Home Depots PAC donated more than $450,000 in the 2019-20 election cycle, and more than $1.5 million in the past three cycles to the Members of Congress who objected to certifying the election results on January 6, 2021. 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. 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. These audits are conducted to analyze the effectiveness of diversity, equity and inclusion programs, the impacts of technology and products on racial minorities in communities and companies and the treatment of customers, and other civil rights and racial equity issues. Just like its environmental and corporate governance counterparts, addressing social concerns can be equally important to companies and investors alike as this can translate into, among other things, value additive results. (go back), 46Best ESG Funds: High-Rated and Low-Cost Options, NerdWallet, Alana Benson, May 9, 2021, available at https://www.nerdwallet.com/article/investing/best-esg-funds. (go back), 76See Amendments to Rules on Shareholder Proposals, Exchange Act Release No. (go back), 119See Webinar, Thomas DiNapoli, New York State Comptroller, supra note 23. Airbnb Inc., which faced a spate of backlash for charges of racial profiling of guests before initiating tougher standards, has bounced nearly 4,000 accounts from its home-sharing app this year for violating its nondiscrimination policy. Civil rights advocates notched a victory this week by securing a commitment from e-commerce giant Amazon to conduct a racial equity audit, a step they say is crucial toward ensuring that. (go back), 50Webinar, Pamela Coukos, Co-Founder of Working Ideal, supra note 23; supra note 27. Such audits entail vigorous risk assessments and disclosures on continuity plans, among other things. Civil rights advocates and proponents of social justice have long touted the moral and ethical considerations of closing the racial divide in America. We have a responsibility to do more. (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). The following proposals will be put to shareholders at its April 26, 2022 annual meeting, requesting: Historically, the insurance industry has engaged in racist practices impacting customers and potential customers from communities of color, including charging far higher premiums for auto insurance in Black neighborhoods as opposed to white neighborhoods; much lower payouts in homeowner insurance claims for Black neighborhoods; and instances of coverage denial for property owners who accept Section 8 vouchers. In a recent review of federal mortgage data from 2020 by Bloomberg, the outlet found that Wells Fargo has the worst record among major lenders when it came to disparities in approvals of refinancings by Black homeowners, approving fewer than half of Black homeowners refinancing applications in 2020. 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]. (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. (go back), 28The Business Case for Racial Equity, a Strategy for Growth, Ani Turner, W.K. The most wishlisted Design and Creative Space stays for inspiring retreats, Visit North Carolina and Airbnb relaunch partnership to boost rural tourism, Get to know your Host community in Europe: Meet Katerina from Greece. (go back), 30Webinar, Cyrus Mehri, Founding Partner of Mehri & Skalet, PLLC, supra note 23. According to a Northeastern University School of Law research paper, Policing the Police, professional liability insurance can be used as an instrument for identifying officers engaged in risky policing behaviors and pricing them out. In particular, shareholders have begun to request that companies conduct racial equity audits (Racial Equity Audits), which generally seek 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. 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. On a more ongoing basis, Brands Inclusion and Diversity team facilitates discussions with the companys nine business resource groups, which represent various communities within Twitter. That movement, together with the disproportionate impacts of the COVID-19 pandemic have focused the attention of the media, the public and policy makers on systemic racism, racialized violence and inequities in employment, health care, and the criminal justice system. As ESG issues garner more media attention and as younger generations move into the investing space, these issues and related disclosures may become increasingly important to consumers, investors and other stakeholders. As discussed further below, several financial institutions, including Citi, JPMorgan Chase & Co. and Goldman have resisted shareholder proposals requesting Racial Equity Audits, stating that they would either fold such measures into their existing human rights assessments or that they didnt believe it was the appropriate time for such an endeavor. (go back), 84See J&J No-Action Letter, supra note 78. Both tech companies have been working to end racism and discrimination for years. 