News, John Biers, May 22, 2011, available at https://news.yahoo.com/big-us-companies-pushed-tally-014418300.html. Trilinc Global, November 4, 2013, available at https://www.trilincglobal.com/what-is-esg/. Further, companies wishing to stay ahead of the curve may start by critically and objectively looking at their current internal practices and policies relating to equity and inclusion and identifying areas in need of improvement. As a result, Engine No. The $1.9 trillion-asset bank has hired the law firm Covington & Burling to conduct the review and plans . [115] The companys environmental impact has also been called out for allegedly disproportionately affecting minority communities. Not only are Racial Equity Audits designed to help inform investors about their current and future investments from a social and financial perspective, but are also intended to help companies craft their policies and practices to achieve their social justice goals. The most recent and prominent example of the intersection between shareholder activism and ESG was the 2021 proxy contest at Exxon. In 2020, we created the Goldman Sachs Fund for Racial Equity to support the vital work of leading organizations addressing racial injustice, structural inequity and economic disparity. Racial Equity Audits and similar equity and inclusion initiatives that are not robust or designed with the aid of independent third party consultants may risk being perceived as mere window dressing and invite criticism from shareholders. Under Rule 14a-8(i)(10), a company is permitted to exclude a shareholder proposal if the company has already substantially implemented the proposal. Wells Fargo announced it will commission a third-party racial equity audit Tuesday after years of advising shareholders to vote against one. Exxon faces proxy fight launched by new activist firm Engine No. US pension giants among 37% support for pioneering 'racial equity audit BlackRock plans racial audit, in break with Wall Street peers hW[oSI+B"!vThKA}4J~-c2)75x>qfg\ Z2X$gp-78Yz|Z8X|^^_&fdrrv1s*Cj=Wo/y>?NW&xUJKW CtW dropped the Morgan Stanley proposal after the bank agreed to conduct a racial equity audit. 14B, September 15, 2004, available at https://www.sec.gov/interps/legal/cfslb14b.htm. If this occurs, legislators and/or regulatory authorities may at some point in the future step in to close the gap between investor demand and practical implementation. The survey was conducted online among 76 venture capitalists who are almost exclusively leads or co-investors, with an average equity check size of $2.65 million. 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. 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. While Professing BLM Support, Wall Street Banks Reject Racial Equity Audits [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. 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. (Adds details about Morgan Stanley in 11th and 12th paragraphs.) Recently, Morgan Stanley MS +0.1% 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. 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. 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. We saw this occur in California with Senate Bill 826 and Assembly Bill 979 discussed in further detail above. [50] Accordingly, auditors are encouraged to solicit information directly through surveys and interviews, and to review historical records and a companys performance against its peers. Goldman Sachs And JPMorgan Look To Avoid Racial Equity Audits 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. ARTICLE: Racial Equity Audits: A New ESG Initiative Poised to Gain Kellogg Foundation has found that [b]y 2050, our country stands to realize an $8 trillion gain in GDP by closing the U.S. racial equity gap. [28]. Advocates Call For Racial Equity Audits To Dismantle Decades of (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]. [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. (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]. (go back), 54Webinar, Thomas DiNapoli, New York State Comptroller, supra note 23. At Morgan Stanley, we lead with exceptional ideas. In 2007, the firm's co-founder, a former Goldman Sachs and Morgan Stanley banker named Divesh Makan, told a wealth management magazine that he'd even organized clients' parties and helped . Why Are Goldman Sachs And JPMorgan Looking To Avoid Racial Equity Audits? Gorman has also tapped Reid to build Morgan Stanley's new Institute of Inclusion group to promote diversity within Morgan Stanley, which he will chair. September 14, 2022, 1:19 p.m. EDT 3 Min Read. [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. [121] Comptroller DiNapoli described the vote as an immense success for a first-time proposal . In November, SEIU's Capital Stewardship Program and. Wells Fargo commits to racial equity audit ahead of hearings Civil rights. As . [61], Pursuant to Rule 14a-8, shareholders may submit proposals to be included in a companys proxy materials for its annual or special meetings of shareholders. 