It received the backing of 38.6 percent of votes cast during the company's AGM in April. The global presence that Morgan Stanley maintains is key to our clients' success, giving us keen insight across regions and markets, and allowing us to make a difference around the world. A racial equity audit is the first step to safeguard against further harm and it's also the smart thing to do. Companies advised to be alert to racial equity audit proposals (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/. Id. 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. hj0_NtJ)=;nhuB)ex(X V *pwztOxqzYr22#LPL>/k~i6jEi|MR [2] Thirdcorporate governance, which considers how a company governs itself and holds itself accountable taking into account the structure and diversity of a companys board of directors, the separation between management and the board of directors, executive compensation, equal and fair pay amongst employees, and the extent to which a company or its management or board of directors are undertaking lobbying efforts, making political and charitable donations, or engaging in corruption or bribery. Bank of America said last week that an audit is unnecessary given its progress on racial equality. Dismissal and neglect of these concerns led to Engine No. Otherwise, these proponents posit, a lackluster or hastily conducted Racial Equity Audit or failure to take meaningful action in response to an audit may actually have the opposite effect for the implementing institutioninstead of insulating the company from potential proposals demanding Racial Equity Audits, faulty or perfunctory audits may instead create a target on the institutions back for ESG activists in the following years. The two leading proxy advisory firms, ISS and Glass Lewis & Co. LLC (Glass Lewis), have generally taken opposing views on Racial Equity Audits. 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. 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. We grieve with our colleagues, friends and families, and believe that we have the power to create long-lasting social, educational and economic change. 5 Sustainable Investing Trends for Companies and Investors, 7 Investment Ideas That Could Drive Markets in 2023, Yes, You Can Be a Tech Innovator at Morgan Stanley, Learn more about Diversity and Inclusion at Morgan Stanley. Shareholder activists have advocated for increased diversity in corporate boardrooms for a number of years. CtW Morgan Stanley Racial Equity Audit Proposal SOC Investment Group To contact the reporter on this story: A racial equity audit is an evaluationusually conducted by an external law firmof an employer's policies, procedures and practices to identify and address systemic bias and discrimination. Racial Justice Audits: Holding Companies Accountable for Their Role in We have global expertise in market analysis and in advisory and capital-raising services for corporations, institutions and governments. 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. These votes follow a 2021 season in which eight racial equity audit proposals were proposed . (go back), 115See, e.g., Bias, disrespect, and demotions: Black employees say Amazon has a race problem, Vox:Recode, Jason Del Rey, February 26, 2021, available at https://www.vox.com/recode/2021/2/26/22297554/amazon-race-black-diversity-inclusion; Black Amazon manager sues the e-commerce giant, accusing it of race and gender discrimination, Washington Post, Jay Greene, March 1, 2021, available at https://www.washingtonpost.com/technology/2021/03/01/amazon-race-discrimination-lawsuit/; Five women sue Amazon, accusing e-retailer of race and gender discrimination and retaliation, Washington Post, Jay Greene, May 19, 2021, available at https://www.washingtonpost.com/technology/2021/05/19/amazon-suit-race-gender-discrimination/. (go back), 6Final Rule: Modernization of Regulation S-K Items 101, 103 and 105, 17 CFR 229, 239 and 240, Release Nos. We live that commitment through long-lasting partnerships, community-based delivery and engaging our best assetMorgan Stanley employees. (go back), 37Webinar, Cyrus Mehri, Founding Partner of Mehri & Skalet, PLLC, supra note 23. Racial equity audit votes At least 19 proposals calling for a racial equity audit at S&P 500 companies garnered an average of 44% support among shareholders last year, an increase from. [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]. Measurement and transparency are important components of the work Citi is doing to advance diversity, equity and inclusion, both at our bank and through our contributions to our communities and society more generally. (go back), 100Goldman Sachs Proxy Statement, supra note 35. Why did nearly all of the banks urge "no" votes on the audit proposals? Given current trends in ESG, public companies should stay informed on Racial Equity Audits and their adoption, crafting and implementation. 