25 percent representation of people of color on the board, far higher premiums for auto insurance in Black neighborhoods as opposed to white neighborhoods, lower payouts in homeowner insurance claims for Black neighborhoods, identifying officers engaged in risky policing behaviors and pricing them out, largest home improvement retailer in North America. [132] However, as Racial Equity Audits become more commonplace and enter the cultural norm, these proposals may begin to resonate with more stakeholders and be approved by shareholders as early as the next proxy season. For all companies, and especially tech companies, that means its time to get to work! [133] However, in the coming years, we believe this is an area in which the proxy advisory firms may issue official voting guidance. Using Racial Equity Audits, a company is given a comprehensive report on their standing regarding how they uphold said regulations. In addition to Starbucks, Airbnb and Facebook have completed audits. However, not all companies have been as eager and willing to comply with these requests. Airbnb. Airbnb is setting an important precedent by taking measurable steps to examine and dismantle discriminatory online systems. [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. Today, building upon 8 years of learnings and experience providing temporary housing to 75,000 refugees, asylum seekers and people displaced by disasters or other crises across 104 countries, Airbnb.org is announcing a series of commitments to diversity, equity and inclusion. (go back), 113See Webinar, Thomas DiNapoli, New York State Comptroller, supra note 23. Other racial equity problems include the companys review and promotion systems creating an unlevel playing field with large disparities in performance review ratings between Black and white employees.. (go back), 109Id. [76] To demonstrate that they had substantially implemented the audit proposals, companies argued they had (i) made pledges and commitments towards racial justice initiatives and made such information publicly available; [77] (ii) issued ESG and/or diversity focused reports; [78] (iii) issued press releases and public disclosures addressing racial inequality; [79] (iv) implemented initiatives to advance racial equity; [80] or (v) financially committed to racial justice initiatives and causes. (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]. ; 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. In 2016, Airbnb partnered with the Color of Change to launch a three year review of the company's platform and . (go back), 105Id. The data collected in the United States for Project Lighthouse will be handled in a way that protects peoples privacy and be used exclusively for anti-discrimination work. [81], Rule 14a-8(i)(7) allows exclusion of proposals related to a companys ordinary business operations. Currently, neither the SEC nor the major U.S. securities exchanges mandate publicly traded companies to make disclosures regarding Racial Equity Audit initiatives. 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. (go back), 82See Final Rule: Amendments to Rules on Shareholder Proposals, Release No. Wells Fargo, the third largest bank by assets in the US, along with seven other major financial institutions, received a shareholder proposal requesting the bank conduct a racial equity audit in 2021. The racial equity audit proposal further identifies a number of issues that would benefit from independent review, including: Sign up to receive periodic updates about our efforts for director accountability. Item 7 requests a racial and gender board diversity report, the proponent arguing that the banks 25 percent representation of people of color on the board does not correlate to its workforce or customer base. Dismissal and neglect of these concerns led to Engine No. In addition to our ongoing diversity and anti-discrimination efforts, as we grapple with the effects of COVID-19, now more than ever we need to be a platform for economic empowerment that can help hosts, including Black residents, keep their homes and avoid displacement from their communities.. 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]. 2008 with the best of intentions, but were not fully conscious of racial bias when they designed the platform. Home Depot indicated it was pausing all contributions after the events of January 6, but made no commitment to realign policies or permanently end support for election objectors. As companies aim for racial equity, Brand said its important to first acknowledge that racism exists and understand that it was intentionally built into corporations. The Amazon proposal got more support from shareholders than any other audit voted on last year. In this case, failure to have a Racial Equity Audit policy or refusal to implement such a policy after shareholders have approved a proposal to implement one may become a criteria an advisory firm would consider in making a recommendation for or against the re-election of a companys chairperson of the governance committee and/or the re-election of other directors at the companys annual meeting. However, on August 6, 2021, the SEC approved new listing rules proposed by The Nasdaq Stock Market LLC (Nasdaq) requiring each Nasdaq-listed company to disclose certain information about the diversity of its board of directors and generally include a minimum number of members of its board of directors who are Diverse (as defined within the new listing rules). (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. These funds have explicit mandates to make ESG-focused investments, from mutual funds whose portfolio companies must score a high grade on ESG metrics to investment firms dedicated to ESG impact investing. (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/. [12] Governance has long been a key focus of shareholder activists as corporate governance best practices, including accountability of a companys board of directors to its shareholders, robust disclosure on executive compensation and independence of a board of directors from management, have been found to have a readily apparent correlation with increased returns to shareholders. What that means for tech companies more broadly is that inclusion must be embedded in every fabric of the organization. Some concrete examples, offered Brand, are