morgan stanley racial equity audit

Votes on the Proposals at JP Morgan & Chase, Goldman Sachs and State Street will take place in the next few weeks. Whether its hardware, software or age-old businesses, everything today is ripe for disruption. Resolutions were withdrawn at BlackRock, CoreCivic, Morgan Stanley and Amgen based on their commitments to conduct internal audits. (go back), 107Amazon Proxy Statement, supra note 104. Facebook, Inc. (Facebook) also conducted its own version of a Racial Equity Audit in 2018. The lender pledged in 2020 to spend $1 billion over four years to combat racial and economic . Our survey found progress in investor attitudes and actions, but more needs to be done to close the funding gap for women and multicultural entrepreneurs. Racial equity audits started catching on after the events of 2020 prompted a racial reckoning in the U.S. Shareholder proposals come from a variety of proponents, including individual investors, labor unions, public pension funds, shareholder activists and institutional investors and such proposals often focus on the environment, corporate governance, executive compensation and social issues. According to CtW, this focus is based on the belief that: the finance industry has played a critical role in perpetuating unequal wealth distribution to communities of color. 34-40018; IC-23200; File No. Amid a pandemic and social unrest, we gathered senior multicultural business leaders to focus on the challenges and opportunities of this indelible moment in history. But that was never going to be enough for racial justice advocates. e.oe."_Lm9Qfj5MvZWNpe0i7 g_s\I`e0GBcEY\6:'vY [L7'$yz{\RUS?_hdHa8xZr$a`[v x0dG{-1weLg! To reinforce the firm's commitment to racial equity, JPMorgan Chase today said it intends to retain a third-party to perform an audit of this effort. [104] The proposal was submitted by Comptroller DiNapoli, as trustee of New York States Common Retirement Fund for public employees, which owns shares in Amazon. S7-11-19, available at https://www.sec.gov/rules/final/2020/33-10825.pdf; New Human Capital Disclosure Requirements, Harvard Law School Forum on Corporate Governance, Margaret Engel, February 6, 2021, available at https://corpgov.law.harvard.edu/2021/02/06/new-human-capital-disclosure-requirements/. Stay abreast of the latest trends and developments. According to Bloomberg, Glass Lewis has broadly said conducting the audits would help companies reduce risks of high-profile controversies that may result in customer and employee attrition, regulatory inquiries and significant fines, and that [g]iven broad societal changes, it is particularly important for consumer-facing companies, which depend on their customers trust and loyalty, to address issues of racial equity. [102] On the other hand, according to Bloomberg, ISS has stated that racial audits arent warranted because companies are taking sufficient meaningful actions to address racial inequities such as expanding opportunities for people and communities of color, as well as improving the diversity and inclusion of its workforces. [103] The following chart sets forth the recommendations ISS and Glass Lewis made with respect to each Racial Equity Audit proposal in the 2021 proxy season: Source: ISS Corporate Solutions and Proxy Insight, During the 2021 proxy season, Amazon.com, Inc. (Amazon) faced a shareholder proposal requesting the company to conduct a Racial Equity Audit. 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. Our culture of access and inclusion has built our legacy and shapes our future, helping to strengthen our business and bring value to clients. Professional development and peer engagement are crucial building blocks to a careers strong foundation. SEIU said in its resolution, which has since been withdrawn, that BlackRock as an investor opposed most shareholder proposals in. [30], The impact a Racial Equity Audit may have on a company may be felt in many ways. The Black Leaders Forum brought together senior leaders from Wealth Management for targeted conversations, development and actions to achieve success. 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. [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. 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. (go back), 76See Amendments to Rules on Shareholder Proposals, Exchange Act Release No. Most of the big banks have not been as interested in these types of transparent 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. Our firm's commitment to sustainability informs our operations, governance, risk management, diversity efforts, philanthropy and research. A new Morgan Stanley program spearheaded by employees in its Fixed Income Division aims to create a more diverse and inclusive workplace for experienced hires. In 2020 and 2021, at least 12 public companies received shareholder proposals to conduct a racial equity audit from pension funds and other shareholder proponents. [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. [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. New York. As . We provide comprehensive workplace financial solutions for organizations and their employees, combining personalized advice with modern technology. 