A fiduciarys duty is to act in the best interest of their beneficiaries and traditionally translates to acting to obtain the highest return on investment, but it can be equally important that fiduciaries seek to minimize risk. Similar proposals have been filed in the 2022 season, along with various other proposals requesting reporting on internal and external corporate policies and practices. And lastly, whether a company has sufficient mechanisms in place to monitor effectiveness. The first major US company to undergo such third-party racial audit was Airbnb. The . [33] The public announcement of the Racial Equity Audit and related diversity, equity and inclusion efforts appeared to not only rehabilitate Starbucks public image after the incident, but helped the company become the most popular restaurant stock on the S&P 500 with actively managed funds that are dedicated to ESG investing, according to RBC Capital Markets. Corp. Code 301.3, 301.4. 2017. Airbnb has an anti-discrimination product team comprised of data scientists, designers, and engineers, explained Wenah. 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. 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.. (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). Users who do not opt-out may be randomly selected to be part of the data analysis. [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. [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. 1 In addition to personal accounts, a study at Harvard Business School highlighted racial discrimination on Airbnb's rental platform. 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. [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. [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. [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. For all companies, and especially tech companies, that means its time to get to work! While we witnessed an increase in shareholder proposals related to Racial Equity Audits in the 2021 proxy season, all such proposals were either withdrawn or defeated. (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/. [69], Proponents contend that Racial Equity Audits would help public companies identify, prioritize, remedy and avoid adverse impacts on nonwhite stakeholders and communities of color [70] and would help a companys board of directors assess such companys behavior through a racial equity lens in order to obtain a complete picture of how it contributes to, and could help dismantle, systemic racism. [71]. The banks are fighting back., Markets Insider, Marguerite Ward, April 7, 2021, available at https://markets.businessinsider.com/news/stocks/bank-leaders-buck-shareholder-call-third-party-racial-equity-audit-2021-4 (We believe our progress on the issue of racial equality, and our regular reporting of that progress, make the proposals requested audit unnecessary, a Bank of America spokesperson told Insider.). 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. Shareholders called for one at the company's investor meeting earlier this year, but the bank (like its peers) told . From 2016 through today, over 1.3 million people have declined to agree to Airbnbs mandatory Community Commitment and Non-Discrimination Policy, and have therefore been denied use of the platform or had their accounts cancelled. 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.. (go back), 94CoreCivic, Inc., Form 8-K, filed with the SEC on May 18, 2021, available at https://www.sec.gov/ix?doc=/Archives/edgar/data/1070985/000119312521165313/d184269d8k.htm. 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. Shareholders and racial justice advocates have coalesced around racial equity audits as a mechanism for uncovering and addressing the racist harm perpetrated by corporations internally and externally. The activist investor nominated a slate of four director candidates with expertise operating energy companies and utilizing clean technology. (go back), 117See Webinar, Thomas DiNapoli, New York State Comptroller, supra note 23. [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. (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. [34]. As a result, Engine No. (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]. The following proposals will be put to shareholders at its May 25, 2022 annual meeting, requesting: The shareholder proposal requesting a diversity and equity audit, Item 12, was withdrawn by the proponent, update here. In recent years, Color of Change and other civil rights groups have successfully pushed for independent racial equity audits at Facebook and Airbnb. 14B, September 15, 2004, available at https://www.sec.gov/interps/legal/cfslb14b.htm. 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. We will continue to urge Airbnb to thoughtfully engage members of our communities in developing solutions to support long-time Black residents at risk of displacement from their neighborhoods.. (go back), 80See J&J No-Action Letter, supra note 78. All rights reserved. We are requesting that boards engage a variety of key stakeholders in undergoing this audit and evaluating the specific topics to be addressed, including civil rights organizations, employees, shareholders, and customers. Most recently in 2020, Airbnb launched Project Lighthouse, an initiative to uncover, measure, and overcome discrimination during the Airbnb booking process. [48] New York State Comptroller Thomas F. DiNapoli, a staunch advocate of Racial Equity Audits, has stated that such an audit should ascertain at least three things: First, whether a companys policies, practices, and products are equitable and nondiscriminatory for employees, customers, and the communities in which they operate. The companys response to unionization efforts by its predominantly Black workforce at a warehouse in Bessemer, Alabama raised further concerns about justice issues. Companies that dismiss these concerns or lag behind their peers in addressing ESG matters may find themselves in the crosshairs of investors and proxy advisory firms, or even state legislatures and federal agencies. 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 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. [116] Comptroller DiNapoli expressed concern with Amazons alleged lack of transparency, stating that while the company has put policies in place to address this issue, it has not reported to investors the effectiveness or the process for completing its ongoing policy review. [117] In 2020, Amazon conducted its first human rights assessment, which it referenced to support its position that there was no need to conduct a Racial Equity Audit. Airbnb also consulted with Antony Haynes, Associate Dean of Albany Law School and Director of CyberSecurity and Privacy Law, and Cathy ONeil and Jacob Appel, of algorithmic auditing consultancy ORCAA. 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. Read More About: airbnb.com/against-discrimination. Last shareholder season, seven shareholder proposals on Amazons proxy either directly or indirectly addressed racial justice issues. [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. Companies Negotiated with Shareholders to Withdraw the Racial Equity Audit Proposal. . (go back), 119See Webinar, Thomas DiNapoli, New York State Comptroller, supra note 23. The proxy advisory firms level of guidance may take varying formsat the low end, proxy advisory firms may increase a companys ESG or corporate governance score for having in the past or recently conducted a Racial Equity Audit. What Makes Patagonia A World Leader in Sustainability, Medium, Tom & Jerry, January 13, 2021, available at https://medium.com/climate-conscious/what-makes-patagonia-a-world-leader-in-sustainability-486073f0daa. Bringing in external partners provides critical feedback and, ultimately, produces better products. 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. (go back), 93See J&J No-Action Letter, supra note 78. [22]. Our partnership with Airbnb on this project has been years in the making, and has led to tangible policy developments to reduce discrimination that should serve as a model for Airbnbs peer tech companies, said Color Of Change President Rashad Robinson. (go back), 90See e.g., Citigroup No-Action Letter, supra note 78; J&J No-Action Letter, supra note 78; JPMorgan No-Action LetterFebruary, supra note 77; Amazon No-Action Letter, supra note 83. (go back), 37Webinar, Cyrus Mehri, Founding Partner of Mehri & Skalet, PLLC, supra note 23. (go back), 118Id. In partnership with Color Of Change and with guidance from civil rights and privacy rights organizations, Airbnb is launching Project Lighthouse, a groundbreaking effort by a consumer tech company to collect the data needed to measure and evaluate discrimination on its platform in the US so it can take additional action against it. 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. Shareholder activist Engine No. 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. According to Forbes Magazine, the past proxy season set new records with at least 467 shareholder resolutions on environmental, social and governance (ESG) issues. [64]. Therefore, this analysis and project will not affect an individuals experience on the platform in any way. . [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]. It will not happen overnight. The racial equity audit proposal at Citigroup Inc. garnered 39% of shareholders' support, while the one at Amazon.com Inc. secured 44% of investors' backing, according to Bloomberg Intelligence data. 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. Given current trends in ESG, public companies should stay informed on Racial Equity Audits and their adoption, crafting and implementation. (go back), 21Cal. In September 2019, Airbnb released a Three-Year Review of its Work to Fight Discrimination and Build Inclusion in an effort to maintain transparency and accountability. (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. According to public policy analysts, racial violence and the COVID-19 pandemic sparked an increase in Rule 14a-8 shareholder proposals focused on racial justice. [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]. 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