pay equity, supplier diversity, and employee resource groups. For example, the SOC Investment Group, formerly known as the CtW Investment Group (CtW), a group that works with pension funds sponsored by unions affiliated with Change to Win, a federation of unions representing nearly 5.5 million members, submitted the following proposal to Bank of America Corporation for inclusion in its proxy statement: RESOLVED that shareholders of Bank of America Corporation (BofA) urge the Board of Directors to oversee a racial equity audit analyzing BofAs adverse impacts on nonwhite stakeholders and communities of color. (go back), 9ESG DisclosureKeeping Pace with Developments Affecting Investors, Public Companies and the Capital Markets, U.S. Securities and Exchange Commission, John Coates, March 11, 2021, available at https://www.sec.gov/news/public-statement/coates-esg-disclosure-keeping-pace-031121. One of key takeaways from Airbnb and Twitters leadership on racial equity is that the commitment to justice and inclusion must span businesses and products. In 2016, Airbnb released its own audit into discrimination and bias on its service. (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. [65] Certain of these racial justice proposals submitted by shareholders included proposals calling for Racial Equity Audits. 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. Silicon Valley has a long way to go to constructively engage with civil rights groups by proactively, not reactively, seeking out our expertise to build platforms that serve Black people instead of harming us. . (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. 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. You cannot fix bias without measuring it first, said Brian Chesky, Airbnb Co-Founder and CEO. Dalana Brand is the Vice President People Experience and Head of Inclusion and Diversity at Twitter. 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. 1 launched a proxy campaign in December 2020 to effect change on Exxons board of directors. (go back), 73As You Sow: Racial Justice, available at https://www.asyousow.org/our-work/social-justice/racial-justice. Data collected through Project Lighthouse will help the company create tools and policies to combat bias against Black users and other people of color, Brian Chesky, Airbnb's CEO and co-founder, told USA TODAY. And lastly, whether a company has sufficient mechanisms in place to monitor effectiveness. [63] If the company determines that it is not in the best interests of the company to include a Rule 14a-8 shareholder proposal in its proxy materials, it can (i) seek no-action relief from the SEC staff (the Staff) that, if granted, would allow the company to exclude the proposal without the threat of Staff recommendation of an enforcement action based on a procedural deficiency or a substantive exclusion under Rule 14a-8; (ii) take legal action in court to exclude the proposal; and/or (iii) negotiate with the proponent to withdraw the proposal. [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. [51], Practitioners also believe that the audit process can be important for companies as a way to build trust with their stakeholders. Others in the tech industry can dive deeper into Twitters tactics around building an inclusive workplace by reading the companys May 2020 Inclusion & Diversity Report. Airbnb also consulted with Antony Haynes, Associate Dean of Albany Law School and Director of CyberSecurity and Privacy Law, and Cathy ONeil and Jacob Appel, of algorithmic auditing consultancy ORCAA. The SEC considered the arguments described above to exclude the shareholder proposals on Racial Equity Audits, and, in each case, the SEC did not concur with the company that the shareholder proposal should be excluded. 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. (go back), 24Heres What Companies Are Promising to Do to Fight Racism, The New York Times, Gillian Friedman, August 23, 2020, available at https://www.nytimes.com/article/companies-racism-george-floyd-protests.html. . In partnership with Color Of Change and with guidance from civil rights and privacy rights organizations, Airbnb is launching Project Lighthouse, a groundbreaking effort by a consumer tech company to collect the data needed to measure and evaluate discrimination on its platform in the US so it can take additional action against it. Even with an increase in the number of shareholder proposals requesting Racial Equity Audits, it is possible that companies may not adopt them as quickly or as widely as the public and/or certain legislative bodies would prefer. [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. Report this profile Report Report. As a result, Engine No. (go back), 137Supra, Goldberg-Zelizer, note 96. [4] According to research from Institutional Shareholder Services (ISS), ESG Funds were among the largest winners in 2020, taking in a record $60 billion in net flows, nearly triple their 2019 total. [5]. (go back), 117See Webinar, Thomas DiNapoli, New York State Comptroller, supra note 23. (go back), 85See Amazon No-Action Letter, supra note 83. The policy asks hosts to treat guests with respect and without judgment or bias based on factors like race. For example, in the supporting statement submitted by the Service Employees International Union (SEIU) to its Racial Equity Audit proposal included in the proxy statement for The Goldman Sachs Group, Inc.s (Goldman) 2021 annual meeting of shareholders, SEIU detailed Goldmans alleged contributions to systemic racism. At the start date, users who want to opt-out can do that by turning off the data use settings in their accounts Privacy & sharing page. The audits are conducted by third-party groups, which analyze companies' business modelsfrom policies to products and servicesto determine whether they cause, reinforce, or perpetuate. As discussed earlier, Starbucks undertook a Racial Equity Audit in 2018. In August 2021, a National Labor Relations Board hearing officers report on a union election there found that the company committed multiple violations of employees rights. A racial equity or civil rights audit is typically an independent analysis, usually conducted by a law firm and/or a consultant, that examines whether a company's policies, practices, products or services are equitable and non-discriminatory for key stakeholders, such as customers and employees Given current trends in ESG, public companies should stay informed on Racial Equity Audits and their adoption, crafting and implementation. Shareholders have filed proposals relating to the impacts of the use of Amazons surveillance and facial recognition technology by governments and law enforcement bodies; its use of concealment clauses regarding harassment, discrimination, and other unlawful acts in the workplace; its lack of reporting on its lobbying activities; and its employees right to collective bargaining, among other issues. Id. [118] However, Comptroller DiNapoli noted a human rights assessment is not the same as an independent racial equity audit, and shareholders should be weary of equating the two. [119], On May 26, 2021, Amazon shareholders rejected eleven shareholder proposals at the annual meeting. Firstenvironmental criteria, which considers a companys actions as a steward of the environment, such as what steps a company is taking to address the depletion of the planets resources, pollution and greenhouse gas emissions, or the effects of climate change. This years racial equity audit proposal highlights the companys Corporate PAC giving, as well as high profile incidents at stores such as the suspension and forced resignation of an employee who refused to remove a Black Lives Matter (BLM) logo from his apron. 4 Tips For Introducing Positive Change To Your Enterprise, No loan approval? 1What is ESG?, ADEC Innovations ESG Solutions, available at https://www.esg.adec-innovations.com/about-us/faqs/what-is-esg/. [95], Companies Recommended Voting Against Racial Equity Audit Proposals. Shareholder activist Engine No. (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]. [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 . . The following proposals will be put to shareholders at its May 25, 2022 annual meeting: Atlanta-based Home Depot, the largest home improvement retailer in North America, faced a shareholder proposal in 2021 that requested a political contributions congruency analysis. (go back), 64What You Need To Know About The 2021 Proxy Season, Forbes, Bhakti Mirchandani, June 28, 2021, available at https://www.forbes.com/sites/bhaktimirchandani/2021/06/28/what-you-need-to-know-about-the-2021-proxy-season/?sh=2e475fae7f5e. Last shareholder season, seven shareholder proposals on Amazons proxy either directly or indirectly addressed racial justice issues. Users who do not opt-out may be randomly selected to be part of the data analysis. Not everyone did. 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). . A Racial Equity Audit is, at its core, an independent, objective and holistic analysis of a company's 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. ESG initiatives, including Racial Equity Audits, are likely to continue to gain momentum during the coming proxy seasons. Another key component of promoting racial equity is creating space for uncomfortable conversations, said Brand. In the U.S. market there are now over 600 ESG funds and exchange-traded funds for investors to choose from with approximately $161 billion in assets under management (AUM), which is more than double the AUM of ESG funds in 2010. Following the audit at Facebook, the company . (go back), 48Webinar, Pamela Coukos, Co-Founder of Working Ideal, supra note 23; supra note 27. (go back), 100Goldman Sachs Proxy Statement, supra note 35. . 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. Racial Equity Audits may also find that a companys existing policies and practices are not sufficient to address or may be perpetuating systemic social issues. (go back), 123Racial Equity Audit, SOC Investment Group, 2021, available at https://www.socinvestmentgroup.com/racial-equity-audit. 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. [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. 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. 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. No major proxy advisory firm has issued official voting guidance on the implementation of Racial Equity Auditsand the two largest advisory firms, ISS and Glass Lewis, have been split on their support for shareholder proposals requesting such audits. Racial equity audits and civil rights audits have been used to identify and reduce sources of . Randomly selected to be part of the organization ), 119See Webinar, DiNapoli. Airbnb is setting an important precedent by taking measurable steps to examine and dismantle discriminatory online systems,... Based on factors like race concrete examples, offered Brand, are to... Fix bias without measuring it first, said Brian Chesky, Airbnb and Facebook have completed audits embedded every., Goldberg-Zelizer, note 96 however, not all companies, that means for tech companies been... Got more support from shareholders than any other Audit voted on last year with these requests DiNapoli that! 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