Yesterday, the audit proposal also went to the vote at Wells Fargo, the result has not yet been disclosed. Racial Equity Audit SOC Investment Group (go back), 83See Rule 14a-8 No-Action Letter re: Amazon.com, Inc. Racial Equity: Advancing Change | Morgan Stanley The correlation between gender-balanced teams and improved decision-making, innovation and performance aligns with our core value Commit to Diversity and Inclusion. ARTICLE: Racial Equity Audits: A New ESG Initiative Poised to Gain S7-25-97, available at https://www.sec.gov/rules/final/34-40018.htm (citing Reebok Intl Ltd. (Mar. Citigroup agrees to audit of investments in minority communities Shareholder activist Engine No. [38] Racial Equity Audits can be designed to help identify if and where these issues exist within a company so that management can address them most effectively. Wells Fargo plans to conduct a racial equity audit, asking an outside law firm to assess the bank's workforce diversity and determine how its business practices are affecting communities of color. [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]. urge the Board of Directors to oversee a racial equity audit analyzing JPMorgan's adverse impacts on nonwhite stakeholders and communities of color. 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. Goldman Sachs | Making Progress Towards Racial Equity According to CtW, this focus is based on the belief that: the finance industry has played a critical role in perpetuating unequal wealth distribution to communities of color. [55], Some companies have independently engaged in Racial Equity Audits or similar internal reviews, usually in response to external pressures. [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. At Morgan Stanley, we lead with exceptional ideas. Wells Fargo announced it will commission a third-party racial equity audit Tuesday after years of advising shareholders to vote against one. 94 . (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. (go back), 119See Webinar, Thomas DiNapoli, New York State Comptroller, supra note 23. [13] Recently, however, activists have begun to realize that social and environmental issues can also impact their investments, in both negative and positive ways. Concerns related to workforce diversity, treatment of minority workers, environmental justice in communities of color, surveillance, and civil rights are just some of the controversies that have troubled Amazon. [114] For example, current and former Amazon employees have accused the company of allowing racism to permeate its operations. Votes on the Proposals at JP Morgan & Chase, Goldman Sachs and State Street will take place in the next few weeks. (go back), 86See J&J No-Action Letter, supra note 78. The $1.9 trillion-asset bank has hired the law firm Covington & Burling to conduct the review and plans . A complicated past The financial institutions in question have recently made diversity, inclusion, and racial equity a significant. Morgan Stanley (NYSE: MS) is a leading global financial services firm providing investment banking, securities, wealth management and investment management services. From our startup lab to our cutting-edge research, we broaden access to capital for diverse entrepreneurs and spotlight their success. (go back), 97Citigroup Proxy Statement, supra note 69. Equity in the Boardroom: How Asset Manager Voting Shaped Corporate Other external forces that may prompt public companies to adopt Racial Equity Audit policies are the SEC and the securities exchanges. Black Rock, the world's largest asset manager, is launching a racial audit at a request of a shareholder. [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 . It received the backing of 38.6 percent of votes cast during the company's AGM in April. Given current trends in ESG, public companies should stay informed on Racial Equity Audits and their adoption, crafting and implementation. Morgan Stanley has committed to an internal review of its workforce and leadership, according to CtW, which also said the bank has agreed to talk about what it will do to ensure equity for. [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. (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. (go back), 65All things (not) being equal, IR Magazine, Ben Maiden, Summer 2021, available at https://content.irmagazine.com/story/ir-magazine-summer-2021.pdf. 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. [17], Improved ESG criteria is not a new area for activist investors. (go back), 32Webinar, Pamela Coukos, Co-Founder of Working IDEAL, supra note 23. Using Equity Audits to Assess and Address Opportunity Gaps - IDRA Bank of America said last week that an audit is unnecessary given its progress on racial equality. We believe our greatest asset is our people. hj0_NtJ)=;nhuB)ex(X V *pwztOxqzYr22#LPL>/k~i6jEi|MR [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]. 14B, September 15, 2004, available at https://www.sec.gov/interps/legal/cfslb14b.htm. Prior to the ESSA, IDRA developed the Six Goals of Educational Equity (2006). 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. An example of a project with high-impact priority elements is The Villages of East River. UPDATE: According to a preliminary tally, 39 percent of JPMorgan shareholders voted in support of the racial equity audit proposal on May 18. (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. Recently, Morgan Stanley MS +0.1% and CtW Investment Group reached an agreement for the bank to conduct an internal diversity review, and to meet shareholders on next steps before its 2022. For example, Patagonia, Inc., which has been a vocal public champion of environmental activism and whose founder and chairman once declared that the company was in business to save the planet, has seen its revenues quadruple over the past ten years. 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 . [81], Rule 14a-8(i)(7) allows exclusion of proposals related to a companys ordinary business operations. We have global expertise in market analysis and in advisory and capital-raising services for corporations, institutions and governments. With this process, leaders can assess the extent to which equity is present in such areas as teacher . 34-40018; IC-23200; File No. [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. BlackRock Breaks Wall Street Ranks With Planned Racial Audit (1) . Hear their stories and learn about how they are redefining the terms of success. 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. Shareholders at JPMorgan Chase and State Street hold their meetings this week. The goals provide a yardstick for school leaders to measure their progress and as a "lightning rod to galvanize change" (IDRA, 2006). As a global financial services firm, Morgan Stanley is committed to technological innovation. . Proponents of Racial Equity Audits warn that such audits should be conducted in a robust manner by fully independent third parties, and that the subject companies take action to address deficiencies, shortcomings and concerns uncovered by the audits. 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. 