morgan stanley racial equity audit

[127], According to SEIU, BlackRock decided that the SEIU proposal is too important to wait until they are voted on at their shareholder meetings [128] and announced its plans to voluntarily conduct an independent racial audit of its operations. 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. As . (go back), 137Supra, Goldberg-Zelizer, note 96. (go back), 5ESG Matters (Part II), ISS EVA, Dr. G. Kevin Spellman and David O. Nicholas, May 18, 2021, available at https://www.issgovernance.com/library/esg-matters-part-ii/. Morgan Stanley Wealth Management has launched a Racial Equity Investing Tool Kit as part of its Investing with Impact Platform to help investors who want to advance the goals of racial. [134] ISS will use the results from its Annual Benchmark Policy Survey as a key component of ISS annual policy development process to assess potential policy changes across regions and markets for 2022 and beyond. [135] While ISS has largely appeared hesitant to support Racial Equity Audits in the circumstances presented in the 2021 proxy season, the results from its Annual Benchmark Policy Survey could change its future guidance and recommendations on such audits. 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. https://www.vox.com/recode/2021/2/26/22297554/amazon-race-black-diversity-inclusion, https://www.washingtonpost.com/technology/2021/03/01/amazon-race-discrimination-lawsuit/, https://www.washingtonpost.com/technology/2021/05/19/amazon-suit-race-gender-discrimination/, https://amazonemployees4climatejustice.medium.com/environmental-justice-and-amazons-carbon-footprint-9e10fab21138, https://www.nbcnews.com/tech/tech-news/amazon-shareholders-demand-end-pollution-hitting-people-color-hardest-n1268413, https://sustainability.aboutamazon.com/people/human-rights?workerCount=true&engagementProgram=true&productCategory=true, https://www.marketwatch.com/story/amazon-investors-reject-new-york-retirement-funds-call-for-a-racial-equity-audit-10-other-shareholder-proposals-11622242863, https://www.osc.state.ny.us/press/releases/2021/05/nys-comptroller-dinapoli-statement-major-support-racial-equity-audit-amazon, https://www.socinvestmentgroup.com/racial-equity-audit, https://static1.squarespace.com/static/5d374de8aae9940001c8ed59/t/60216432f41c694416fcceb5/1612801075053/BlackRock+2021+racial+equity+audit+proposal+final+%281%29.pdf, https://www.seiu.org/blog/2021/4/seiu-and-change-to-wins-investment-funds-pushing-for-racial-diversity-in-financial-institutions, https://news.bloombergtax.com/financial-accounting/blackrock-breaks-ranks-with-wall-street-in-performing-race-audit, https://fortune.com/2021/04/06/blackrock-racial-audit-corporate-diversity-inclusion-race-at-work/, https://insights.issgovernance.com/posts/iss-opens-global-annual-benchmark-policy-survey-and-separate-climate-survey/, https://www.congress.gov/bill/117th-congress/house-bill/2123/committees?r=61&s=1, https://www.olshanlaw.com/resources-alerts-Nasdaq-SEC-boardroom-diversity-rule.html. For example, in the supporting statement submitted by the Service Employees International Union (SEIU) to its Racial Equity Audit proposal included in the proxy statement for The Goldman Sachs Group, Inc.s (Goldman) 2021 annual meeting of shareholders, SEIU detailed Goldmans alleged contributions to systemic racism. Global institutions, leading hedge funds and industry innovators turn to Morgan Stanley for sales, trading and market-making services. [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 lender pledged in 2020 to spend $1 billion over four years to combat racial and economic inequality. (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. Racial equity audit votes At least 19 proposals calling for a racial equity audit at S&P 500 companies garnered an average of 44% support among shareholders last year, an increase from. Discover who we are and the right opportunity for you. [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. Learn from our industry leaders about how to manage your wealth and help meet your personal financial goals. [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. The Firm's employees serve cl . Across all our businesses, we offer keen insight on today's most critical issues. hj0_NtJ)=;nhuB)ex(X V *pwztOxqzYr22#LPL>/k~i6jEi|MR - March 24, 2022. (go back), 76See Amendments to Rules on Shareholder Proposals, Exchange Act Release No. Shareholders at JPMorgan Chase and State Street hold their meetings this week. The lender pledged in 2020 to spend $1 billion over four years to combat racial and economic. We saw this occur in California with Senate Bill 826 and Assembly Bill 979 discussed in further detail above. See how you can make meaningful contributions as a student or recent graduate at Morgan Stanley. David Ake) It followed his 2021 executive order . (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. If this occurs, legislators and/or regulatory authorities may at some point in the future step in to close the gap between investor demand and practical implementation. We grieve with our colleagues, friends and families, and believe that we have the power to create long-lasting social, educational and economic change. (go back), 98Wells Fargo & Company, Notice of Annual Meeting and Proxy Statement, Schedule 14A, filed with the SEC on March 16, 2021, available at https://www.sec.gov/Archives/edgar/data/72971/000119312521082907/d71313ddef14a.htm [hereinafter Wells Fargo Proxy Statement]. A racial equity audit is an evaluationusually conducted by an external law firmof an employer's policies, procedures and practices to identify and address systemic bias and discrimination. 