[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. ; 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. And the same study found that white Airbnb hosts in Black neighborhoods earned an estimated $160 million, compared to only $48 million earned by Black hosts. (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. AI could help you next time. Therefore, this analysis and project will not affect an individuals experience on the platform in any way. Rather, as argued by Trillium Asset Management (Trillium), a strong proponent of such audits, the point of an audit is to embrace the notion that if management is truly committed to make racial justice a critical element of its operations then in practice it can and should treat it like any other operations issue and audit it as such. [29] These proponents further argue that Racial Equity Audits should not be viewed as the end of a process for companies and/or shareholders looking to make a change; instead, they can be a stepping stone to assist companies in developing and identifying a strategic plan to advance their goals. 2017. 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. (go back), 118Id. "Our work is nowhere near done, but the civil rights audit was a critical first step," Airbnb CEO Brian Chesky says in the framework released today. Restoration: The Role Stakeholder Governance Must Play in Recreating a Fair and Sustainable American EconomyA Reply to Professor Rock, https://www.esg.adec-innovations.com/about-us/faqs/what-is-esg/, https://investor.vanguard.com/investing/esg/, https://www.issgovernance.com/library/esg-matters-part-ii/, https://www.sec.gov/rules/final/2020/33-10825.pdf, https://corpgov.law.harvard.edu/2021/02/06/new-human-capital-disclosure-requirements/. ESG initiatives, including Racial Equity Audits, are likely to continue to gain momentum during the coming proxy seasons. All Homes and Experiences referenced on the Airbnb Newsroom are intended purely to inspire and illustrate. If a company lags behind in this quickly developing area, we believe shareholders may become more willing to launch shareholder campaigns focused on ESG issues, including demanding objective results through Racial Equity Audits. [55], Some companies have independently engaged in Racial Equity Audits or similar internal reviews, usually in response to external pressures. S7-25-97, available at https://www.sec.gov/rules/final/34-40018.htm (citing Reebok Intl Ltd. (Mar. 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. (go back), 76See Amendments to Rules on Shareholder Proposals, Exchange Act Release No. [90], Under Rule 14a-8(i)(3), a shareholder proposal may be excluded from a companys proxy materials if the proposal or the supporting statement accompanying the proposal is contrary to any of the federal proxy rules, including Rule 14a-9, which prohibits a company from disclosing materially false or misleading statements in its proxy materials. Shareholder activists have advocated for increased diversity in corporate boardrooms for a number of years. 20091 (August 16, 1983)). 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. (go back), 134 ISS Opens Global Annual Benchmark Policy Survey and Separate Climate Survey, ISS, July 28, 2021, available at https://insights.issgovernance.com/posts/iss-opens-global-annual-benchmark-policy-survey-and-separate-climate-survey/. Further, companies wishing to stay ahead of the curve may start by critically and objectively looking at their current internal practices and policies relating to equity and inclusion and identifying areas in need of improvement. [126] The resolution included in SEIUs proposal also noted that: A 2020 report on proxy voting found that BlackRock did not use its clout as a significant owner to advance racial justice. [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. 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. 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. [32] For example, following the voluntary Racial Equity Audit conducted by Starbucks after the 2018 incident discussed above, the company began requiring implicit bias training for employees, setting public corporate diversity goals and implementing a number of other social initiatives. [65] Certain of these racial justice proposals submitted by shareholders included proposals calling for Racial Equity Audits. [95], Companies Recommended Voting Against Racial Equity Audit Proposals. Racial Equity Audits and similar equity and inclusion initiatives that are not robust or designed with the aid of independent third party consultants may risk being perceived as mere window dressing and invite criticism from shareholders. Most companies who may have been unsuccessful in seeking no-action relief from the SEC to exclude the proposal or in negotiating a resolution with a shareholder to withdraw the proposal have recommended that shareholders vote against the proposals. Amongst the various ESG developments gaining traction in the markets is the recent push by shareholders for companies to conduct Racial Equity Audits, which generally consist of an objective investigation into a companys practices, policies and histories to determine such companys impact on social issues and areas for improvement. If this occurs, legislators and/or regulatory authorities may at some point in the future step in to close the gap between investor demand and practical implementation. (go back), 83See Rule 14a-8 No-Action Letter re: Amazon.com, Inc. [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]. (go back), 7Statement on the Review of Climate-Related Disclosure, U.S. Securities and Exchange Commission, Acting Chair Allison H. Lee, February 24, 2021, available at https://www.sec.gov/news/public-statement/lee-statement-review-climate-related-disclosure. 