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. Bank of America said last week that an audit is unnecessary given its progress on racial equality. [134] ISS will use the results from its Annual Benchmark Policy Survey as a key component of ISS annual policy development process to assess potential policy changes across regions and markets for 2022 and beyond. [135] While ISS has largely appeared hesitant to support Racial Equity Audits in the circumstances presented in the 2021 proxy season, the results from its Annual Benchmark Policy Survey could change its future guidance and recommendations on such audits. The goals provide a yardstick for school leaders to measure their progress and as a "lightning rod to galvanize change" (IDRA, 2006). (go back), 30Webinar, Cyrus Mehri, Founding Partner of Mehri & Skalet, PLLC, supra note 23. BlackRock Breaks Wall Street Ranks With Planned Racial Audit (1) In 2020, partners at the Interfaith Center on Corporate Responsibility(ICCR) filed 12 resolutions calling for racial equity audits. The move comes in a year when several US financial institutions have faced requests for racial equity audits amid growing investor scrutiny of diversity, equity and inclusion (DE&I) issues at US companies. [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. (go back), 27Racial Equity Audit Proposal Q&A CtW Investment Group and the Service Employees International Union, available at https://static1.squarespace.com/static/5d374de8aae9940001c8ed59/t/605cdec4e6861277202f0b46/1616699076603/Racial+Equity+Audit+QA_CtW_SEIU+%28002%29.pdf. Concerns related to workforce diversity, treatment of minority workers, environmental justice in communities of color, surveillance, and civil rights are just some of the controversies that have troubled Amazon. [114] For example, current and former Amazon employees have accused the company of allowing racism to permeate its operations. BlackRock, the worlds 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. 1What is ESG?, ADEC Innovations ESG Solutions, available at https://www.esg.adec-innovations.com/about-us/faqs/what-is-esg/. Prior to the ESSA, IDRA developed the Six Goals of Educational Equity (2006). Some studies have shown that promoting racial justice can increase profitability and competitive advantage. [39] A study by McKinsey & Company found that implementing or improving racial justice policies can positively affect a companys bottom line. (go back), 86See J&J No-Action Letter, supra note 78. . UPDATE: According to a preliminary tally, 39 percent of JPMorgan shareholders voted in support of the racial equity audit proposal on May 18. Yesterday, the audit proposal also went to the vote at Wells Fargo, the result has not yet been disclosed. (go back), 84See J&J No-Action Letter, supra note 78. 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/. . (go back), 80See J&J No-Action Letter, supra note 78. (go back), 98Wells Fargo & Company, Notice of Annual Meeting and Proxy Statement, Schedule 14A, filed with the SEC on March 16, 2021, available at https://www.sec.gov/Archives/edgar/data/72971/000119312521082907/d71313ddef14a.htm [hereinafter Wells Fargo Proxy Statement]. [43] Accordingly, it has been argued that working to ensure that systemic risk in the marketplace is proactively addressed via, for example, a Racial Equity Audit, is consistent with a fiduciarys duties. Id. Proxy advisors split over racial equity requests at banking giants A career at Morgan Stanley means belonging to an ideas-driven culture that embraces new perspectives to solve complex problems. On July 28, 2021, ISS launched its Annual Benchmark Policy Survey, which included requests for feedback on Racial Equity Audits. (go back), 138See H.R.2123Diversity and Inclusion Data Accountability and Transparency Act, Congress Bill Tracker, available at https://www.congress.gov/bill/117th-congress/house-bill/2123/committees?r=61&s=1 (as of July 15, 2021). (go back), 115See, e.g., Bias, disrespect, and demotions: Black employees say Amazon has a race problem, Vox:Recode, Jason Del Rey, February 26, 2021, available at https://www.vox.com/recode/2021/2/26/22297554/amazon-race-black-diversity-inclusion; Black Amazon manager sues the e-commerce giant, accusing it of race and gender discrimination, Washington Post, Jay Greene, March 1, 2021, available at https://www.washingtonpost.com/technology/2021/03/01/amazon-race-discrimination-lawsuit/; Five women sue Amazon, accusing e-retailer of race and gender discrimination and retaliation, Washington Post, Jay Greene, May 19, 2021, available at https://www.washingtonpost.com/technology/2021/05/19/amazon-suit-race-gender-discrimination/. We have the experience and agility to partner with clients from individual investors to global CEOs. Meet one of our Financial Advisors and see how we can help you. 30-10825; 34-89670; File 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. JPMorgan's racial-equity audit falls short for some shareholders