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. [139] The draft legislation would also require banks to investigate what ties they may have to slavery and disclose steps such institution would take to reconcile profits it may have received from slavery. [142] Accordingly, as Racial Equity Audits become an increasingly important area for investors, it is possible that the SEC and the major exchanges may eventually require companies to make further diversity, equity and inclusion disclosures, which may include the existence and frequency of a companys Racial Equity Audits. Published Mon, Apr 18 2022 4:50 PM EDT Updated Mon, Apr 18 2022 6:22 PM EDT. Some studies have shown that promoting racial justice can increase profitability and competitive advantage. [39] A study by McKinsey & Company found that implementing or improving racial justice policies can positively affect a companys bottom line. (go back), 33On the Progress of its Efforts to Promote Civil Rights, Equity, Diversity, and Inclusion, Starbucks, February 24, 2020, available at https://stories.starbucks.com/uploads/2020/02/Starbucks-Civil-Rights-Assessment-2020-Update.pdf; supra note 27. Why did nearly all of the banks urge "no" votes on the audit proposals? (go back), 116See How Amazons Emissions are Hurting Communities of Color, Amazon Employees for Climate Justice, May 26, 2020, available at https://amazonemployees4climatejustice.medium.com/environmental-justice-and-amazons-carbon-footprint-9e10fab21138; Amazon workers demand end to pollution hitting people of color hardest, NBC News, April Gleiser and Leticia Miranda, May 24, 2021, available at https://www.nbcnews.com/tech/tech-news/amazon-shareholders-demand-end-pollution-hitting-people-color-hardest-n1268413. 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. [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. endstream endobj 334 0 obj <>stream (go back), 85See Amazon No-Action Letter, supra note 83. Not only are Racial Equity Audits designed to help inform investors about their current and future investments from a social and financial perspective, but are also intended to help companies craft their policies and practices to achieve their social justice goals. 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. Sarah Anderson May 17, 2021 Inequality.org . Recently, Morgan Stanley ( MS +0.65%) 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 annual meeting. Source: SEC Filings. The Future Generation Scholarship initiative will support 25 ethnic-minority and/or socially mobile students every year with a goal to kick-start their careers in financial services. A racial equity audit is the first step to safeguard against further harm and it's also the smart thing to do. David Ake) It followed his 2021 executive order . CtW dropped the Morgan Stanley proposal after the bank agreed to conduct a racial equity audit. This is all while donating the greater of 1% of sales or 10% of profits to environmental activism, working to be 100% carbon neutral by 2025 and allowing employees to spend up to two fully-paid months of working time on supporting environmental conservation projects. (go back), 73As You Sow: Racial Justice, available at https://www.asyousow.org/our-work/social-justice/racial-justice. 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. As discussed earlier, Starbucks undertook a Racial Equity Audit in 2018. Speaking at the recent Corporate Secretary Forum, Rose Marie Glazer, senior vice president, corporate secretary and deputy general counsel at AIG, described the proposals as 'an . Our board of directors and senior executives hold the belief that capital can and should benefit all of society. (go back), 38See e.g., Opinion: Companies Have a Duty to Defend Democracy, NPR, Brett Bruen, July 7, 2020, available at https://www.npr.org/2020/07/07/887628306/opinion-companies-have-a-duty-to-defend-democracy (discussing corporations ability to be more responsive to critical issues to voters on the macro-level, such as gun control and climate change, as well as on a more personal level including Twitter, Uber and Blue Apron announc[ing that] they would give employees a paid day off when their country holds elections). (go back), 40Delivering through Diversity, McKinsey, Vivian Hunt, Sara Prince, Sundiatu Dixon-Fyle and Lareina Yee, January 2018, available at https://www.mckinsey.com/~/media/mckinsey/business%20functions/organization/our%20insights/delivering%20through%20diversity/delivering-through-diversity_full-report.ashx. 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. Bank of America said last week that an audit is unnecessary given its progress on racial equality. 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. For the sixth consecutive time, Morgan Stanley Bank has been recognized with the highest rating from the Office of the Comptroller of the Currency for its work meeting the credit needs of the communities it serves. Dismissal and neglect of these concerns led to Engine No. Indeed, the House Financial Services Subcommittee on Diversity and Inclusion is currently reviewing legislation that would require banks to conduct Racial Equity Audits every two years in an effort to promote diversity and equity. Id. We believe our greatest asset is our people. Input from civil rights organizations, employees, and customers should be considered in determining the specific matters to be analyzed. . (go back), 30Webinar, Cyrus Mehri, Founding Partner of Mehri & Skalet, PLLC, supra note 23. As a firm, we can do more, and here are five steps were taking right now. [136] As the general publics views evolve on ESG issues, public pressure for certain actionsin this case, increased diversity in public boardroomsoften influence not just shareholder advocacy but legislative action. ; see also Comptroller DiNapoli Wants Audit of Amazons Racial Justice Practices, Times Union, Rick Karlin, December 21, 2020, available at https://www.timesunion.com/news/article/Comptroller-DiNapoli-wants-audit-of-Amazon-s-15815322.php. In 2007, the firm's co-founder, a former Goldman Sachs and Morgan Stanley banker named Divesh Makan, told a wealth management magazine that he'd even organized clients' parties and helped . [32] For example, following the voluntary Racial Equity Audit conducted by Starbucks after the 2018 incident discussed above, the company began requiring implicit bias training for employees, setting public corporate diversity goals and implementing