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. A National Labor Relations Board complaint alleged that the company enforced its dress code selectively and disparately against workers that displayed the slogan and engaged in other related protected concerted activities.. More details are publicly available in a technical paper. 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. Corp. Code 301.3, 301.4. (go back), 48Webinar, Pamela Coukos, Co-Founder of Working Ideal, supra note 23; supra note 27. In June 2020, Scharf defended his early choices, arguing that the unfortunate reality is that there is a very limited pool of Black talent to recruit from with this specific experience.. [23] In the aftermath of the killing of George Floyd in May 2020 and the subsequent civil rights movement and unrest, many companies announced a number of initiatives and measures to address social justice issues, including committing financial resources and reviewing their own policies and practices. (go back), 91See SEC, Division of Corporate Finance Staff Legal Bulletin No. Airbnb has consistently engaged in fighting bias and discrimination on its platform since 2016, after its first civil rights audit, authored by Laura Murphy, former Director of the American Civil Liberties Unions Washington Legislative Office and President of Laura Murphy & Associates. And lastly, whether a company has sufficient mechanisms in place to monitor effectiveness. According to certain proponents, the point of a Racial Equity Audit is not necessarily to critique a companys current platforms and efforts. Wenah herself has been working on this project for many years. Beyond the moral case and business case for conducting Racial Equity Audits, and fighting systemic racism in general, is the democracy case espoused by social justice advocates [37] and that corporations can at times act more swiftly and have a more profound effect on current social issues than the government; therefore, these advocates argue that corporations have a responsibility to address issues affecting our democracy. Then at the end of 2018, Airbnb sought to further mitigate bias by developing a policy that hides Airbnb guest profile photos until after the booking is accepted. Racial equity audits of corporations originated, raised further concerns about justice issues, the company committed multiple violations of employees rights. Airbnb has consistently engaged in fighting bias and discrimination on its platform since 2016, after its first civil rights audit, authored by Laura Murphy, former Director of the American Civil Liberties Union's Washington Legislative Office and President of Laura Murphy & Associates. (go back), 22Supra note 10. Cacace actively holds the position of Director of Anti-Discrimination & Equity Programs for Airbnb. ESG considerations can be broken down into three categories. What's new: The report which got sign-off from a slew of civil rights groups lays out 10 standards for racial audits. In setting this precedent, it is important to understand that there are technology platforms that have already left irreversible marks on Black communities and communities of color around the country that need to be addressed. Shareholders called for one at the company's investor meeting earlier this year, but the bank (like its peers) told . The first major US company to undergo such third-party racial audit was Airbnb. 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. 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. Shareholders hope an Alphabet audit would cover a range of topics including: 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. Companies Sought No-Action Relief. The findings will inform the creation and updates of tools and policies to help combat racial discrimination and bias that Black users and other people of color have faced when using Airbnb. Beyond the scope of this initiative, Color Of Change will continue to advise Airbnb on strengthening its commitment to civil rights and rooting out racial bias in other areas, including background checks and risk assessments, law enforcement engagement, and community resources about support services to avoid potentially violent interactions with the police. [50] Accordingly, auditors are encouraged to solicit information directly through surveys and interviews, and to review historical records and a companys performance against its peers. [45]. The project will start on June 30, 2020 and will be limited to U.S.-based hosts and guests. [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 . . Id. 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). [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. As an extra security precaution, this information will be deleted every 30 days. (go back), 73As You Sow: Racial Justice, available at https://www.asyousow.org/our-work/social-justice/racial-justice. What's next: Citigroup said last week it will undergo a 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. 