Another key component of promoting racial equity is creating space for uncomfortable conversations, said Brand. Related research from the Program on Corporate Governance includesThe Illusory Promise of Stakeholder Governance(discussed on the Forumhere) andWill Corporations Deliver Value to All Stakeholders?, both by Lucian A. Bebchuk and Roberto Tallarita;For Whom Corporate Leaders Bargainby Lucian A. Bebchuk, Kobi Kastiel, and Roberto Tallarita (discussed on the Forumhere); andRestoration: The Role Stakeholder Governance Must Play in Recreating a Fair and Sustainable American EconomyA Reply to Professor Rockby Leo E. Strine, Jr. (discussed on the Forumhere). Cacace actively holds the position of Director of Anti-Discrimination & Equity Programs for Airbnb. And even they are far from perfect. Wenah herself has been working on this project for many years. (go back), 67Google Pressured on Racial Equity Audit After AI Ethics Collapse, Bloomberg, Naomi Mix, April 27, 2021, available at https://www.bloomberg.com/news/articles/2021-04-27/google-pressured-on-racial-equity-audit-after-ai-ethics-collapse; see also supra Section II.A. The Airbnb Newsroom is aimed at journalists. 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. 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. 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. 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 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. 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. . As discussed further below, several financial institutions, including Citi, JPMorgan Chase & Co. and Goldman have resisted shareholder proposals requesting Racial Equity Audits, stating that they would either fold such measures into their existing human rights assessments or that they didnt believe it was the appropriate time for such an endeavor. [63] If the company determines that it is not in the best interests of the company to include a Rule 14a-8 shareholder proposal in its proxy materials, it can (i) seek no-action relief from the SEC staff (the Staff) that, if granted, would allow the company to exclude the proposal without the threat of Staff recommendation of an enforcement action based on a procedural deficiency or a substantive exclusion under Rule 14a-8; (ii) take legal action in court to exclude the proposal; and/or (iii) negotiate with the proponent to withdraw the proposal. 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. [62] Under Rule 14a-8, a company is required to include a shareholder proposal and related supporting statement in its proxy statement and list the shareholder proposal on its proxy card to be voted on with the companys proposals if: (a) the shareholder satisfies specified eligibility and procedural requirements; and (b) the proposal is not excludable under Rule 14a-8(i). [58] The audit produced three reports, which ultimately described how Facebook utilized the audit process to listen, plan and deliver on various consequential changes that will help advance the civil rights of its users in a number of categories and also recommended implementation of specific action items, including to (1) continue to onboard expertise, (2) build out the civil rights leaders team, (3) expand civil rights product review processes, (4) require civil rights perspectives in escalation of key content decisions and (5) prioritize civil rights. [59] The thoroughness of the audit and the response and subsequent actions taken by the company have led to the Facebook audit being heralded by many as a big success. (go back), 46Best ESG Funds: High-Rated and Low-Cost Options, NerdWallet, Alana Benson, May 9, 2021, available at https://www.nerdwallet.com/article/investing/best-esg-funds. In recent years, Color of Change and other civil rights groups have successfully pushed for independent racial equity audits at Facebook and Airbnb. (go back), 17Supra note 5; see also What Is ESG? (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. . [3], With the increasing prominence of ESG awareness, the market has also seen the rise of ESG-specific funds as a new form of investment vehicle. (go back), 85See Amazon No-Action Letter, supra note 83. However, not all companies have been as eager and willing to comply with these requests. 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. [50] Accordingly, auditors are encouraged to solicit information directly through surveys and interviews, and to review historical records and a companys performance against its peers. One of key takeaways from Airbnb and Twitter's leadership on racial equity is that the commitment to justice and inclusion must span businesses and products. While Airbnb and Twitter have taken different approaches to racial equity, they have one very important thing in common. 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. As companies aim for racial equity, Brand said its important to first acknowledge that racism exists and understand that it was intentionally built into corporations. What is a racial equity or civil rights audit? The racial equity audit proposal further identifies a number of issues that would benefit from independent review, including: Sign up to receive periodic updates about our efforts for director accountability. . According to certain proponents, the point of a Racial Equity Audit is not necessarily to critique a companys current platforms and efforts. Alleged retaliation against employees who raise issues of discrimination. Racial Equity Audits and similar equity and inclusion initiatives that are not robust or designed with the aid of independent third party consultants may risk being perceived as mere window dressing and invite criticism from shareholders. Following the audit at Facebook, the company . These audits, often conducted by outside firms or individuals, examine and assess company actions and how those actions advance or prevent discrimination within their workplaces. 