In partnership with Color Of Change, the nations largest online racial justice organization with millions of members, and with guidance from civil rights and privacy rights organizations, Airbnb will launch a groundbreaking project to measure and fight bias and discrimination. 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), 80See J&J No-Action Letter, supra note 78. [54] Comptroller DiNapoli has observed that discrimination can be deep-seated within a company, and internal self-reviews have the potential to reinforce current structural impediments and biases, which is why he believes it is necessary for audits to be an independent assessment. All rights reserved. (go back), 56Facebooks Civil Rights AuditFinal Report, Facebook, July 8, 2020, available at https://about.fb.com/wp-content/uploads/2020/07/Civil-Rights-Audit-Final-Report.pdf. 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. CEO Charles Scharf took the helm of the bank in 2019 and implemented changes to management, including bringing on other white men he had worked with previously to high-level positions within Wells Fargo. Most recently in 2020, Airbnb launched Project Lighthouse, an initiative to uncover, measure, and overcome discrimination during the Airbnb booking process. Areas include, for example: This project has been in development for nearly two years with support and input from Asian Americans Advancing Justice AAJC, Center for Democracy & Technology, Color Of Change, League of United Latin American Citizens LULAC, National Association for the Advancement of Colored People (NAACP), National Action Network, The Leadership Conference, and Upturn. (go back), 66Bank of America Corporation, 2021 Notice of Annual Meeting and Proxy Statement, Schedule 14A, filed with the SEC on March 8, 2021, available at https://about.bankofamerica.com/annualmeeting/static/media/BAC_2021_ProxyStatement_ADA.612694a6.pdf. (go back), 72Climate, ESG, and the Board of Directors: You Cannot Direct the Wind, But You Can Adjust Your Sails, U.S. Securities and Exchange Commission, Commissioner Allison H. Lee, June 28, 2021, available at https://www.sec.gov/news/speech/lee-climate-esg-board-of-directors. Therefore, this analysis and project will not affect an individuals experience on the platform in any way. 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. 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. [21] Most shareholder activists are cognizant of the stance of institutional investors and proxy advisory firms on ESG issues and have increasingly incorporated ESG factors into their proxy campaigns. [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), 23Racial Equity Audits: A Critical Tool for Shareholders, CtW Investment Group, available at https://www.socinvestmentgroup.com/critical-tool-for-shareholders [hereinafter Webinar]. JPMorgan's audit will examine the $30 billion commitment it made in 2020 to advance racial equity, which included funding of affordable housing, increasing the number of mortgages it. [91] The Staff has recognized that exclusion is permitted pursuant to Rule 14a-8(i)(3) if the resolution contained in the proposal is so inherently vague or indefinite that neither the stockholders voting on the proposal, nor the company in implementing the proposal (if adopted), would be able to determine with any reasonable certainty exactly what actions or measures the proposal requires. [92] Johnson & Johnson, the only company to invoke Rule 14a-8(i)(3) during the 2021 proxy season to attempt to exclude a Racial Equity Audit proposal, argued that the proposal was impermissibly vague and indefinite because neither Johnson & Johnson nor shareholders would be able to determine with any reasonable certainty what actions or measures the proposal requires. [93]. In recent years, Color of Change and other civil rights groups have successfully pushed for independent racial equity audits at Facebook and Airbnb. The two leading proxy advisory firms, ISS and Glass Lewis & Co. LLC (Glass Lewis), have generally taken opposing views on Racial Equity Audits. [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. 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. ESG considerations can be broken down into three categories. [121] Comptroller DiNapoli described the vote as an immense success for a first-time proposal . These votes follow a 2021 season in which eight racial equity audit proposals were proposed at companies in the S&P 500, seven of which received more than 20 percent support. Amazon, the second-largest employer in the US, faces numerous shareholder proposals attempting to address its lack of transparency relating to risks associated with internal and external racial justice issues. [44] Advocates of Racial Equity Audits believe that they are essentially intended to be implemented in furtherance of risk management and risk tolerance, criteria that fiduciaries may choose to measure in order to protect their investments. 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. 1, Reuters, Svea Herbst-Bayliss, Gary McWilliams, December 7, 2020, available at https://www.reuters.com/article/exxon-shareholders-engine-no-1/exxon-faces-proxy-fight-launched-by-new-activist-firm-engine-no-1-idUSKBN28H2IO. BlackRock, the worlds largest asset management firm, and CoreCivic Inc. (CoreCivic), an operator of private prisons, have agreed to conduct independent Racial Equity Audits after receiving shareholder proposals for such audits, resulting in the proponents withdrawing their proposals. [40] As illustrated in the study, companies with the highest degrees of ethnic/cultural diversity were 33% more likely to outperform their less diverse peers and companies with the most ethnically/culturally diverse boards of directors are 43% more likely to experience higher profits than their less diverse peers. The companys response to unionization efforts by its predominantly Black workforce at a warehouse in Bessemer, Alabama raised further concerns about justice issues. [16] Enhanced performance in these areas can lead to less scrutiny from environmental regulators, increased customer loyalty, more productive employees, reduced employee turnover, more lucrative business partnerships and increased profitability. As discussed earlier, Starbucks undertook a Racial Equity Audit in 2018. For example, a 2017 study found that across 72 predominantly Black New York City neighborhoods, Airbnb hosts were five times more likely to be white. Julie Wenah, Community Counsel and Acting Regional Counsel for Africa at Airbnb, was a speaker at Scaling Social Impact in a Remote World. (go back), 91See SEC, Division of Corporate Finance Staff Legal Bulletin No. 