1 launched a proxy campaign in December 2020 to effect change on Exxons board of directors. [81], Rule 14a-8(i)(7) allows exclusion of proposals related to a companys ordinary business operations. 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. While the company opposed all seven, at least four of those resolutions, including the first racial equity audit proposal at the company, two proposals for reports on the human rights implications of certain surveillance products, and a lobbying disclosure proposal received substantial support of over 30 percent. Most recently in 2020, Airbnb launched Project Lighthouse, an initiative to uncover, measure, and overcome discrimination during the Airbnb booking process. 34-40018, May 28, 1998, available at https://www.govinfo.gov/content/pkg/FR-1998-05-28/html/98-14121.htm. [22]. (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]. . (citing 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. In the meantime, on November 9, 2020, the Securities and Exchange Commission (SEC) announced the issuance of new final rules that expanded human capital management disclosure requirements applicable to SEC reporting companies. In this way legislatures and/or regulatory authorities have the ability to serve as the catalyst for change and wider-reaching adoption by forcing companies that might have been unlikely or slow to act on their own to adopt such policies. Civil rights advocates and proponents of social justice have long touted the moral and ethical considerations of closing the racial divide in America. [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. (go back), 29Webinar, Susan Baker, Director of Shareholder Advocacy, Trillium Asset Management, supra note 23. Civil rights. Not everyone did. The tactic in question is civil rights audits, also known as racial equity audits, which are third-party assessments of a company's role in addressing systemic racism. 16, 1992)). (go back), 108Amazon No-Action Letter, supra note 83. The companys response to unionization efforts by its predominantly Black workforce at a warehouse in Bessemer, Alabama raised further concerns about justice issues. (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. 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. Trilinc Global, November 4, 2013, available at https://www.trilincglobal.com/what-is-esg/. . And even they are far from perfect. What is a racial equity or civil rights audit? 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]. Only the Anti-discrimination team, Security team, and research partner will have access to this information. This was led by an external expert and included extensive consultations with civil rights organizations, which resulted in tangible improvements in Airbnbs business practices. 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. (go back), 128SEIU and Change to Wins investment funds pushing for racial diversity in financial institutions, available at https://www.seiu.org/blog/2021/4/seiu-and-change-to-wins-investment-funds-pushing-for-racial-diversity-in-financial-institutions. 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. 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. 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. In announcing the settlement, the NFHA stated, [t]he actions of Travelers disproportionately harmed low-income African Americans and women-headed households who use Housing Choice Vouchers., Shareholders have filed two proposals at Travelers, one requesting a racial equity audit, and the other asking for a report on the companys policies and practices to help ensure its insurance offerings, including those for law enforcement liability insurance, reduce and do not increase the potential for police brutality. https://www.sec.gov/rules/final/34-40018.htm (citing Reebok Intl Ltd. (Mar. . (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. The amplification racism and bigotry, in particular the role of YouTube in exposing young people to white supremacist ideology; The deployment of AI tools that have the potential to discriminate, for example Googles face detection technology; The supply of technology used in surveilling communities of color and border communities; and. Following the audit at Facebook, the company . (go back), 113See Webinar, Thomas DiNapoli, New York State Comptroller, supra note 23. (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]. [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]. According to the proponents, issues relating to racial equity and the companys corporate practices are longstanding, and include multiple lawsuits relating to employment and lending discrimination. 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. November 4, 2013, available at https: //www.trilincglobal.com/what-is-esg/ in December to! And project will start on June 30, 2020 and will be deleted every 30.... These unrealized gains for Airbnb 23 ; supra note 83 June 30 2020!, Trillium Asset Management, supra note 83 Racial audit was Airbnb company sufficient. 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