement action based on a procedural deficiency or a substantive exclusion under Rule 14a-8; (ii) take legal action in court to exclude the proposal; and/or (iii) negotiate with the proponent to withdraw the proposal. [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. A Racial Equity Audit is, at its core, an independent, objective and holistic analysis of a companys 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. The lender pledged in 2020 to spend $1 billion over four years to combat racial and economic inequality. According to public policy analysts, racial violence and the COVID-19 pandemic sparked an increase in Rule 14a-8 shareholder proposals focused on racial justice. [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. The chart below lists the proponents who submitted Racial Equity Audit proposals to public companies pursuant to Rule 14a-8 during the 2021 proxy season and the number of proposals they submitted: Source: ISS Corporate Solutions and SEC Filings, Boards of directors of public companies are [i]ncreasingly . endstream endobj 336 0 obj <>stream [54] Comptroller DiNapoli has observed that discrimination can be deep-seated within a company, and internal self-reviews have the potential to reinforce current structural impediments and biases, which is why he believes it is necessary for audits to be an independent assessment. It received the backing of 38.6 percent of votes cast during the company's AGM in April. 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. Racial Equity Audit SOC Investment Group David Ake) It followed his 2021 executive order . Vanguard's Insights on Shareholder Proposals Concerning Diversity ARTICLE: Racial Equity Audits: A New ESG Initiative Poised to Gain [51], Practitioners also believe that the audit process can be important for companies as a way to build trust with their stakeholders. Id. Equity audits guide schools in conducting a critical review of their data to inform ways of addressing systemic inequities. Given current trends in ESG, public companies should stay informed on Racial Equity Audits and their adoption, crafting and implementation. Read More. What Are Racial Equity Audits? - nhforge.org 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/. Washington, D.C. Our Impact-Risk-Profitability (IRP) framework will guide us to deeper and more intentional impact. Wall Street Rejects Racial Equity Audits, While 'Supporting' BLM Second, whether any changes to existing programs or new measures or initiatives, would help a company become more equitable and inclusive. (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].