We help people, businesses and institutions build, preserve and manage wealth so they can pursue their financial goals. (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/. Our work on racial equity focuses on our commitments as a business, as a responsible member of global and local communities, and as an inclusive workplace that values diversity. (go back), 86See J&J No-Action Letter, supra note 78. LinkedIn Andrew Santini : I am very proud to announce that I have Wall Street Rejects Racial Equity Audits, While 'Supporting' BLM ARTICLE: Racial Equity Audits: A New ESG Initiative Poised to Gain The America First Legal Foundation is accusing the IRS of using "racial equity" for audits targeting White and Asian taxpayers. [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. [13] Recently, however, activists have begun to realize that social and environmental issues can also impact their investments, in both negative and positive ways. Whether its hardware, software or age-old businesses, everything today is ripe for disruption. Morgan Stanley, and Citigroup have conducted audits in the financial world. Racial Justice Audits: Holding Companies Accountable for Their Role in 2022 Annual Impact Report 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. 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. Source: SEC Filings. . (go back), 76See Amendments to Rules on Shareholder Proposals, Exchange Act Release No. In doing so, these companies have argued that they have already taken measures to address racial justice, such as investing in Black entrepreneurs, expanding credit and working to boost diversity within their ranks. [75]. Morgan Stanley CtW Morgan Stanley Racial Equity Audit Proposal Julia Khan November 20, 2020 Morgan Stanley Click Here to Read the Letter in PDF Format. 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. 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. With offices in more than. (go back), 37Webinar, Cyrus Mehri, Founding Partner of Mehri & Skalet, PLLC, supra note 23. 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 report on the audit, prepared at reasonable cost and . (go back), 73As You Sow: Racial Justice, available at https://www.asyousow.org/our-work/social-justice/racial-justice. (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]. Our firm's commitment to sustainability informs our operations, governance, risk management, diversity efforts, philanthropy and research. Get the latest insights, analyses and market trends in our newsletter, podcasts and videos. [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), 38See e.g., Opinion: Companies Have a Duty to Defend Democracy, NPR, Brett Bruen, July 7, 2020, available at https://www.npr.org/2020/07/07/887628306/opinion-companies-have-a-duty-to-defend-democracy (discussing corporations ability to be more responsive to critical issues to voters on the macro-level, such as gun control and climate change, as well as on a more personal level including Twitter, Uber and Blue Apron announc[ing that] they would give employees a paid day off when their country holds elections). (go back), 88See JPMorgan No-Action LetterFebruary, supra note 77. (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]. 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. [15] As discussed in more detail below, a companys performance on ESG factors, such as investment into renewable energy, promotion of employee health and safety and contributions to the local community, are pressing issues that can either benefit or adversely affect a companys perception in the public eye, operational execution and bottom line. Proxy advisors split over racial equity requests at banking giants In general, Racial Equity Audit proposals ask the board of directors of a company to oversee such audits analyzing the companys business modelsfrom policies to products and servicesto determine whether they cause, reinforce or perpetuate discrimination. [67]. [14], ISS and others have published a number of reports that have found that addressing social and environmental concerns correlates with companies either currently experiencing or having the potential to experience increased growth and profitability. PDF S Arps Slate Meagher Flom Llp - Sec (go back), 77Rule 14a-8 No Action Letter re: JPMorgan Chase & Co.2021 Annual Meeting, Supplemental Letter dated January 11, 2021, Relating to Shareholder Proposal Submitted by CtW Investment Group, Skadden, Arps, Slate, Meagher & Flom LLP, February 16, 2021, available at https://www.sec.gov/divisions/corpfin/cf-noaction/14a-8/2021/ctwjpmorgan032621-14a8.pdf [hereinafter JPMorgan No-Action LetterFebruary]. (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. 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. Morgan Stanley Launches the Institute for Inclusion Citigroup agrees to audit of investments in minority communities Goldman Sachs And JPMorgan Look To Avoid Racial Equity Audits This 202-unit, scattered-site property comprising 16 buildings is located in the predominantly Black neighborhoods of Wards 7 and 8 of . Shareholders target 'white man's world' with record - POLITICO SOC Investment Group (then known as CtW Investment Group) filed a proposal seeking a racial equity audit in Citi's proxy statement this year. (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. (go back), 47The Best ESG Funds for Great Returns & Low Costs, Forbes, Rob Berger and Benjamin Curry, July 1, 2021, available at https://www.forbes.com/advisor/investing/best-esg-funds/. [41] A study by a Citigroup, Inc. (Citi) global economist found that addressing racial disparities can have even broader macro benefits. 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. Related research from the Program on Corporate Governance includesThe Illusory Promise of Stakeholder Governance(discussed on the Forumhere) andWill Corporations Deliver Value to All Stakeholders?, both by Lucian A. Bebchuk and Roberto Tallarita;For Whom Corporate Leaders Bargainby Lucian A. Bebchuk, Kobi Kastiel, and Roberto Tallarita (discussed on the Forumhere); andRestoration: The Role Stakeholder Governance Must Play in Recreating a Fair and Sustainable American EconomyA Reply to Professor Rockby Leo E. Strine, Jr. (discussed on the Forumhere). Hear their stories and learn about how they are redefining the terms of success. [115] The companys environmental impact has also been called out for allegedly disproportionately affecting minority communities. However, not all companies have been as eager and willing to comply with these requests. [69], Proponents contend that Racial Equity Audits would help public companies identify, prioritize, remedy and avoid adverse impacts on nonwhite stakeholders and communities of color [70] and would help a companys board of directors assess such companys behavior through a racial equity lens in order to obtain a complete picture of how it contributes to, and could help dismantle, systemic racism. [71]. (go back), 95For a detailed discussion of BlackRocks decision to implement a Racial Equity Audit, see Section IV.A. BlackRock breaks Wall Street ranks with planned racial audit 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. The lender pledged in 2020 to spend $1 billion over four years to combat racial and economic inequality. JPMorgan analysts are projecting a pre-tax loss of $2.4 billion in 2023, $1.7 billion in 2024 and about $800 million in 2025."We still do not bake in pre-tax profitability in our model, which . endstream endobj 336 0 obj <>stream At Morgan Stanley, advancing racial equity is about intentional, holistic change at the intersection of what we do, who we are and how we engage our communities. 