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. Firstenvironmental criteria, which considers a companys actions as a steward of the environment, such as what steps a company is taking to address the depletion of the planets resources, pollution and greenhouse gas emissions, or the effects of climate change. (go back), 20Proxy Voting Guidelines Benchmark Policy Recommendations, ISS, effective for meetings on or after February 1, 2021, available at https://www.issgovernance.com/file/policy/active/americas/US-Voting-Guidelines.pdf. [55], Some companies have independently engaged in Racial Equity Audits or similar internal reviews, usually in response to external pressures. 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. [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. . 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. Last week, the duo achieved a significant win at BlackRock and Morgan Stanley when both agreed to undertake diversity reviews, prompting a withdrawal of the proposals. Companies Negotiated with Shareholders to Withdraw the Racial Equity Audit Proposal.BlackRock, the world's 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. Second, whether any changes to existing programs or new measures or initiatives, would help a company become more equitable and inclusive. Published Mon, Apr 18 2022 4:50 PM EDT Updated Mon, Apr 18 2022 6:22 PM EDT. 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. The Black Leaders Forum brought together senior leaders from Wealth Management for targeted conversations, development and actions to achieve success. Gorman has also tapped Reid to build Morgan Stanley's new Institute of Inclusion group to promote diversity within Morgan Stanley, which he will chair. Will Corporations Deliver Value to All Stakeholders? 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. Shareholder activist Engine No. 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. Equity audits guide schools in conducting a critical review of their data to inform ways of addressing systemic inequities. Morgan Stanley's HBCU Scholars program provides scholarships for students at three Historically Black Colleges and Universities. (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. (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]. (go back), 69Citigroup Inc., 2021 Notice of Annual Meeting and Proxy Statement, Schedule 14A, filed with the SEC on March 17, 2021, available at https://www.sec.gov/Archives/edgar/data/831001/000120677421000735/citi3828191-def14a.htm [hereinafter Citigroup Proxy Statement]; see also CoreCivic Inc. Proposal, Service Employees International Union (SEIU), available at https://exchange.iccr.org/node/88686/text. (go back), 48Webinar, Pamela Coukos, Co-Founder of Working Ideal, supra note 23; supra note 27. [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. h247T0Pw/+Q0,H/-K-0 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. [65] Certain of these racial justice proposals submitted by shareholders included proposals calling for Racial Equity Audits. Facebook, Inc. (Facebook) also conducted its own version of a Racial Equity Audit in 2018. A 38 percent "yes" vote at Citi was particularly encouraging, given the fact that institutional investors typically follow the corporate board's recommendation. Investing in underserved communities through our products, services, spending, business practices and thought leadership, Supporting underserved communities through philanthropy that drives more equitable outcomes, Attracting, developing and retaining individuals with diverse backgrounds and driving a culture of inclusion. 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). We have the experience and agility to partner with clients from individual investors to global CEOs. (go back), 86See J&J No-Action Letter, supra note 78. ESG initiatives, including Racial Equity Audits, are likely to continue to gain momentum during the coming proxy seasons. Just like its environmental and corporate governance counterparts, addressing social concerns can be equally important to companies and investors alike as this can translate into, among other things, value additive results. Increased focusfrom companies, regulators, investors, and employeeson racial and ethnic discrimination has heightened scrutiny of public companies' DEI-related risks and opportunities, as have the COVID-19 pandemic and . [34]. To that end, they believe companies should clearly disclose and explain the processes and personnel roles within a Racial Equity Audit and undertake to publicly share the results of the audit. (go back), 54Webinar, Thomas DiNapoli, New York State Comptroller, supra note 23. Morgan Stanley and its former chief diversity officer, Marilyn Booker, reached a deal Friday to end the lawsuit Booker brought last year against the bank and two of its executives, alleging "race and gender discrimination, retaliation and unequal pay." 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. 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/. But that was never going to be enough for racial justice advocates. (go back), 83See Rule 14a-8 No-Action Letter re: Amazon.com, Inc. (go back), 21Cal. (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. 