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. As a result, Engine No. . [68] Several of the supporting statements for Racial Equity Audit proposals stated that: High-profile police killings of black peoplemost recently George Floydhave galvanized the movement for racial justice. (go back), 95For a detailed discussion of BlackRocks decision to implement a Racial Equity Audit, see Section IV.A. (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. SEIU report slams BlackRock, Vanguard, Fidelity and State Street Morgan Stanley is also donating $5 million . [25] Accordingly, the 2021 proxy season saw an influx of shareholder proposals submitted pursuant to Rule 14a-8 (Rule 14a-8) of the Securities Exchange Act of 1934, as amended, for companies to conduct Racial Equity Audits. US pension giants among 37% support for pioneering 'racial equity audit Currently, neither the SEC nor the major U.S. securities exchanges mandate publicly traded companies to make disclosures regarding Racial Equity Audit initiatives. 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. At Morgan Stanley, advancing racial equity is about intentional, holistic change at the intersection of what we do, who we are and how we engage our communities. 2023Morgan Stanley. The survey was conducted online among 76 venture capitalists who are almost exclusively leads or co-investors, with an average equity check size of $2.65 million. Increased focusfrom companies, regulators, investors, and employeeson racial and ethnic discrimination has heightened scrutiny of public companies' DEI-related risks and opportunities, as have the COVID-19 pandemic and . 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. An example of a project with high-impact priority elements is The Villages of East River. (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. 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). PDF Venture Capital and Racial Equality - Morgan Stanley https://www.reuters.com/article/us-amazon-com-sec-vote/u-s-sec-blocks-amazon-effort-to-stop-shareholder-votes-on-racial-equity-audit-idUSKBN2BU38U. We have shown our commitment to these principles when we set and disclosed our representation goals and shared the results of our pay equity analysis. (go back), 138See H.R.2123Diversity and Inclusion Data Accountability and Transparency Act, Congress Bill Tracker, available at https://www.congress.gov/bill/117th-congress/house-bill/2123/committees?r=61&s=1 (as of July 15, 2021). Risks to shareholder value associated with diversity, equity, and inclusion (DEI) remain a top engagement priority for Vanguard with our funds' portfolio companies. (go back), 75Goldman, Citi Stave Off Investor Calls for Racial Audits (1), Bloomberg Law, Saijel Kishan and Jeff Green, April 29, 2021, available at https://news.bloomberglaw.com/banking-law/goldman-citi-stave-off-investor-calls-for-racial-audits-1. See how we can help you work toward your goalseven as they evolve over years or generations. In November, SEIU's Capital Stewardship Program and. [43] Accordingly, it has been argued that working to ensure that systemic risk in the marketplace is proactively addressed via, for example, a Racial Equity Audit, is consistent with a fiduciarys duties. At Morgan Stanley, we put our beliefs to work. Assumed . 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. [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. 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. [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. LinkedIn Andrew Santini : I am very proud to announce that I have Meet one of our Financial Advisors and see how we can help you. urge the Board of Directors to oversee a racial equity audit analyzing JPMorgan's adverse impacts on nonwhite stakeholders and communities of color. Morgan Stanley's HBCU Scholars program provides scholarships for students at three Historically Black Colleges and Universities. Exxon has faced pressure from shareholders to shift practices to reduce greenhouse gas emissions. 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. Some companies are turning to law firms like Covington to do the work. 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. Votes on the Proposals at JP Morgan & Chase, Goldman Sachs and State Street will take place in the next few weeks. Image Two Black employees at JPMorgan said race was a constant undertone in their . Our culture of access and inclusion has built our legacy and shapes our future, helping to strengthen our business and bring value to clients. PAB News | Shareholders File Resolutions Calling for Companies to [140] The legislation is sponsored by Rep. Joyce Beatty and co-sponsored by Reps. Nikema Williams and Jesus G. Garcia and is currently under committee review. hj0_`%A (?BY*JFwiPRNB` H&@& cTL2Vc$`p 1q) 19IB9HA$..Ey?/ANWez][{{iK.5&QZ"]EF'v?}^L7u?F$9 r4-{2`|4E@$VH`&JxCz9 . 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.
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