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. [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. (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). Some, including Starbucks, Facebook and AirBnB, have already commissioned racial equity audits. [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. 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. Paul, Weiss has launched a new Civil Rights and Racial Equity Audit Practice, which is among the . And even they are far from perfect. called upon to navigate the challenges presented by climate change, racial injustice, economic inequality, and numerous other issues that are fundamental to the success and sustainability of companies, financial markets, and our economy. [72] After the May 2020 killing of George Floyd, 66% of S&P 500 companies posted statements on their websites or social media accounts, 36% made financial contributions to racial justice organizations and 14% stated in their communications that Black Lives Matter. [73] While it has been observed that these companies were quick to issue statements supporting Black Lives Matter and promis[ed] to do more to be responsive to non-white consumers, employees and communities, [74] most companies on the receiving end of a Rule 14a-8 proposal to implement a Racial Equity Audit have actively resisted such proposal by seeking no-action relief from the SEC to exclude the proposal from their 2021 proxy statements, negotiating with proponents to withdraw their proposals, and, when the company had been unsuccessful with the foregoing, recommending that shareholders vote against the proposals. Will Corporations Deliver Value to All Stakeholders? (go back), 74Big US companies pushed to tally progress on racial justice, Yahoo! In general, Racial Equity Audit proposals ask the board of directors of a company to oversee such audits analyzing the companys business modelsfrom policies to products and servicesto determine whether they cause, reinforce or perpetuate discrimination. [67]. (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). Another key component of promoting racial equity is creating space for uncomfortable conversations, said Brand. [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. [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]. Murphy helped Airbnb and Facebook conduct racial audits in recent years. The increasing focus on environmental, social and governance (ESG) considerations at public companies, including this years highly publicized proxy contest at Exxon Mobil Corporation (Exxon), has demonstrated the growing importance of understanding ESG and the implications it can have for investors and companies. (go back), 80See J&J No-Action Letter, supra note 78. 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 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. Racial equity audits of corporations originated within the racial justice movement recently. Facebook, Inc. (Facebook) also conducted its own version of a Racial Equity Audit in 2018. (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. . Shareholder activists have advocated for increased diversity in corporate boardrooms for a number of years. (go back), 70Citigroup Proxy Statement, supra note 69; JPMorgan Chase & Co., 2021 Notice of Annual Meeting of Shareholders and Proxy Statement, Schedule 14A, filed with the SEC on April 7, 2021, available at https://www.sec.gov/Archives/edgar/data/0000019617/000001961721000275/a2021proxystatement.htm [hereinafter JPMorgan Proxy Statement]. (go back), 50Webinar, Pamela Coukos, Co-Founder of Working Ideal, supra note 23; supra note 27. In an attempt to re-educate tech workers about racism, Twitter is looking to integrate targeted anti-racism training into its curriculum. 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. (go back), 10ESG Activism Becomes the Norm, ESG Activism, Insightia, 2021, available at 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. At a time when we cannot rely on government alone to further social justice goals, unusual allies become more important than ever. (go back), 18BlackRock Investment Stewardship, Proxy voting guidelines for U.S. securities, BlackRock, effective January 2021, available at https://www.blackrock.com/corporate/literature/fact-sheet/blk-responsible-investment-guidelines-us.pdf. [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. (go back), 82See Final Rule: Amendments to Rules on Shareholder Proposals, Release No. 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). All rights reserved. (go back), 6Final Rule: Modernization of Regulation S-K Items 101, 103 and 105, 17 CFR 229, 239 and 240, Release Nos. Racial Equity Audits could emerge as a critical tool for companies to evaluate their current social impact and provide an objective method for investors to monitor their investments and potentially identify new companies that could benefit from increased social and economic engagement. As Black Lives Matter uprisings continue to swell beyond the borders of the United States, the tech industry has been forced to reckon with racism within its own companies. [24] However, many advocates believe that without objective means to identify areas of improvement and monitor companies progress, these commitments may be illusory and confirmation that these companies have in fact met their commitments could be difficult. . These companies have asserted that they disagree with the approach of Racial Equity Audit proposals, but are aligned with [their] stated goal of addressing racial inequity in the financial sector. [96], For example, the board of directors of Citi recommended a vote against the Racial Equity Audit proposal included in its 2021 proxy statement, noting that [a]s recently as September 2020, Citi released a 104 page report on the economic cost of Black inequality in the United States titled Closing the Racial Inequality Gaps, and said its efforts on these issues are available to the public. 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. . (go back), 47The Best ESG Funds for Great Returns & Low Costs, Forbes, Rob Berger and Benjamin Curry, July 1, 2021, available at https://www.forbes.com/advisor/investing/best-esg-funds/. These perceptions will be aggregated and used to identify and measure discrepancies in peoples experiences on the platform that could be a result of discrimination and bias. (go back), 137Supra, Goldberg-Zelizer, note 96. 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), 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. As a result, Engine No. 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. (go back), 77Rule 14a-8 No Action Letter re: JPMorgan Chase & Co.2021 Annual Meeting, Supplemental Letter dated January 11, 2021, Relating to Shareholder Proposal Submitted by CtW Investment Group, Skadden, Arps, Slate, Meagher & Flom LLP, February 16, 2021, available at https://www.sec.gov/divisions/corpfin/cf-noaction/14a-8/2021/ctwjpmorgan032621-14a8.pdf [hereinafter JPMorgan No-Action LetterFebruary]. 2023 366 Technology. You cannot fix bias without measuring it first, said Brian Chesky, Airbnb Co-Founder and CEO. (go back), 104Amazon.com, Inc., Notice of 2021 Annual Meeting of Shareholders and Proxy Statement, Schedule 14A, filed with the SEC on April 15, 2021, available at https://www.sec.gov/Archives/edgar/data/1018724/000110465921050333/tm2035374-1_def14a.htm [hereinafter Amazon Proxy Statement]. 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. Civil rights advocates notched a victory this week by securing a commitment from e-commerce giant Amazon to conduct a racial equity audit, a step they say is crucial toward ensuring that. [i]f CEO Jeff Bezos shares (70,616,270 shares, 14%) were to be removed from those voting against it, the proposal received majority support. [122]. (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. The perceived race information generated in this project will be aggregated and only be used to analyze past interactions on the platform, exclusively to develop anti-discrimination work. New York University School of Law. 1What is ESG?, ADEC Innovations ESG Solutions, available at https://www.esg.adec-innovations.com/about-us/faqs/what-is-esg/. 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