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. [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. [123], While the financial institutions that have received Racial Equity Audit proposals have recently made philanthropic and strategic investments, along with other commitments to racial equity, CtW has stated that the only way to effectively address racial injustice and economic inequality is careful study of how the industrys products and services have contributed to this imbalance, [124] which includes analyzing mortgage issuances, the number of bank branches in minority neighborhoods or banking deserts and whether charitable contributions are fully aligned with . (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/. [60], A number of other high-profile companies and financial institutions have been approached either by shareholders or civil rights advocates about conducting Racial Equity Audits. 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. We help people, businesses and institutions build, preserve and manage wealth so they can pursue their financial goals. In 2020, partners at the Interfaith Center on Corporate Responsibility(ICCR) filed 12 resolutions calling for racial equity audits. Everything we do at Morgan Stanley is guided by our five core values: Do the right thing, put clients first, lead with exceptional ideas, commit to diversity and inclusion, and give back. 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. Why did nearly all of the banks urge "no" votes on the audit proposals? For example, such guidelines may provide for a minimum frequency of Racial Equity Audits and indicate parameters on what attributes an audit must possess to be considered sufficient. Whether it be modern day redlining techniques related to mortgage loans, to excessive checking account fees, to most recently, Payday [sic] Protection Program distribution, communities of color have faced decades of discrimination as a result of the financial industrys policies and practices. As ESG issues garner more media attention and as younger generations move into the investing space, these issues and related disclosures may become increasingly important to consumers, investors and other stakeholders. The $10 million Fund for Racial Equity builds upon more than $200 million Goldman Sachs has granted over the last decade to organizations serving . Amazon to conduct racial-equity audit led by former Attorney General Loretta Lynch. (go back), 7Statement on the Review of Climate-Related Disclosure, U.S. Securities and Exchange Commission, Acting Chair Allison H. Lee, February 24, 2021, available at https://www.sec.gov/news/public-statement/lee-statement-review-climate-related-disclosure. Amundi Asset Management, Northern Trust Investments, and PIMCO were leaders in supporting racial equity audit proposals, voting in favor of 100 percent of proposals.Morgan Stanley, UBS, Legal & General . [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. Multicultural and women entrepreneurs are the cutting-edge leaders of businesses that power markets. (go back), 31Webinar, Susan Baker, Director of Shareholder Advocacy, Trillium Asset Management, supra note 23; supra note 27. 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. See how you can continue your career journey at Morgan Stanley. Companies Sought No-Action Relief. Morgan Stanley initially urged its shareholders to reject the audit . Racial Equity Audits are the practice of independently reviewing an organisation's policies and ascertaining how well they encourage and promote inclusion, diversity, and racial equality. (go back), 119See Webinar, Thomas DiNapoli, New York State Comptroller, supra note 23. Our insightful research, advisory and investing capabilities give us unique and broad perspective on sustainability topics. The most recent and prominent example of the intersection between shareholder activism and ESG was the 2021 proxy contest at Exxon. [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. [41] A study by a Citigroup, Inc. (Citi) global economist found that addressing racial disparities can have even broader macro benefits. FlZ240l7_Dl4\'q3c`HBB0d)b@b7TpCR6>[Jn'EP*w"n<7R`/E/=O$H+tgu1wJwD$dAmX,E"AE W?,#( New York, NY. CtW and US labour union SEIU filed racial equity audit proposals at eight US financial giants this year. 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. Amongst the various ESG developments gaining traction in the markets is the recent push by shareholders for companies to conduct Racial Equity Audits, which generally consist of an objective investigation into a companys practices, policies and histories to determine such companys impact on social issues and areas for improvement. [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. [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. Investors want Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, Goldman Sachs, Morgan Stanley, J&J and Amazon to conduct racial equity audits to ensure they can fulfill promises. (go back), 30Webinar, Cyrus Mehri, Founding Partner of Mehri & Skalet, PLLC, supra note 23. https://www.sec.gov/news/public-statement/lee-statement-review-climate-related-disclosure. Exxon has faced pressure from shareholders to shift practices to reduce greenhouse gas emissions. (go back), 8Public Input Welcomed on Climate Change Disclosures, U.S. Securities and Exchange Commission, Acting Chair Allison H. Lee, March 15, 2021, available at https://www.sec.gov/news/public-statement/lee-climate-change-disclosures. Morgan Stanley is also donating $5 million . [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.