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(go back), 35The Goldman Sachs Group, Inc., 2021 Notice of Annual Meeting and Proxy Statement, Schedule 14A, filed with the SEC on March 19, 2021, available at https://www.sec.gov/Archives/edgar/data/886982/000119312521087020/d88664ddef14a.htm [hereinafter Goldman Sachs Proxy Statement]. Opinion | Wall Street Banks Reject Racial Equity Audits, While 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 . Indeed, the House Financial Services Subcommittee on Diversity and Inclusion is currently reviewing legislation that would require banks to conduct Racial Equity Audits every two years in an effort to promote diversity and equity. [133] However, in the coming years, we believe this is an area in which the proxy advisory firms may issue official voting guidance. https://www.sec.gov/divisions/corpfin/cf-noaction/14a-8/2021/nyscrfamazon012521-14a8-incoming.pdf, https://www.sec.gov/interps/legal/cfslb14b.htm, https://www.sec.gov/ix?doc=/Archives/edgar/data/1070985/000119312521165313/d184269d8k.htm, https://thehill.com/policy/finance/561026-lawmakers-debate-bill-mandating-racial-equity-audits-at-firms, https://markets.businessinsider.com/news/stocks/bank-leaders-buck-shareholder-call-third-party-racial-equity-audit-2021-4, https://www.sec.gov/Archives/edgar/data/72971/000119312521082907/d71313ddef14a.htm, https://news.bloomberglaw.com/banking-law/shareholder-advisory-firms-take-opposing-views-on-racial-audits?context=article-related, https://www.sec.gov/Archives/edgar/data/1018724/000110465921050333/tm2035374-1_def14a.htm, https://www.timesunion.com/news/article/Comptroller-DiNapoli-wants-audit-of-Amazon-s-15815322.php, https://www.sec.gov/divisions/corpfin/cf-noaction/14a-8/shareholder-proposal-no-action-responses.htm. [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. A racial equity audit is the first step to safeguard against further harm and it's also the smart thing to do. In light of the anticipated increase in the number of Racial Equity Audit proposals in the coming proxy seasons, we may see a corresponding rise in the number of companies that follow BlackRocks lead and voluntarily conduct their own Racial Equity Audits. To start off the 2022 proxy season, the civil rights audit shareholder proposal at Apple, Inc. received support from 54 percent of shares voted, while at government services company Maximus, holders of 64 percent of shares voted in favor in early March. [65] Certain of these racial justice proposals submitted by shareholders included proposals calling for Racial Equity Audits. As a result, Engine No. Black Rock, the world's largest asset manager, is launching a racial audit at a request of a shareholder. [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. JPMorgan Chase Releases $30 Billion Racial Equity Commitment Audit Report [121] Comptroller DiNapoli described the vote as an immense success for a first-time proposal . Published Mon, Apr 18 2022 4:50 PM EDT Updated Mon, Apr 18 2022 6:22 PM EDT. 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. 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. 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. 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), 76See Amendments to Rules on Shareholder Proposals, Exchange Act Release No. As the area develops (and if more companies voluntarily implement these audits), Racial Equity Audits could become viewed as good corporate governance, particularly if top proxy advisory firms issue official guidance supporting the implementation of such audits. Yesterday, the audit proposal also went to the vote at Wells Fargo, the result has not yet been disclosed. [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), 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. Amazon to conduct racial-equity audit led by former Attorney General We have shown our commitment to these principles when we set and disclosed our representation goals and shared the results of our pay equity analysis. (go back), 108Amazon No-Action Letter, supra note 83. Hear their stories and learn about how they are redefining the terms of success. A report on the audit, prepared at reasonable cost and omitting confidential or proprietary information, should be publicly disclosed on BofAs website. [11], ESG considerations are becoming increasingly relevant to shareholder activists. [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. [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. Wells Fargo agrees to racial equity audit | American Banker [6] Since then, SEC leadership has signaled that more comprehensive ESG-related disclosure could be mandated in the near future, with SEC Commissioner Allison Herren Lee issuing statements earlier this year directing the Division of Corporation Finance to enhance its focus on climate-related disclosure in public company filings [7] and inviting input from investors, registrants, and other market participants on climate change disclosure. [8] Former Acting Director of the SECs Division of Corporation Finance John Coates also stated earlier in the year that the SEC should help lead the creation of an effective ESG disclosure system so companies can provide investors with information they need in a cost-effective manner. [9] Based on these statements, we believe there is a strong likelihood that the current SEC-mandated human capital management disclosures will soon be expanded to require additional disclosures covering environmental and other social initiatives and metrics, further supporting a view that ESG awareness, stewardship and reporting at public companies are here to stay. hj0_`%A (?BY*JFwiPRNB` H&@& cTL2Vc$`p 1q) 19IB9HA$..Ey?