morgan stanley racial equity audit morgan stanley racial equity audit

Legislative or regulatory requirements are not without their own risks, and compliance with any such minimum standards would not be fool proof to insulate a company from potential ESG proposals and proxy campaigns. Learn from our industry leaders about how to manage your wealth and help meet your personal financial goals. 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. (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. 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), 48Webinar, Pamela Coukos, Co-Founder of Working Ideal, supra note 23; supra note 27. Every company has a different mix of products, operations and services; therefore, according to practitioners in the area, it is important for participants in a Racial Equity Audit to identify the scope of the audit and benchmarks prior to conducting the audit. No two companies are identical. Kellogg Foundation has found that [b]y 2050, our country stands to realize an $8 trillion gain in GDP by closing the U.S. racial equity gap. [28]. [45]. (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. 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. McKensie Mack Group (MMG), a Black-led consultancy that centers around racial equity, released their Sacramento Area Council of Governments (SACOG) racial equity audit. (go back), 118Id. In light of the anticipated increase in the number of Racial Equity Audit proposals in the coming proxy seasons, we may see a corresponding rise in the number of companies that follow BlackRocks lead and voluntarily conduct their own Racial Equity Audits. We deliver active investment strategies across public and private markets and custom solutions to institutional and individual investors. 34-40018, May 28, 1998, available at https://www.govinfo.gov/content/pkg/FR-1998-05-28/html/98-14121.htm. From volatility and geopolitics to economic trends and investment outlooks, stay informed on the key developments shaping today's markets. Opinion | Wall Street Banks Reject Racial Equity Audits, While Morgan Stanley and BlackRock, facing shareholder pressure, agreed to similar audits earlier this year. [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. Importantly, the proposals encourage an internal and external review, looking at human capital management but also the products and services companies offer, along with their philanthropic and political contributions. Racial Equity: Advancing Change | Morgan Stanley The activist investor nominated a slate of four director candidates with expertise operating energy companies and utilizing clean technology. Bank Leaders Buck Shareholder Call for Third-Party Racial Equity Audit [81], Rule 14a-8(i)(7) allows exclusion of proposals related to a companys ordinary business operations. Why did nearly all of the banks urge "no" votes on the audit proposals? On July 28, 2021, ISS launched its Annual Benchmark Policy Survey, which included requests for feedback on Racial Equity Audits. Wall Street Rejects Racial Equity Audits, While 'Supporting' BLM Supporting the progression of women into senior roles is a key strategic priority for Morgan Stanleys senior leadership worldwide. JPMorgan Chase JPM, +0.38% is one of a handful of the nation's biggest banks being urged to conduct racial-equity audits to examine how their practices and policies affect nonwhite customers. CK%@q)4rK!u\r94 !5@@yb#8u(:uI&UsRmndt>&. 16, 1992)). [57] The aspects of Facebook that the audit focused on were informed by the aforementioned interviews, which led to a holistic review of the entire company and not just a single aspect such as employment practices. Recently, a former head of global diversity at Morgan Stanley, a Black woman, sued the bank for discrimination. [108] Amazon argued that, regardless of the proposal being framed in the form of a request for a report, this did not change the fact that the subject matter of the proposed report is within [Amazons] ordinary business and thus excludable under Rule 14a-8(i)(7). 1, Reuters, Svea Herbst-Bayliss, Gary McWilliams, December 7, 2020, available at https://www.reuters.com/article/exxon-shareholders-engine-no-1/exxon-faces-proxy-fight-launched-by-new-activist-firm-engine-no-1-idUSKBN28H2IO. The Citi Blog - Citi Will Conduct a Racial Equity Audit US pension giants among 37% support for pioneering 'racial equity audit Morgan Stanley is a leading global financial services firm providing a wide range of investment banking, securities, investment management and wealth management services. 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. Bank of America said last week that an audit is unnecessary given its progress on racial equality. 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. 