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. 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. 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 2018, Travelers paid out $450,000 to the National Fair Housing Alliance in a settlement of a lawsuit that claimed Travelers had denied insurance to landlords who rented to voucher recipients. 20091 (August 16, 1983)). 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. https://www.sec.gov/news/public-statement/lee-climate-change-disclosures, https://www.sec.gov/news/public-statement/coates-esg-disclosure-keeping-pace-031121, https://www.activistinsight.com/wp-content/uploads/dlm_uploads/2021/06/InsightiaESGActivism-1.pdf?utm_source=newsletter&utm_medium=email&utm_campaign=greenfin&utm_content=2021-06-30, https://www.trilincglobal.com/what-is-esg/, https://www.businessinsider.com/patagonia-mission-environmentalism-good-for-business-2018-12, https://www.blackrock.com/corporate/literature/fact-sheet/blk-responsible-investment-guidelines-us.pdf, https://www.issgovernance.com/file/policy/active/americas/US-Voting-Guidelines.pdf, https://www.reuters.com/article/exxon-shareholders-engine-no-1/exxon-faces-proxy-fight-launched-by-new-activist-firm-engine-no-1-idUSKBN28H2IO, https://www.socinvestmentgroup.com/critical-tool-for-shareholders, https://www.bloomberg.com/news/articles/2020-10-20/racism-and-inequity-have-cost-the-u-s-16-trillion-wall-street-economist-says, https://stories.starbucks.com/uploads/2020/02/Starbucks-Civil-Rights-Assessment-2020-Update.pdf, https://www.forbes.com/sites/korihale/2021/01/20/starbucks-steps-up-its-racial-justice-outreach-with-100-million-pledge/?sh=53b94b63389c, https://www.npr.org/2020/07/07/887628306/opinion-companies-have-a-duty-to-defend-democracy, https://www.mckinsey.com/~/media/mckinsey/business%20functions/organization/our%20insights/delivering%20through%20diversity/delivering-through-diversity_full-report.ashx, https://www.nerdwallet.com/article/investing/best-esg-funds, https://about.fb.com/wp-content/uploads/2020/07/Civil-Rights-Audit-Final-Report.pdf, https://www.forbes.com/sites/bhaktimirchandani/2021/06/28/what-you-need-to-know-about-the-2021-proxy-season/?sh=2e475fae7f5e, https://content.irmagazine.com/story/ir-magazine-summer-2021.pdf, https://about.bankofamerica.com/annualmeeting/static/media/BAC_2021_ProxyStatement_ADA.612694a6.pdf, https://www.sec.gov/Archives/edgar/data/831001/000120677421000735/citi3828191-def14a.htm, https://exchange.iccr.org/node/88686/text, https://www.sec.gov/Archives/edgar/data/0000019617/000001961721000275/a2021proxystatement.htm, https://www.sec.gov/news/speech/lee-climate-esg-board-of-directors, https://www.asyousow.org/our-work/social-justice/racial-justice, https://news.yahoo.com/big-us-companies-pushed-tally-014418300.html, https://news.bloomberglaw.com/banking-law/goldman-citi-stave-off-investor-calls-for-racial-audits-1, https://www.govinfo.gov/content/pkg/FR-1998-05-28/html/98-14121.htm, https://www.sec.gov/divisions/corpfin/cf-noaction/14a-8/2021/ctwcitigroup022621-14a8.pdf. 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. The Staff has stated that substantial implementation under the rule does not require the company to have implemented the proposal in full or exactly as proposed by the shareholder. 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. [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]. 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), 117See Webinar, Thomas DiNapoli, New York State Comptroller, supra note 23. The audit featured three reports and extensive interviews with hundreds of civil rights organizations and . 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. Id. [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. 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. Id. (go back), 48Webinar, Pamela Coukos, Co-Founder of Working Ideal, supra note 23; supra note 27. He agreed and was personally concerned that there was an unacceptable lack of urgency around Airbnb's previous attempts to address allegations of racial bias within the Airbnb community, and vowed that such unconsciousness would not New York State Common Retirement Fund et al. This diversity of perspectives during the development process is key, said Wenah. The Sustainable Investments Institute reports that 28 shareholder proposals dealing with racial justice had been included in proxy statements filed with the SEC as of April 27, 2021. (go back), 119See Webinar, Thomas DiNapoli, New York State Comptroller, supra note 23. Alleged retaliation against employees who raise issues of discrimination. Financial institutions and asset management firms have become the focus of Racial Equity Audit shareholder proposals. We anticipate greater interest in Racial Equity Audits and similar initiatives in the upcoming proxy season and accordingly believe companies will be pushed to critically and objectively examine their current internal practices and policies relating to equity and inclusion to identify areas in need of improvement. AI could help you next time. 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), 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/. 1What is ESG?, ADEC Innovations ESG Solutions, available at https://www.esg.adec-innovations.com/about-us/faqs/what-is-esg/. 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. 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.. 2017. Only the Anti-discrimination team, Security team, and research partner will have access to this information. [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. 2020, available at https: //www.reuters.com/article/exxon-shareholders-engine-no-1/exxon-faces-proxy-fight-launched-by-new-activist-firm-engine-no-1-idUSKBN28H2IO development process is key, said airbnb racial equity audit..., and research partner will have access to this information as discussed earlier, Starbucks undertook Racial! Have successfully pushed for independent Racial equity Audit shareholder proposals, and research partner will access! 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