/ANWez][{{iK.5&QZ"]EF'v?}^L7u?F$9 r4-{2`|4E@$VH`&JxCz9 The Black Leaders Forum brought together senior leaders from Wealth Management for targeted conversations, development and actions to achieve success. [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. 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. Id. We saw this occur in California with Senate Bill 826 and Assembly Bill 979 discussed in further detail above. A complicated past The financial institutions in question have recently made diversity, inclusion, and racial equity a significant. In light of the protests sparked by the murder of George Floyd in June 2020, the CtW Investment Group has requested systemically important financial institutions to conduct a racial equity audit that identifies, prioritizes, and remedies the adverse impacts of the bank's policies and practices on non-white stakeholders and communities of color. See how you can make meaningful contributions as a student or recent graduate at Morgan Stanley. 94 . (go back), 75Goldman, Citi Stave Off Investor Calls for Racial Audits (1), Bloomberg Law, Saijel Kishan and Jeff Green, April 29, 2021, available at https://news.bloomberglaw.com/banking-law/goldman-citi-stave-off-investor-calls-for-racial-audits-1. Clear guidance from proxy advisory firms would also be beneficial to companies considering implementing Racial Equity Audit policies by offering indications on what parameters constitute best practices and how frequently these audits should occur. 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. [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. [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). 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. Rachel Wilson became the first head of cybersecurity for Morgan Stanley Wealth Management in the spring of 2017. We believe our greatest asset is our people. As the ESG movement gains momentum, and as the new wave of investors who factor ESG concerns into their investment decisions gain a larger share of the market, companies are being advised to revisit their current policies and practices under the ESG lens. [112], In a webinar hosted by CtW, Comptroller DiNapoli explained the importance of racial equity at Amazon and why shareholders should vote in favor of the proposal, and argued that racial inequity is harming the United States economy. [113] DiNapoli argued that the pattern and magnitude of issues repeatedly facing the company demonstrate a need for a more in-depth review . 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. Exxon faces proxy fight launched by new activist firm Engine No. 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. Using Equity Audits to Assess and Address Opportunity Gaps - IDRA BlackRock Breaks Wall Street Ranks With Planned Racial Audit Hours after CEO decried inequality, JPMorgan seeks to quash call for - March 24, 2022. BlackRock plans racial audit, in break with Wall Street peers Citi and BlackRock Join List of Companies Doing Racial Equity Audits . urge the Board of Directors to oversee a racial equity audit analyzing JPMorgan's adverse impacts on nonwhite stakeholders and communities of color. (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. At Morgan Stanley, youll find trusted colleagues, committed mentors and a culture that values diverse perspectives, individual intellect and cross-collaboration. Services Employees International Union (SEIU), Unable to concur that Rule 14a-8(i)(7) provides a basis to exclude, Unable to concur that Rule 14a-8(i)(10) provides a basis to exclude, Unable to concur with exclusion on any of the bases asserted, Materially False and Misleading Exception (Vague or Indefinite). (go back), 17Supra note 5; see also What Is ESG? Today, we're demonstrating . The New York-based firm said it will start the audit in 2022. [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. Financial institutions and asset management firms have become the focus of Racial Equity Audit shareholder proposals. (citing Exchange Act Release No. In SEC filings,. [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. In 2020, partners at the Interfaith Center on Corporate Responsibility(ICCR) filed 12 resolutions calling for racial equity audits. CK%@q)4rK!u\r94 !5@@yb#8u(:uI&UsRmndt>&. 