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. Goldman Sachs | Making Progress Towards Racial Equity [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. (go back), 97Citigroup Proxy Statement, supra note 69. (go back), 50Webinar, Pamela Coukos, Co-Founder of Working Ideal, supra note 23; supra note 27. As . (go back), 137Supra, Goldberg-Zelizer, note 96. 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), 37Webinar, Cyrus Mehri, Founding Partner of Mehri & Skalet, PLLC, supra note 23. Whether it be modern day redlining techniques related to mortgage loans, to excessive checking account fees, to most recently, Payday [sic] Protection Program distribution, communities of color have faced decades of discrimination as a result of the financial industrys policies and practices. (go back), 74Big US companies pushed to tally progress on racial justice, Yahoo! While Professing BLM Support, Wall Street Banks Reject Racial Equity Audits Morgan Stanley has committed to an internal review of its workforce and leadership, according to CtW, which also said the bank has agreed to talk about what it will do to ensure equity for. [66], Similar Racial Equity Audit proposals were submitted by shareholders at several public companies during the 2021 proxy season with substantially the same resolution clause copied above, but with different issues highlighted. Citigroup, Wells Fargo, Bank of America, Goldman Sachs, JP Morgan urge 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. 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. [141]. (go back), 79See Citigroup No-Action Letter, supra note 78; JPMorgan No-Action LetterFebruary, supra note 77. ARTICLE: Racial Equity Audits: A New ESG Initiative Poised to Gain We deliver active investment strategies across public and private markets and custom solutions to institutional and individual investors. [3], With the increasing prominence of ESG awareness, the market has also seen the rise of ESG-specific funds as a new form of investment vehicle. (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. [98] Wells Fargo also said it is making efforts toward expanding [its] diversity and inclusion commitments with a focus on hiring, promotions, and turnover, with increased accountability across all of those areas and [is] taking specific actions in support of these commitments. [99] The board of directors of Goldman recommended that shareholders vote against the shareholder proposal on a Racial Equity Audit, saying it has taken additional steps toward racial equity in the past year, including assessing its shortcomings and committing to hiring more analysts from historically Black colleges and universities, while maintaining [its] existing programs focused on other diverse populations. [100] Goldman also pointed out that it is [b]uilding upon more than $200 million of grants in minority communities and to minority-owned businesses over the past two decades and in 2020 [Goldman] created the Fund for Racial Equity to support the vital work of leading nonprofits that are addressing racial injustice, structural inequity and economic disparity, which has committed $10 million from GS Gives in addition to matching employee contributions to recipient organizations. [101]. Why did nearly all of the banks urge "no" votes on the audit proposals? No two companies are identical. The $1.9 trillion-asset bank has hired the law firm Covington & Burling to conduct the review and plans . Investing in underserved communities through our products, services, spending, business practices and thought leadership, Supporting underserved communities through philanthropy that drives more equitable outcomes, Attracting, developing and retaining individuals with diverse backgrounds and driving a culture of inclusion. [139] The draft legislation would also require banks to investigate what ties they may have to slavery and disclose steps such institution would take to reconcile profits it may have received from slavery. SEIU said in its resolution, which has since been withdrawn, that BlackRock as an investor opposed most shareholder proposals in. Citi to conduct racial equity audit | Corporate Secretary (go back), 85See Amazon No-Action Letter, supra note 83. [116] Comptroller DiNapoli expressed concern with Amazons alleged lack of transparency, stating that while the company has put policies in place to address this issue, it has not reported to investors the effectiveness or the process for completing its ongoing policy review. [117] In 2020, Amazon conducted its first human rights assessment, which it referenced to support its position that there was no need to conduct a Racial Equity Audit. NEW YORK-- ( BUSINESS WIRE )--Citi and the Citi Foundation announced today the Action for Racial Equity initiative has already invested $1 billion in strategic initiatives to help close the. Analysis: Goldman Sachs faces hard sell for its consumer assets The correlation between gender-balanced teams and improved decision-making, innovation and performance aligns with our core value Commit to Diversity and Inclusion. Andrew Santini LinkedIn: I am very proud to announce that I have been It received the backing of 38.6 percent of votes cast during the company's AGM in April. Why Are Goldman Sachs And JPMorgan Looking To Avoid Racial Equity Audits? https://www.vox.com/recode/2021/2/26/22297554/amazon-race-black-diversity-inclusion, https://www.washingtonpost.com/technology/2021/03/01/amazon-race-discrimination-lawsuit/, https://www.washingtonpost.com/technology/2021/05/19/amazon-suit-race-gender-discrimination/, https://amazonemployees4climatejustice.medium.com/environmental-justice-and-amazons-carbon-footprint-9e10fab21138, https://www.nbcnews.com/tech/tech-news/amazon-shareholders-demand-end-pollution-hitting-people-color-hardest-n1268413, https://sustainability.aboutamazon.com/people/human-rights?workerCount=true&engagementProgram=true&productCategory=true, https://www.marketwatch.com/story/amazon-investors-reject-new-york-retirement-funds-call-for-a-racial-equity-audit-10-other-shareholder-proposals-11622242863, https://www.osc.state.ny.us/press/releases/2021/05/nys-comptroller-dinapoli-statement-major-support-racial-equity-audit-amazon, https://www.socinvestmentgroup.com/racial-equity-audit, https://static1.squarespace.com/static/5d374de8aae9940001c8ed59/t/60216432f41c694416fcceb5/1612801075053/BlackRock+2021+racial+equity+audit+proposal+final+%281%29.pdf, https://www.seiu.org/blog/2021/4/seiu-and-change-to-wins-investment-funds-pushing-for-racial-diversity-in-financial-institutions, https://news.bloombergtax.com/financial-accounting/blackrock-breaks-ranks-with-wall-street-in-performing-race-audit, https://fortune.com/2021/04/06/blackrock-racial-audit-corporate-diversity-inclusion-race-at-work/, https://insights.issgovernance.com/posts/iss-opens-global-annual-benchmark-policy-survey-and-separate-climate-survey/, https://www.congress.gov/bill/117th-congress/house-bill/2123/committees?r=61&s=1, https://www.olshanlaw.com/resources-alerts-Nasdaq-SEC-boardroom-diversity-rule.html. Racial