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 . Opinion | Wall Street Banks Reject Racial Equity Audits, While This post is based on an Olshan memorandum by Mr. Berenblat, Ms. Gonzalez-Sussman,Claudia B. Dubn, Rebecca L. Van Derlaske, Ian A. Engoron, and Sarah R. Matchett. We provide comprehensive workplace financial solutions for organizations and their employees, combining personalized advice with modern technology. We anticipate greater interest in Racial Equity Audits and similar initiatives in the upcoming proxy season and accordingly believe companies will be pushed to critically and objectively examine their current internal practices and policies relating to equity and inclusion to identify areas in need of improvement. [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). According to Bloomberg, Glass Lewis has broadly said conducting the audits would help companies reduce risks of high-profile controversies that may result in customer and employee attrition, regulatory inquiries and significant fines, and that [g]iven broad societal changes, it is particularly important for consumer-facing companies, which depend on their customers trust and loyalty, to address issues of racial equity. [102] On the other hand, according to Bloomberg, ISS has stated that racial audits arent warranted because companies are taking sufficient meaningful actions to address racial inequities such as expanding opportunities for people and communities of color, as well as improving the diversity and inclusion of its workforces. [103] The following chart sets forth the recommendations ISS and Glass Lewis made with respect to each Racial Equity Audit proposal in the 2021 proxy season: Source: ISS Corporate Solutions and Proxy Insight, During the 2021 proxy season, Amazon.com, Inc. (Amazon) faced a shareholder proposal requesting the company to conduct a Racial Equity Audit. With offices in more than. [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. [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. (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]. The request for BlackRock to do one came from SEIU, which withdrew its resolution after the firm agreed to undergo the racial-equity audit. Racial Equity Audits: The New ESG Frontier (Adds details about Morgan Stanley in 11th and 12th paragraphs.) 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. . Washington, D.C. Our Impact-Risk-Profitability (IRP) framework will guide us to deeper and more intentional impact. The $10 million Fund for Racial Equity builds upon more than $200 million Goldman Sachs has granted over the last decade to organizations serving . Other external forces that may prompt public companies to adopt Racial Equity Audit policies are the SEC and the securities exchanges. Racial Equity Audit SOC Investment Group Id. [51], Practitioners also believe that the audit process can be important for companies as a way to build trust with their stakeholders. Amazon to conduct racial-equity audit led by former Attorney General Loretta Lynch. (go back), 31Webinar, Susan Baker, Director of Shareholder Advocacy, Trillium Asset Management, supra note 23; supra note 27. 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. The goals provide a yardstick for school leaders to measure their progress and as a "lightning rod to galvanize change" (IDRA, 2006). [121] Comptroller DiNapoli described the vote as an immense success for a first-time proposal . [23] In the aftermath of the killing of George Floyd in May 2020 and the subsequent civil rights movement and unrest, many companies announced a number of initiatives and measures to address social justice issues, including committing financial resources and reviewing their own policies and practices. Citigroup, Wells Fargo, Bank of America, Goldman Sachs, JP Morgan urge And lastly, whether a company has sufficient mechanisms in place to monitor effectiveness. [13] Recently, however, activists have begun to realize that social and environmental issues can also impact their investments, in both negative and positive ways. ARTICLE: Racial Equity Audits: A New ESG Initiative Poised to Gain We leverage the full resources of our firm to help individuals, families and institutions reach their financial goals. 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. UPDATE: According to a preliminary tally, 39 percent of JPMorgan shareholders voted in support of the racial equity audit proposal on May 18. Goldman Sachs And JPMorgan Look To Avoid Racial Equity Audits - Forbes Citi announced the move in a blog post last Friday afternoon. A racial equity audit is the first step to safeguard against further harm and it's also the smart thing to do. Morgan Stanley Adds Racial Equity Investing Tool Kit: Portfolio A 38 percent "yes" vote at Citi was particularly encouraging, given the fact that institutional investors typically follow the corporate board's recommendation. Dismissal and neglect of these concerns led to Engine No. 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. PAB News | Shareholders File Resolutions Calling for Companies to While Professing BLM Support, Wall Street Banks Reject Racial Equity Audits (go back), 107Amazon Proxy Statement, supra note 104. 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. [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. [120] Among these, the proposal for a Racial Equity Audit garnered the most support, with 44% of the votes cast on this proposal voting in favor. Wall Street Rejects Racial Equity Audits, While 'Supporting' BLM Wells Fargo announced it will commission a third-party racial equity audit Tuesday after years of advising shareholders to vote against one. [60], A number of other high-profile companies and financial institutions have been approached either by shareholders or civil rights advocates about conducting Racial Equity Audits. [94] In the financial industry, BlackRocks decision distinguishes it from other financial institutions that have asked shareholders to vote against similar audit proposals and/or have sought no-action relief from the SEC. [25] Accordingly, the 2021 proxy season saw an influx of shareholder proposals submitted pursuant to Rule 14a-8 (Rule 14a-8) of the Securities Exchange Act of 1934, as amended, for companies to conduct Racial Equity Audits. Promoted to one of five voting members on the S&P Municipal Bond Index Committee, overseeing and ruling on policy and governance. Wells Fargo agrees to racial equity audit | National Mortgage News (go back), 74Big US companies pushed to tally progress on racial justice, Yahoo! (go back), 118Id. Facebook, Inc. (Facebook) also conducted its own version of a Racial Equity Audit in 2018. BlackRock Breaks Wall Street Ranks With Planned Racial Audit [49], Practitioners also stress the importance of auditors using the right methodology, including both quantitative and qualitative methods, and for such auditors to review not only information provided by the company but to gather its own information. By offering such guidance, companies may find it easier to voluntarily implement Racial Equity Audit policies. At the higher end, proxy advisory firms may offer official guidelines on what they believe are minimum actions a company should take with respect to Racial Equity Audits in order to receive the advisors support. David Friedman - Vice President - Morgan Stanley | LinkedIn Recently, a former head of global diversity at Morgan Stanley, a Black woman, sued the bank for discrimination. 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. Recently, investors and companies have also begun to appreciate that positive financial returns are often associated with investing in initiatives working towards racial equality. (AP Photo/J. [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. PDF Sunday | March 12, 2023 8:00 a.m. 12:00 p.m. CT Sarah Anderson May 17, 2021 Inequality.org
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