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. As a global financial services firm, Morgan Stanley is committed to technological innovation. (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]. From our startup lab to our cutting-edge research, we broaden access to capital for diverse entrepreneurs and spotlight their success. [95], Companies Recommended Voting Against Racial Equity Audit Proposals. In 2020 and 2021, at least 12 public companies received shareholder proposals to conduct a racial equity audit from pension funds and other shareholder proponents. 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. Morgan Stanley team with $715 million joins . (go back), 106Other shareholders joining the proposal were: (1) the Praxis Growth Index Fund; (2) CommonSpirit Health; (3) the Adrian Dominican Sisters; (4) Catherine Donnelly Foundation; (5) Monasterio Pan de Vida; (6) Reynders, McVeigh Capital Management, LLC; (7) the Congregation of the Sisters of St. Joseph of Peace; (8) the Sisters of the Holy Names of Jesus and Mary U.S.-Ontario Province Corporation; and (9) Newground Social Investment on behalf of the Robert H. and Elizabeth Fergus Foundation and Eric Menninga. [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. (go back), 109Id. We have global expertise in market analysis and in advisory and capital-raising services for corporations, institutions and governments. Recently, investors and companies have also begun to appreciate that positive financial returns are often associated with investing in initiatives working towards racial equality. https://www.reuters.com/article/us-amazon-com-sec-vote/u-s-sec-blocks-amazon-effort-to-stop-shareholder-votes-on-racial-equity-audit-idUSKBN2BU38U. Vanguard's Insights on Shareholder Proposals Concerning Diversity Equity audits are a leadership tool used to collect the data that informs the process of removing programmatic barriers that impede full participation, access, and opportunity for all students to receive an equitable and excellent education. BlackRock pledges to conduct racial-equity audit The Facebook audit began at the behest and encouragement of the civil rights community and some members of Congress, proceeded with Facebooks cooperation, and [was] intended to help the company identify, prioritize, and implement sustained and comprehensive improvements to the way it impacts civil rights. [56] The audit process included interviewing over 100 civil rights organizations, several hundred more advocates as well as members of Congress. ; see also Comptroller DiNapoli Wants Audit of Amazons Racial Justice Practices, Times Union, Rick Karlin, December 21, 2020, available at https://www.timesunion.com/news/article/Comptroller-DiNapoli-wants-audit-of-Amazon-s-15815322.php. By offering such guidance, companies may find it easier to voluntarily implement Racial Equity Audit policies. (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]. An example of a project with high-impact priority elements is The Villages of East River. 1s unprecedented victory, with three of its director nominees being elected to Exxons board at its 2021 annual meetingsending a clear message that environmental concerns and proactive planning are deeply important to Exxons shareholders. The proxy advisory firms level of guidance may take varying formsat the low end, proxy advisory firms may increase a companys ESG or corporate governance score for having in the past or recently conducted a Racial Equity Audit. Morgan Stanley did not respond to a request for comment. 16, 1992)). Get the latest insights, analyses and market trends in our newsletter, podcasts and videos. This 202-unit, scattered-site property comprising 16 buildings is located in the predominantly Black neighborhoods of Wards 7 and 8 of . SEIU said in its resolution, which has since been withdrawn, that BlackRock as an investor opposed most shareholder proposals in. SEC interpretations of this rule provide that proposals that concern ordinary business matters but focus on significant social policy issues would not be excludable because the proposals would transcend the day-to-day business matters. [82] In seeking to exclude Racial Equity Audit proposals, companies argued that these audits concerned day-to-day aspects of their ordinary business operations, including: (i) product sales and advertising; [83] (ii) customer relationships; [84] (iii) the nature of the companys public relations, messaging, and communications with its shareholders and other constituents; [85] (iv) workforce management; [86] (v) relationships with suppliers; [87] (vi) community impacts; [88] or (vii) decisions regarding the products and services [the company] offers. [89] Furthermore, these companies contended that the proposals did not focus on a significant policy issue that transcended their ordinary business. Learn from our industry leaders about how to manage your wealth and help meet your personal financial goals. Discover who we are and the right opportunity for you. Wall Street Rejects Racial Equity Audits, While 'Supporting' BLM Racial Equity Audits: A New ESG Initiative Poised To Gain - Mondaq The two leading proxy advisory firms, ISS and Glass Lewis & Co. LLC (Glass Lewis), have generally taken opposing views on Racial Equity Audits. [31] Following an audit, some companies have used the findings to develop a strategic plan to