a number of other social initiatives. Across all our businesses, we offer keen insight on today's most critical issues. (go back), 112Shareholder Proposal No-Action Responses, SEC, Staffs Response, April 7, 2021, available at https://www.sec.gov/divisions/corpfin/cf-noaction/14a-8/shareholder-proposal-no-action-responses.htm; see also U.S. SEC blocks Amazon effort to stop shareholder votes on racial equity audit, Reuters, April 7, 2021, available at 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. SOC Investment Group (then known as CtW Investment Group) filed a proposal seeking a racial equity audit in Citi's proxy statement this year. [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]. Wells Fargo announced it will commission a third-party racial equity audit Tuesday after years of advising shareholders to vote against one. The Facebook audit began at the behest and encouragement of the civil rights community and some members of Congress, proceeded with Facebooks cooperation, and [was] intended to help the company identify, prioritize, and implement sustained and comprehensive improvements to the way it impacts civil rights. [56] The audit process included interviewing over 100 civil rights organizations, several hundred more advocates as well as members of Congress. Morgan Stanley is differentiated by the caliber of our diverse team. Second, whether any changes to existing programs or new measures or initiatives, would help a company become more equitable and inclusive. [15] As discussed in more detail below, a companys performance on ESG factors, such as investment into renewable energy, promotion of employee health and safety and contributions to the local community, are pressing issues that can either benefit or adversely affect a companys perception in the public eye, operational execution and bottom line. [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. Equity audits are a leadership tool used to collect the data that informs the process of removing programmatic barriers that impede full participation, access, and opportunity for all students to receive an equitable and excellent education. (go back), 93See J&J No-Action Letter, supra note 78. We offer timely, integrated analysis of companies, sectors, markets and economies, helping clients with their most critical decisions. Our work on racial equityfocuses on our commitments as a business, as a responsiblemember of global and local communities, and as an inclusive workplace that values diversity. Patagonias environmental mission hasnt just been good for the planet its also boosted the bottom line, Business Insider, Richard Feloni, December 21, 2018, available at https://www.businessinsider.com/patagonia-mission-environmentalism-good-for-business-2018-12. CK%@q)4rK!u\r94 !5@@yb#8u(:uI&UsRmndt>&. Services Employees International Union (SEIU), Unable to concur that Rule 14a-8(i)(7) provides a basis to exclude, Unable to concur that Rule 14a-8(i)(10) provides a basis to exclude, Unable to concur with exclusion on any of the bases asserted, Materially False and Misleading Exception (Vague or Indefinite). (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). UPDATE: According to a preliminary tally, 39 percent of JPMorgan shareholders voted in support of the racial equity audit proposal on May 18. [22]. The investigation will be conducted by attorneys at Covington & Burling, according to an external blog post on Citi's website. hj0_NtJ)=;nhuB)ex(X V *pwztOxqzYr22#LPL>/k~i6jEi|MR Meet one of our Financial Advisors and see how we can help you. Recently, investors and companies have also begun to appreciate that positive financial returns are often associated with investing in initiatives working towards racial equality. 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. [65] Certain of these racial justice proposals submitted by shareholders included proposals calling for Racial Equity Audits. (go back), 9ESG DisclosureKeeping Pace with Developments Affecting Investors, Public Companies and the Capital Markets, U.S. Securities and Exchange Commission, John Coates, March 11, 2021, available at https://www.sec.gov/news/public-statement/coates-esg-disclosure-keeping-pace-031121. Today, we're demonstrating . Below is a chart listing the shareholder proposals submitted at various companies during the 2021 proxy season, the proponent, the regulatory basis to exclude the proposal invoked by the company and the SECs response to the companys request for exclusion. (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. 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. h247T0Pw/+Q0,H/-K-0 Restoration: The Role Stakeholder Governance Must Play in Recreating a Fair and Sustainable American EconomyA Reply to Professor Rock, https://www.esg.adec-innovations.com/about-us/faqs/what-is-esg/, https://investor.vanguard.com/investing/esg/, https://www.issgovernance.com/library/esg-matters-part-ii/, https://www.sec.gov/rules/final/2020/33-10825.pdf, https://corpgov.law.harvard.edu/2021/02/06/new-human-capital-disclosure-requirements/. We lead with exceptional ideas, prioritize diversity and inclusion and find meaningful ways to give backall to contribute to a future that benefits our clients and communities. Morgan Stanley Chairman and CEO James Gorman discusses the impact of the pandemic on minority-owned financial institutions with Carver Federal Savings Bank CEO Michael Pugh. . Civil rights advocates and proponents of social justice have long touted the moral and ethical considerations of closing the racial divide in America. (go back), 125Rule 14a-8 No Action Letter, CtW Investment Group, November 12, 2020, available at https://www.sec.gov/divisions/corpfin/cf-noaction/14a-8/2021/ctwjpmorgan032621-14a8.pdf. These votes follow a 2021 season in which eight racial equity audit proposals were proposed .