The audit was led by Laura W. Murphy, a civil rights advocate, with help from a civil rights law firm. (go back), 37Webinar, Cyrus Mehri, Founding Partner of Mehri & Skalet, PLLC, supra note 23. 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. [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. 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. (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), 76See Amendments to Rules on Shareholder Proposals, Exchange Act Release No. (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]. 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 an attempt to re-educate tech workers about racism, Twitter is looking to integrate targeted anti-racism training into its curriculum. 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. . 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. 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. Second, whether any changes to existing programs or new measures or initiatives, would help a company become more equitable and inclusive. 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. . As a result, Engine No. This project will measure discrimination based on perception, using a privacy-centric methodology that determines the race someone might associate with a first name and profile photo. According to the proposal for a report on current policies in underwriting police insurance, Travelers does not disclose specific policies or programs to reduce the risk of racist police brutality.. BlackRock, with $8.7 trillion of assets under management, said in a memo to employees Thursday that an external review of how its diversity, equity and inclusion policies impact stakeholders will. (go back), 123Racial Equity Audit, SOC Investment Group, 2021, available at https://www.socinvestmentgroup.com/racial-equity-audit. (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. (go back), 108Amazon No-Action Letter, supra note 83. Like the other companies that received shareholder proposals on Racial Equity Audits in the 2021 proxy season, SEIUs proposal urged BlackRock to assess its behavior through a racial equity lens to identify how it contributes to systemic racism, including where its stated values are misaligned with the impact of its actions. [34]. (go back), 73As You Sow: Racial Justice, available at https://www.asyousow.org/our-work/social-justice/racial-justice. 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. Most recently in 2020, Airbnb launched Project Lighthouse, an initiative to uncover, measure, and overcome discrimination during the Airbnb booking process. (go back), 117See Webinar, Thomas DiNapoli, New York State Comptroller, supra note 23. https://www.sec.gov/rules/final/34-40018.htm (citing Reebok Intl Ltd. (Mar. (go back), 86See J&J No-Action Letter, supra note 78. (go back), 50Webinar, Pamela Coukos, Co-Founder of Working Ideal, supra note 23; supra note 27. Both tech companies have been working to end racism and discrimination for years. Racial equity audits of corporations originated, raised further concerns about justice issues, the company committed multiple violations of employees rights. 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. What is a racial equity or civil rights audit? [94] In the financial industry, BlackRocks decision distinguishes it from other financial institutions that have asked shareholders to vote against similar audit proposals and/or have sought no-action relief from the SEC. 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. [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). 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. 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. (go back), 5ESG Matters (Part II), ISS EVA, Dr. G. Kevin Spellman and David O. Nicholas, May 18, 2021, available at https://www.issgovernance.com/library/esg-matters-part-ii/. [20] State governments have also codified ESG initiatives into lawCalifornia leading the charge with the passage of Senate Bill 826 and Assembly Bill 979, which require a certain percentage of directors on the boards of public companies headquartered in the state be composed of females and individuals from underrepresented communities. 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.. 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. What's next: Citigroup said last week it will undergo a racial equity audit. [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. More details are publicly available in a technical paper. Our purpose is to create belonging, and even one incident is an affront to our values. . (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. Kellogg Foundation has found that [b]y 2050, our country stands to realize an $8 trillion gain in GDP by closing the U.S. racial equity gap. [28]. Id. Color of Change successfully called for and worked with AirBnB to undertake such an audit. 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. 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. Companies Negotiated with Shareholders to Withdraw the Racial Equity Audit Proposal. 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. 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. (go back), Posted by Ron S. Berenblat and Elizabeth R. Gonzalez-Sussman, Olshan Frome Wolosky LLP, on, Harvard Law School Forum on Corporate Governance, on Racial Equity Audits: A New ESG Initiative, The Illusory Promise of Stakeholder Governance. The methodology is publicly available in a technical paper for other companies who want to detect and remediate bias and discrimination on their platforms. [11], ESG considerations are becoming increasingly relevant to shareholder activists. (go back), 84See J&J No-Action Letter, supra note 78. According to Wenah, Airbnb lost 1.3 million users after launching the Community Commitment. 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 Airbnb does not recommend or endorse specific Home or Experience listings on the Airbnb platform. Beyond fund managers typical fiduciary duties to minimize risk and achieve positive returns, these fiduciaries are explicitly mandated with making investments into companies that aim to have a sustainable and societal impact in the world [46] based on ESG criteria or that meet stringent environmental, social and governance standards. [47] As the usefulness of Racial Equity Audits as a tool for ESG-conscious shareholders to measure a companys adherence to ESG prerogatives becomes more mainstream, it would be no surprise to see support for these audits grow. (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/. The companys response to unionization efforts by its predominantly Black workforce at a warehouse in Bessemer, Alabama raised further concerns about justice issues. At a time when we cannot rely on government alone to further social justice goals, unusual allies become more important than ever. 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