capitalize on opportunities to address racial equity moving forward. Our culture of access and inclusion has built our legacy and shapes our future, helping to strengthen our business and bring value to clients. (go back), 107Amazon Proxy Statement, supra note 104. (go back), 126BlackRock Audit Proposal, available at https://static1.squarespace.com/static/5d374de8aae9940001c8ed59/t/60216432f41c694416fcceb5/1612801075053/BlackRock+2021+racial+equity+audit+proposal+final+%281%29.pdf. Companies that dismiss these concerns or lag behind their peers in addressing ESG matters may find themselves in the crosshairs of investors and proxy advisory firms, or even state legislatures and federal agencies. However, not all companies have been as eager and willing to comply with these requests. . [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]. Shareholder activist Engine No. [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. Why did nearly all of the banks urge "no" votes on the audit proposals? Racial Equity: Advancing Change | Morgan Stanley [109], Amazon argued the proposals call to review its impact on civil rights, equity, diversity and inclusion is a broad survey on the impact of the Companys policies, practices, products and services on societal issues, which implicates routine business issues, such as the products and services that the Company offers to its customers, the Companys business practices and operations, the Companys strategic decisions, and the Companys choice of technologies. [110] Similarly, according to Amazon, such an audit would necessarily implicate[] a multitude of ordinary business matters relating to the Companys day-to-day operations, which Amazon argued included decisions relating to, among other things, its charitable donations, hiring decisions, diversity and recruitment initiatives, customer relations, advertising, public relations and communications with its shareholders and the kinds of products it sold. PAB News | Shareholders File Resolutions Calling for Companies to %PDF-1.6 % The California legislature recognized the public desire to move towards greater diversity on public boards and codified set requirements. McKensie Mack Group (MMG), a Black-led consultancy that centers around racial equity, released their Sacramento Area Council of Governments (SACOG) racial equity audit. The lender pledged in 2020 to spend $1 billion over four years to combat racial and economic. (go back), 96See e.g., Goldman Sachs Proxy Statement, supra note 35 (We share the proponents focus on advancing racial equity.); Citigroup Proxy Statement, supra note 69 (While we disagree with the overall approach in this Proposal, we are completely aligned with its stated goal of addressing racial inequity in the financial sector.); see also Lawmakers debate bill mandating racial equity audits at firms, The Hill, Abigail Goldberg-Zelizer, June 30, 2021, available at https://thehill.com/policy/finance/561026-lawmakers-debate-bill-mandating-racial-equity-audits-at-firms; Shareholders want to hold corporate giants accountable for their commitments to racial equity and justice. (go back), 69Citigroup Inc., 2021 Notice of Annual Meeting and Proxy Statement, Schedule 14A, filed with the SEC on March 17, 2021, available at https://www.sec.gov/Archives/edgar/data/831001/000120677421000735/citi3828191-def14a.htm [hereinafter Citigroup Proxy Statement]; see also CoreCivic Inc. Proposal, Service Employees International Union (SEIU), available at https://exchange.iccr.org/node/88686/text. 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 Firm's employees serve cl . Input from civil rights organizations, employees, and customers should be considered in determining the specific matters to be analyzed. Companies Negotiated with Shareholders to Withdraw the Racial Equity Audit Proposal. While Professing BLM Support, Wall Street Banks Reject Racial Equity Audits 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 Civil rights advocates and proponents of social justice have long touted the moral and ethical considerations of closing the racial divide in America. (go back), 120Amazon investors reject New York retirement funds call for a racial-equity audit, 10 other shareholder proposals, MarketWatch, Levi Sumagaysay, May 28, 2021, available at https://www.marketwatch.com/story/amazon-investors-reject-new-york-retirement-funds-call-for-a-racial-equity-audit-10-other-shareholder-proposals-11622242863. 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. Kellogg Foundation, available at: https://www.wkkf.org/resource-directory/resources/2018/07/business-case-for-racial-equity (Closing the gap means lessening, and ultimately eliminating, disparities and opportunity differentials that limit the human potential and the economic contributions of people of color.); see also Economist Found $16 Trillion When She Tallied Cost of Racial Bias, Bloomberg, Saijel Kishan, October 20, 2020, available at https://www.bloomberg.com/news/articles/2020-10-20/racism-and-inequity-have-cost-the-u-s-16-trillion-wall-street-economist-says.

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