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 . David Friedman - Vice President - Morgan Stanley | LinkedIn (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/. The goals provide a yardstick for school leaders to measure their progress and as a "lightning rod to galvanize change" (IDRA, 2006). (go back), 129BlackRock Breaks Wall Street Ranks With Planned Racial Audit (1), Bloomberg Tax, Saijel Kishan, April 5, 2021, available at https://news.bloombergtax.com/financial-accounting/blackrock-breaks-ranks-with-wall-street-in-performing-race-audit. Citigroup, Wells Fargo, Bank of America, Goldman Sachs, JP Morgan urge 94 . Multicultural and women entrepreneurs are the cutting-edge leaders of businesses that power markets. [132] However, as Racial Equity Audits become more commonplace and enter the cultural norm, these proposals may begin to resonate with more stakeholders and be approved by shareholders as early as the next proxy season. We offer timely, integrated analysis of companies, sectors, markets and economies, helping clients with their most critical decisions. [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. Equity Audits: A Powerful Tool to Transform Teaching and Learning Global institutions, leading hedge funds and industry innovators turn to Morgan Stanley for sales, trading and market-making services. . Our latest initiative combines the resources and reach of Morgan Stanley with the knowledge and experience of our distinguished nonprofit partner organizations to help deliver positive, tangible impact on the challenges of stress, anxiety, and depression in children, adolescents and young people. This is because issues relating to climate change and the environment, racial justice and diversity, human capital and governance may influence companies at large and shareholder investment flows. Proponents of Racial Equity Audits warn that such audits should be conducted in a robust manner by fully independent third parties, and that the subject companies take action to address deficiencies, shortcomings and concerns uncovered by the audits. [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. [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). Advocates Call For Racial Equity Audits To Dismantle Decades of (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. 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. An example of a project with high-impact priority elements is The Villages of East River. (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). [137] The proposed Diversity and Inclusion Data Accountability and Transparency Act would require such audits by independent third parties of the subject companies policies and practices pertaining to civil rights, equity, diversity and inclusion. [138] The initial debates on the draft legislation also considered adding to the draft bill penalties for non-compliance, including fines of up to $20,000 a day for failure to engage in such audits. Wells Fargo plans to conduct a racial equity audit, asking an outside law firm to assess the bank's workforce diversity and determine how its business practices are affecting communities of color. (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. Civil rights. Vanguard's Insights on Shareholder Proposals Concerning Diversity 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. Id. (go back), 50Webinar, Pamela Coukos, Co-Founder of Working Ideal, supra note 23; supra note 27. Most of the big banks have not been as interested in these types of transparent audits. And lastly, whether a company has sufficient mechanisms in place to monitor effectiveness. Dismissal and neglect of these concerns led to Engine No. According to certain proponents, the point of a Racial Equity Audit is not necessarily to critique a companys current platforms and efforts. At Morgan Stanley, we focus the expertise of the entire firmour advice, data, strategies and insightson creating solutions for our clients, large and small. BlackRock pledges to conduct racial-equity audit In our recent survey, we found by just how much. urge the Board of Directors to oversee a racial equity audit analyzing JPMorgan's adverse impacts on nonwhite stakeholders and communities of color. Morgan Stanley did not respond to a request for comment. [40] As illustrated in the study, companies with the highest degrees of ethnic/cultural diversity were 33% more likely to outperform their less diverse peers and companies with the most ethnically/culturally diverse boards of directors are 43% more likely to experience higher profits than their less diverse peers. . 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. [121] Comptroller DiNapoli described the vote as an immense success for a first-time proposal . It received the backing of 38.6 percent of votes cast during the company's AGM in April. 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. Kellogg Foundation, available at: https://www.wkkf.org/resource-directory/resources/2018/07/business-case-for-racial-equity (Closing the gap means lessening, and ultimately eliminating, disparities and opportunity differentials that limit the human potential and the economic contributions of people of color.); see also Economist Found $16 Trillion When She Tallied Cost of Racial Bias, Bloomberg, Saijel Kishan, October 20, 2020, available at https://www.bloomberg.com/news/articles/2020-10-20/racism-and-inequity-have-cost-the-u-s-16-trillion-wall-street-economist-says. 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. Why Racial Equity Audit Matters - LinkedIn Id. endstream endobj 335 0 obj <>stream Racial Equity Audit SOC Investment Group At Morgan Stanley, we put our beliefs to work. 