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. We value our commitment to diverse perspectives and a culture of inclusion across the firm. Importantly, the proposals encourage an internal and external review, looking at human capital management but also the products and services companies offer, along with their philanthropic and political contributions. 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. Recently, Morgan Stanley and CtW Investment Group reached an agreement for the bank to conduct an internal diversity review . https://www.sec.gov/news/public-statement/lee-statement-review-climate-related-disclosure. Why did nearly all of the banks urge "no" votes on the audit proposals? According to Forbes Magazine, the past proxy season set new records with at least 467 shareholder resolutions on environmental, social and governance (ESG) issues. [64]. (go back), 22Supra note 10. (go back), 102Shareholder-Advisory Firms Take Opposing Views on Racial Audits, Bloomberg Law, Saijel Kishan, April 17, 2021, available at https://news.bloomberglaw.com/banking-law/shareholder-advisory-firms-take-opposing-views-on-racial-audits?context=article-related (quoting Glass Lewis). 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. BlackRock opposed nearly all shareholder proposals directly addressing racial justice issues, including two proposals at Amazon seeking disclosure regarding hate-promoting products and effects of its facial recognition technology on people of color. [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. The decision to retain an independent . The Citi Blog - Citi Will Conduct a Racial Equity Audit [104] The proposal was submitted by Comptroller DiNapoli, as trustee of New York States Common Retirement Fund for public employees, which owns shares in Amazon. Morgan Stanley did not respond to a request for comment. The firm reached its decision following successful engagement with and withdrawal of a racial equity audit shareholder proposal by SOC Investment Group and SHARE. (go back), 21Cal. Hours after CEO decried inequality, JPMorgan seeks to quash call for The increasing focus on environmental, social and governance (ESG) considerations at public companies, including this years highly publicized proxy contest at Exxon Mobil Corporation (Exxon), has demonstrated the growing importance of understanding ESG and the implications it can have for investors and companies. Ron S. Berenblat and Elizabeth R. Gonzalez-Sussman are partners at Olshan Frome Wolosky LLP. IRS accused of using 'racial equity' for audits targeting White, Asian McKensie Mack Group (MMG), a Black-led consultancy that centers around racial equity, released their Sacramento Area Council of Governments (SACOG) racial equity audit. . (go back), 4ESG investing: Discover funds that reflect what matters most to you, The Vanguard Group, Inc., available at https://investor.vanguard.com/investing/esg/. What Makes Patagonia A World Leader in Sustainability, Medium, Tom & Jerry, January 13, 2021, available at https://medium.com/climate-conscious/what-makes-patagonia-a-world-leader-in-sustainability-486073f0daa. (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. 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. [i]f CEO Jeff Bezos shares (70,616,270 shares, 14%) were to be removed from those voting against it, the proposal received majority support. [122]. Id. Exxon has faced pressure from shareholders to shift practices to reduce greenhouse gas emissions. These votes follow a 2021 season in which eight racial equity audit proposals were proposed . (go back), 34Starbucks Steps Up Its Racial Justice Outreach With $100 Million Pledge, Forbes, Kori Hale, January 20, 2021, available at https://www.forbes.com/sites/korihale/2021/01/20/starbucks-steps-up-its-racial-justice-outreach-with-100-million-pledge/?sh=53b94b63389c. [52] Practitioners also stress the importance of identifying and engaging the process owners (e.g., the Chief Executive Officer, Chief Legal Officer or Chief Diversity, Equity and Inclusion Officer) as the persons who will actually drive the implementation of recommended initiatives. Amid a pandemic and social unrest, we gathered senior multicultural business leaders to focus on the challenges and opportunities of this indelible moment in history. (go back), 123Racial Equity Audit, SOC Investment Group, 2021, available at https://www.socinvestmentgroup.com/racial-equity-audit. Using Equity Audits to Assess and Address Opportunity Gaps - IDRA (go back), 82See Final Rule: Amendments to Rules on Shareholder Proposals, Release No. Legislative or regulatory requirements are not without their own risks, and compliance with any such minimum standards would not be fool proof to insulate a company from potential ESG proposals and proxy campaigns. Citigroup, Wells Fargo, Bank of America, Goldman Sachs, JP Morgan urge Shareholders at JPMorgan Chase and State Street hold their meetings this week. CtW dropped the Morgan Stanley proposal after the bank agreed to conduct a racial equity audit. We leverage the full resources of our firm to help individuals, families and institutions reach their financial goals. Corp. Code 301.3, 301.4. May 2010 - Jul 20122 years 3 months. At Morgan Stanley, giving back is a core valuea central part of our culture globally. Goldman Sachs And JPMorgan Look To Avoid Racial Equity Audits - Forbes Prior, he . Tagged: 2020, Regulatory letters Newer PostCtW letter to DoorDash dual class Older PostCtW Racial Equity letter to Morgan Stanley Back to Top 1900 L Street NW, Suite 900 Washington, DC 20036 Measurement and transparency are important components of the work Citi is doing to advance diversity, equity and inclusion, both at our bank and through our contributions to our communities and society more generally. Our board of directors and senior executives hold the belief that capital can and should benefit all of society. 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. (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.
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