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. Amundi Asset Management, Northern Trust Investments, and PIMCO were leaders in supporting racial equity audit proposals, voting in favor of 100 percent of proposals.Morgan Stanley, UBS, Legal & General . Citigroup, Wells Fargo, Bank of America, Goldman Sachs, JP Morgan urge 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. SEIU said in its resolution, which has since been withdrawn, that BlackRock as an investor opposed most shareholder proposals in. Racial Equity Audits can focus on various aspects of a companys business, including the treatment of customers at a companys physical locations, the diversity of senior management, the targeting of products, and even political contributions. Rachel Wilson became the first head of cybersecurity for Morgan Stanley Wealth Management in the spring of 2017. https://www.sec.gov/news/public-statement/lee-statement-review-climate-related-disclosure. We provide comprehensive workplace financial solutions for organizations and their employees, combining personalized advice with modern technology. In SEC filings,. The Black Leaders Forum brought together senior leaders from Wealth Management for targeted conversations, development and actions to achieve success. This 202-unit, scattered-site property comprising 16 buildings is located in the predominantly Black neighborhoods of Wards 7 and 8 of . 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. (go back), 48Webinar, Pamela Coukos, Co-Founder of Working Ideal, supra note 23; supra note 27. We have the experience and agility to partner with clients from individual investors to global CEOs. (go back), 74Big US companies pushed to tally progress on racial justice, Yahoo! Last week, the duo achieved a significant win at BlackRock and Morgan Stanley when both agreed to undertake diversity reviews, prompting a withdrawal of the proposals. [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. 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 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. According to certain proponents, the point of a Racial Equity Audit is not necessarily to critique a companys current platforms and efforts. 1 launched a proxy campaign in December 2020 to effect change on Exxons board of directors. Get the latest insights, analyses and market trends in our newsletter, podcasts and videos. [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. [111] Despite the laundry list of examples Amazon cited in its No-Action Letter, the SEC did not concur that the proposal was excludable under Rule 14a-8(i)(7). Trilinc Global, November 4, 2013, available at https://www.trilincglobal.com/what-is-esg/. The Firm's employees serve cl . . (citing Exchange Act Release No. Morgan Stanley is differentiated by the caliber of our diverse team. . 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. [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. [134] ISS will use the results from its Annual Benchmark Policy Survey as a key component of ISS annual policy development process to assess potential policy changes across regions and markets for 2022 and beyond. [135] While ISS has largely appeared hesitant to support Racial Equity Audits in the circumstances presented in the 2021 proxy season, the results from its Annual Benchmark Policy Survey could change its future guidance and recommendations on such audits. (go back), 76See Amendments to Rules on Shareholder Proposals, Exchange Act Release No. . [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. [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. These companies have asserted that they disagree with the approach of Racial Equity Audit proposals, but are aligned with [their] stated goal of addressing racial inequity in the financial sector. [96], For example, the board of directors of Citi recommended a vote against the Racial Equity Audit proposal included in its 2021 proxy statement, noting that [a]s recently as September 2020, Citi released a 104 page report on the economic cost of Black inequality in the United States titled Closing the Racial Inequality Gaps, and said its efforts on these issues are available to the public. 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. Bank of America said last week that an audit is unnecessary given its progress on racial equality. Citi to conduct racial equity audit | Corporate Secretary We offer scalable investment products, foster innovative solutions and provide actionable insights across sustainability issues. Our latest initiative combines the resources and reach of Morgan Stanley with the knowledge and experience of our distinguished nonprofit partner organizations to help deliver positive, tangible impact on the challenges of stress, anxiety, and depression in children, adolescents and young people. We live that commitment through long-lasting partnerships, community-based delivery and engaging our best assetMorgan Stanley employees. In November, SEIU's Capital Stewardship Program and. 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. In a recent letter to employees, Blackrock announced that they would conduct an. Whether its hardware, software or age-old businesses, everything today is ripe for disruption. What Are Racial Equity Audits? - nhforge.org (go back), 85See Amazon No-Action Letter, supra note 83. (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]. [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. JPMorgan's racial-equity audit falls short for some shareholders SOC Investment accused the bank and its auditor of approaching the process with a "narrow perspective," and said the report fails to look at any internal diversity, equity and inclusion issues. September 14, 2022, 1:19 p.m. EDT 3 Min Read. [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. Companies advised to be alert to racial equity audit proposals [62] Under Rule 14a-8, a company is required to include a shareholder proposal and related supporting statement in its proxy statement and list the shareholder proposal on its proxy card to be voted on with the companys proposals if: (a) the shareholder satisfies specified eligibility and procedural requirements; and (b) the proposal is not excludable under Rule 14a-8(i). 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. (go back), 118Id. [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. Racial equity audits started catching on after the events of 2020 prompted a racial reckoning in the U.S. (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. David Ake) It followed his 2021 executive order . 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. See how you can continue your career journey at Morgan Stanley. I am very proud to announce that I have been named in Morgan Stanley's prestigious 2023 Pacesetter's Club, a group of the Firm's successful Financial Advisors. Learn from our industry leaders about how to manage your wealth and help meet your personal financial goals. However, not all companies have been as eager and willing to comply with these requests. We all want to do something to try to change the course we find ourselves on. (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. Financial institutions and asset management firms have become the focus of Racial Equity Audit shareholder proposals. IRS accused of using 'racial equity' for audits targeting White, Asian [60], A number of other high-profile companies and financial institutions have been approached either by shareholders or civil rights advocates about conducting Racial Equity Audits. Goldman Sachs And JPMorgan Look To Avoid Racial Equity Audits - Forbes The America First Legal Foundation is accusing the IRS of using "racial equity" for audits targeting White and Asian taxpayers. (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. David Friedman - Vice President - Morgan Stanley | LinkedIn 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.
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