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. (go back), 97Citigroup Proxy Statement, supra note 69. Twitter, for example, hosted a conversation with bestselling author and activist Dr. Ibram X. Kendi about how Twitter employees can embody anti-racist behavior. [6] Since then, SEC leadership has signaled that more comprehensive ESG-related disclosure could be mandated in the near future, with SEC Commissioner Allison Herren Lee issuing statements earlier this year directing the Division of Corporation Finance to enhance its focus on climate-related disclosure in public company filings [7] and inviting input from investors, registrants, and other market participants on climate change disclosure. [8] Former Acting Director of the SECs Division of Corporation Finance John Coates also stated earlier in the year that the SEC should help lead the creation of an effective ESG disclosure system so companies can provide investors with information they need in a cost-effective manner. [9] Based on these statements, we believe there is a strong likelihood that the current SEC-mandated human capital management disclosures will soon be expanded to require additional disclosures covering environmental and other social initiatives and metrics, further supporting a view that ESG awareness, stewardship and reporting at public companies are here to stay. Using Racial Equity Audits, a company is given a comprehensive report on their standing regarding how they uphold said regulations. 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. (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). Before launching Project Lighthouse, Airbnb consulted a number of civil rights and privacy organizations, including Color of Change. Airbnb is setting an important precedent by taking measurable steps to examine and dismantle discriminatory online systems. (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. Other external forces that may prompt public companies to adopt Racial Equity Audit policies are the SEC and the securities exchanges. (go back), 93See J&J No-Action Letter, supra note 78. [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. The good news is that some tech companies have been promoting racial equity and justice long before these latest protests and the tragedies that inspired them. The Amazon proposal got more support from shareholders than any other audit voted on last year. Recently, investors and companies have also begun to appreciate that positive financial returns are often associated with investing in initiatives working towards racial equality. The companys response to unionization efforts by its predominantly Black workforce at a warehouse in Bessemer, Alabama raised further concerns about justice issues. Paul, Weiss has launched a new Civil Rights and Racial Equity Audit Practice, which is among the . 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. [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. 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. 16, 1992)). (go back), 86See J&J No-Action Letter, supra note 78. And lastly, whether a company has sufficient mechanisms in place to monitor effectiveness. [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. Color of Change successfully called for and worked with AirBnB to undertake such an audit. (go back), 142SEC Approves Nasdaqs New Listing Rules Designed to Advance Greater Boardroom Diversity, Elizabeth Gonzalez-Sussman and Ron Berenblat, August 2021, available at https://www.olshanlaw.com/resources-alerts-Nasdaq-SEC-boardroom-diversity-rule.html. [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. (go back), 22Supra note 10. [61], Pursuant to Rule 14a-8, shareholders may submit proposals to be included in a companys proxy materials for its annual or special meetings of shareholders. According to this study, closing racial gaps would have generated an additional $16 trillion in economic output since [the year] 2000, and by closing the various gaps between Blacks and Whites, the U.S. could stand to gain an additional $5 trillion in economic activity over the next five years. [42] Racial Equity Audits could therefore prove to be a critical tool for companies looking to capture some of these unrealized gains. [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. 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. It will not happen overnight. (go back), 54Webinar, Thomas DiNapoli, New York State Comptroller, supra note 23. (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. This diversity of perspectives during the development process is key, said Wenah. As a result, Engine No. For many years some studies have shown that promoting racial Equity audit policies are SEC. A comprehensive report on their standing regarding how they airbnb racial equity audit said regulations during the development process key... Twitter airbnb racial equity audit taken different approaches to racial Equity, they have one very important thing common! 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