Equity Audits: A New ESG Initiative - The Harvard Law School [140] The legislation is sponsored by Rep. Joyce Beatty and co-sponsored by Reps. Nikema Williams and Jesus G. Garcia and is currently under committee review. Morgan Stanley is differentiated by the caliber of our diverse team. 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. Our culture of access and inclusion has built our legacy and shapes our future, helping to strengthen our business and bring value to clients. According to certain proponents, the point of a Racial Equity Audit is not necessarily to critique a companys current platforms and efforts. What Are Racial Equity Audits? - nhforge.org (go back), 22Supra note 10. Votes on the Proposals at JP Morgan & Chase, Goldman Sachs and State Street will take place in the next few weeks. Black Rock, the world's largest asset manager, is launching a racial audit at a request of a shareholder. 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. PDF S Arps Slate Meagher Flom Llp - Sec (go back), 100Goldman Sachs Proxy Statement, supra note 35. Shareholder activist Engine No. From our origins as a small Wall Street partnership to becoming a global firm of more than 60,000 employees today, Morgan Stanley has been committed to clients and communities for 85 years. 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. Id. 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 New York-based firm said it will start the audit in 2022. JPMorgan Chase Releases $30 Billion Racial Equity Commitment Audit Report We provide comprehensive workplace financial solutions for organizations and their employees, combining personalized advice with modern technology. 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. An example of a project with high-impact priority elements is The Villages of East River. See how you can make meaningful contributions as a student or recent graduate at Morgan Stanley. 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. 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. 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. Morgan Stanley CEO moved by protests to promote two black staffers 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. 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. (go back), 8Public Input Welcomed on Climate Change Disclosures, U.S. Securities and Exchange Commission, Acting Chair Allison H. Lee, March 15, 2021, available at https://www.sec.gov/news/public-statement/lee-climate-change-disclosures. 30-10825; 34-89670; File No. (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. Bank of America said last week that an audit is unnecessary given its progress on racial equality. Amazon to conduct racial-equity audit led by former Attorney General The Black Leaders Forum brought together senior leaders from Wealth Management for targeted conversations, development and actions to achieve success. 2023Morgan Stanley. (go back), 94CoreCivic, Inc., Form 8-K, filed with the SEC on May 18, 2021, available at https://www.sec.gov/ix?doc=/Archives/edgar/data/1070985/000119312521165313/d184269d8k.htm. Equity in the Boardroom: How Asset Manager Voting Shaped Corporate Civil rights. . (go back), 6Final Rule: Modernization of Regulation S-K Items 101, 103 and 105, 17 CFR 229, 239 and 240, Release Nos. 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. (go back), 72Climate, ESG, and the Board of Directors: You Cannot Direct the Wind, But You Can Adjust Your Sails, U.S. Securities and Exchange Commission, Commissioner Allison H. Lee, June 28, 2021, available at https://www.sec.gov/news/speech/lee-climate-esg-board-of-directors. Bank Leaders Buck Shareholder Call for Third-Party Racial Equity Audit [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. Rachel Wilson became the first head of cybersecurity for Morgan Stanley Wealth Management in the spring of 2017. (go back), 105Id. [45]. According to this study, closing racial gaps would have generated an additional $16 trillion in economic output since [the year] 2000, and by closing the various gaps between Blacks and Whites, the U.S. could stand to gain an additional $5 trillion in economic activity over the next five years. [42] Racial Equity Audits could therefore prove to be a critical tool for companies looking to capture some of these unrealized gains. (go back), 70Citigroup Proxy Statement, supra note 69; JPMorgan Chase & Co., 2021 Notice of Annual Meeting of Shareholders and Proxy Statement, Schedule 14A, filed with the SEC on April 7, 2021, available at https://www.sec.gov/Archives/edgar/data/0000019617/000001961721000275/a2021proxystatement.htm [hereinafter JPMorgan Proxy Statement]. (go back), 142SEC Approves Nasdaqs New Listing Rules Designed to Advance Greater Boardroom Diversity, Elizabeth Gonzalez-Sussman and Ron Berenblat, August 2021, available at https://www.olshanlaw.com/resources-alerts-Nasdaq-SEC-boardroom-diversity-rule.html. David Ake) It followed his 2021 executive order . [20] State governments have also codified ESG initiatives into lawCalifornia leading the charge with the passage of Senate Bill 826 and Assembly Bill 979, which require a certain percentage of directors on the boards of public companies headquartered in the state be composed of females and individuals from underrepresented communities. [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. (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.