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. Assumed . While the majority of investors perceive the funding landscape as balanced, their actual investments in multicultural and women-owned businesses are highly skewed. Source: SEC Filings. [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. We value our commitment to diverse perspectives and a culture of inclusion across the firm. Our culture of access and inclusion has built our legacy and shapes our future, helping to strengthen our business and bring value to clients. . From our origins as a small Wall Street partnership to becoming a global firm of more than 60,000 employees today, Morgan Stanley has been committed to clients and communities for 85 years. LinkedIn Andrew Santini : I am very proud to announce that I have The big Wall Street banks have all talked a good line about supporting the Black Lives Matter movement. We help people, businesses and institutions build, preserve and manage wealth so they can pursue their financial goals. 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/. As the ESG movement gains momentum, and as the new wave of investors who factor ESG concerns into their investment decisions gain a larger share of the market, companies are being advised to revisit their current policies and practices under the ESG lens. Recently, Morgan Stanley and CtW Investment Group reached an agreement for the bank to conduct an internal diversity review . (go back), 81See Citigroup No-Action Letter, supra note 78. What Counts as Race Discrimination? A Suit Against JPMorgan Is a Test Companies advised to be alert to racial equity audit proposals However, not all companies have been as eager and willing to comply with these requests. (go back), 4ESG investing: Discover funds that reflect what matters most to you, The Vanguard Group, Inc., available at https://investor.vanguard.com/investing/esg/. 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. Corp. Code 301.3, 301.4. As a firm, we can do more, and here are five steps were taking right now. Ron S. Berenblat and Elizabeth R. Gonzalez-Sussman are partners at Olshan Frome Wolosky LLP. 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. CtW dropped the Morgan Stanley proposal after the bank agreed to conduct a racial equity audit. JPMorgan analysts are projecting a pre-tax loss of $2.4 billion in 2023, $1.7 billion in 2024 and about $800 million in 2025."We still do not bake in pre-tax profitability in our model, which . A racial equity audit is the first step to safeguard against further harm and it's also the smart thing to do. We have global expertise in market analysis and in advisory and capital-raising services for corporations, institutions and governments. At Morgan Stanley, youll find trusted colleagues, committed mentors and a culture that values diverse perspectives, individual intellect and cross-collaboration. At Morgan Stanley, giving back is a core valuea central part of our culture globally. Wall Street Banks Reject Racial Equity Audits, While Professing BLM Support JPMorgan Chase CEO Jamie Dimon is urging shareholders to vote against a proposed review of the impact of bank policies and practices on racial inequality. Citi to conduct racial equity audit | Corporate Secretary In 2020, partners at the Interfaith Center on Corporate Responsibility(ICCR) filed 12 resolutions calling for racial equity audits. Published Dec. 21, 2022 Gabrielle Saulsbery Reporter BlackRock plans racial audit, in break with Wall Street peers Read More. Morgan Stanley team with $715 million joins . David Ake) It followed his 2021 executive order . [129] As a result, the shareholder proposal was withdrawn and SEIU announced that it was currently working with BlackRock to bring about needed change within the company and the financial services industry. [130] Commentators anticipate that BlackRocks commitment to a Racial Equity Audit could sway other financial services companies to follow in its footsteps. [131]. [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. This 202-unit, scattered-site property comprising 16 buildings is located in the predominantly Black neighborhoods of Wards 7 and 8 of . [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. 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]. [30], The impact a Racial Equity Audit may have on a company may be felt in many ways. (go back), 126BlackRock Audit Proposal, available at https://static1.squarespace.com/static/5d374de8aae9940001c8ed59/t/60216432f41c694416fcceb5/1612801075053/BlackRock+2021+racial+equity+audit+proposal+final+%281%29.pdf. Morgan Stanley Launches the Institute for Inclusion Bank of America said last week that an audit is unnecessary given its progress on racial equality. (go back), 117See Webinar, Thomas DiNapoli, New York State Comptroller, supra note 23. Exxon has faced pressure from shareholders to shift practices to reduce greenhouse gas emissions. Yesterday, the audit proposal also went to the vote at Wells Fargo, the result has not yet been disclosed. The move comes in a year when several US financial institutions have faced requests for racial equity audits amid growing investor scrutiny of diversity, equity and inclusion (DE&I) issues at US companies. (go back), 93See J&J No-Action Letter, supra note 78. Morgan Stanley's HBCU Scholars program provides scholarships for students at three Historically Black Colleges and Universities. CtW Morgan Stanley Racial Equity Audit Proposal SOC Investment Group A Racial Equity Audit is, at its core, an independent, objective and holistic analysis of a companys policies, practices, products, services and efforts to combat systemic racism in order to end discrimination within or exhibited by the company with respect to its customers, suppliers or other stakeholders. Source: SEC Filings. Analysis: Goldman Sachs faces hard sell for its consumer assets The investigation will be conducted by attorneys at Covington & Burling, according to an external blog post on Citi's website. (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. 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. 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. [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. Our firm's commitment to sustainability informs our operations, governance, risk management, diversity efforts, philanthropy and research. . 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. (go back), 65All things (not) being equal, IR Magazine, Ben Maiden, Summer 2021, available at https://content.irmagazine.com/story/ir-magazine-summer-2021.pdf. Beyond fund managers typical fiduciary duties to minimize risk and achieve positive returns, these fiduciaries are explicitly mandated with making investments into companies that aim to have a sustainable and societal impact in the world [46] based on ESG criteria or that meet stringent environmental, social and governance standards. [47] As the usefulness of Racial Equity Audits as a tool for ESG-conscious shareholders to measure a companys adherence to ESG prerogatives becomes more mainstream, it would be no surprise to see support for these audits grow. By offering such guidance, companies may find it easier to voluntarily implement Racial Equity Audit policies. (go back), 28The Business Case for Racial Equity, a Strategy for Growth, Ani Turner, W.K. In November, SEIU's Capital Stewardship Program and. Morgan Stanley CEO moved by protests to promote two black staffers Proxy advisors split over racial equity requests at banking giants We have the experience and agility to partner with clients from individual investors to global CEOs. (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/. Wells Fargo plans to conduct a racial equity audit, asking an outside law firm to assess the bank's workforce diversity and determine how its business practices are affecting communities of color. [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. . https://www.sec.gov/news/public-statement/lee-climate-change-disclosures, https://www.sec.gov/news/public-statement/coates-esg-disclosure-keeping-pace-031121, 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, https://www.trilincglobal.com/what-is-esg/, https://www.businessinsider.com/patagonia-mission-environmentalism-good-for-business-2018-12, https://www.blackrock.com/corporate/literature/fact-sheet/blk-responsible-investment-guidelines-us.pdf, https://www.issgovernance.com/file/policy/active/americas/US-Voting-Guidelines.pdf, https://www.reuters.com/article/exxon-shareholders-engine-no-1/exxon-faces-proxy-fight-launched-by-new-activist-firm-engine-no-1-idUSKBN28H2IO, https://www.socinvestmentgroup.com/critical-tool-for-shareholders, https://www.bloomberg.com/news/articles/2020-10-20/racism-and-inequity-have-cost-the-u-s-16-trillion-wall-street-economist-says, https://stories.starbucks.com/uploads/2020/02/Starbucks-Civil-Rights-Assessment-2020-Update.pdf, https://www.forbes.com/sites/korihale/2021/01/20/starbucks-steps-up-its-racial-justice-outreach-with-100-million-pledge/?sh=53b94b63389c, https://www.npr.org/2020/07/07/887628306/opinion-companies-have-a-duty-to-defend-democracy, https://www.mckinsey.com/~/media/mckinsey/business%20functions/organization/our%20insights/delivering%20through%20diversity/delivering-through-diversity_full-report.ashx, https://www.nerdwallet.com/article/investing/best-esg-funds, https://about.fb.com/wp-content/uploads/2020/07/Civil-Rights-Audit-Final-Report.pdf, https://www.forbes.com/sites/bhaktimirchandani/2021/06/28/what-you-need-to-know-about-the-2021-proxy-season/?sh=2e475fae7f5e, https://content.irmagazine.com/story/ir-magazine-summer-2021.pdf, https://about.bankofamerica.com/annualmeeting/static/media/BAC_2021_ProxyStatement_ADA.612694a6.pdf, https://www.sec.gov/Archives/edgar/data/831001/000120677421000735/citi3828191-def14a.htm, https://exchange.iccr.org/node/88686/text, https://www.sec.gov/Archives/edgar/data/0000019617/000001961721000275/a2021proxystatement.htm, https://www.sec.gov/news/speech/lee-climate-esg-board-of-directors, https://www.asyousow.org/our-work/social-justice/racial-justice, https://news.yahoo.com/big-us-companies-pushed-tally-014418300.html, https://news.bloomberglaw.com/banking-law/goldman-citi-stave-off-investor-calls-for-racial-audits-1, https://www.govinfo.gov/content/pkg/FR-1998-05-28/html/98-14121.htm, https://www.sec.gov/divisions/corpfin/cf-noaction/14a-8/2021/ctwcitigroup022621-14a8.pdf.