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. (go back), 48Webinar, Pamela Coukos, Co-Founder of Working Ideal, supra note 23; supra note 27. (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. The most recent and prominent example of the intersection between shareholder activism and ESG was the 2021 proxy contest at Exxon. [18] Concurrently with shareholder activists nominating an increasing number of diverse director candidates, the voting policies of many institutional investors, such as BlackRock, Inc. (BlackRock), have been updated to reflect a desire to enhance boardroom diversity, [19] as have the voting guidelines of many prominent proxy advisory firms, such as ISS. Then at the end of 2018, Airbnb sought to further mitigate bias by developing a policy that hides Airbnb guest profile photos until after the booking is accepted. 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. (go back), 123Racial Equity Audit, SOC Investment Group, 2021, available at https://www.socinvestmentgroup.com/racial-equity-audit. According to public policy analysts, racial violence and the COVID-19 pandemic sparked an increase in Rule 14a-8 shareholder proposals focused on racial justice. Racial equity audits of corporations originated within the racial justice movement recently. (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. 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. [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. (go back), 91See SEC, Division of Corporate Finance Staff Legal Bulletin No. (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. 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. (go back), 97Citigroup Proxy Statement, supra note 69. [49], Practitioners also stress the importance of auditors using the right methodology, including both quantitative and qualitative methods, and for such auditors to review not only information provided by the company but to gather its own information. 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 audit was led by Laura W. Murphy, a civil rights advocate, with help from a civil rights law firm. [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. 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. As discussed earlier, Starbucks undertook a Racial Equity Audit in 2018. Shareholders hope an Alphabet audit would cover a range of topics including: The reservation process, through search, request, acceptance and cancellation; Contact with Airbnb customer support and other lines of support. (go back), 28The Business Case for Racial Equity, a Strategy for Growth, Ani Turner, W.K. [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. Civil rights advocates and proponents of social justice have long touted the moral and ethical considerations of closing the racial divide in America. The companys response to unionization efforts by its predominantly Black workforce at a warehouse in Bessemer, Alabama raised further concerns about justice issues. The following proposals will be put to shareholders at its May 19, 2022 annual meeting: The following proposals will be put to shareholders at its June 1, 2022 annual meeting: Alphabet, the parent company of Google and YouTube, faces nine shareholder proposals this year on issues relating to diversity, racism, lobbying activity, and platform use problems facing the company. Companies that sought to exclude Racial Equity Audit proposals from their 2021 proxy statements by requesting no-action relief from the SEC argued that the exclusions set forth in sections (i)(3), (i)(7) or (i)(10) of Rule 14a-8 applied. Most recently in 2020, Airbnb launched Project Lighthouse, an initiative to uncover, measure, and overcome discrimination during the Airbnb booking process. The SEC considered the arguments described above to exclude the shareholder proposals on Racial Equity Audits, and, in each case, the SEC did not concur with the company that the shareholder proposal should be excluded. We anticipate greater interest in Racial Equity Audits and similar initiatives in the upcoming proxy season and accordingly believe companies will be pushed to critically and objectively examine their current internal practices and policies relating to equity and inclusion to identify areas in need of improvement. By staying in the project, users will be helping to create a new benchmark to uncover, measure, and fight discrimination on Airbnb. She described the products and policies Airbnb has pioneered to reduce racism on its platform. [52] Practitioners also stress the importance of identifying and engaging the process owners (e.g., the Chief Executive Officer, Chief Legal Officer or Chief Diversity, Equity and Inclusion Officer) as the persons who will actually drive the implementation of recommended initiatives. 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. (go back), 43Webinar, Vivian Gray, SEIU Pension Fund Trustee, supra note 23. News, John Biers, May 22, 2011, available at https://news.yahoo.com/big-us-companies-pushed-tally-014418300.html. These audits are conducted to analyze the effectiveness of diversity, equity and inclusion programs, the impacts of technology and products on racial minorities in communities and companies and the treatment of customers, and other civil rights and racial equity issues. On a more ongoing basis, Brands Inclusion and Diversity team facilitates discussions with the companys nine business resource groups, which represent various communities within Twitter. [22]. (go back), 102Shareholder-Advisory Firms Take Opposing Views on Racial Audits, Bloomberg Law, Saijel Kishan, April 17, 2021, available at https://news.bloomberglaw.com/banking-law/shareholder-advisory-firms-take-opposing-views-on-racial-audits?context=article-related (quoting Glass Lewis). (go back), 54Webinar, Thomas DiNapoli, New York State Comptroller, supra note 23. After a notice period, the data analysis will begin. It will not happen overnight. 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/. [76] To demonstrate that they had substantially implemented the audit proposals, companies argued they had (i) made pledges and commitments towards racial justice initiatives and made such information publicly available; [77] (ii) issued ESG and/or diversity focused reports; [78] (iii) issued press releases and public disclosures addressing racial inequality; [79] (iv) implemented initiatives to advance racial equity; [80] or (v) financially committed to racial justice initiatives and causes. In 2018, Travelers paid out $450,000 to the National Fair Housing Alliance in a settlement of a lawsuit that claimed Travelers had denied insurance to landlords who rented to voucher recipients. 1 launched a proxy campaign in December 2020 to effect change on Exxons board of directors. In addition to Starbucks, Airbnb and Facebook have completed audits. (go back), 85See Amazon No-Action Letter, supra note 83. The chart below lists the proponents who submitted Racial Equity Audit proposals to public companies pursuant to Rule 14a-8 during the 2021 proxy season and the number of proposals they submitted: Source: ISS Corporate Solutions and SEC Filings, Boards of directors of public companies are [i]ncreasingly . Exxon has faced pressure from shareholders to shift practices to reduce greenhouse gas emissions. Google has blocked companies from using racial justice, Alphabets business practices are enabling racism and discrimination, posing legal, financial, and reputational risk., Shareholder proposal requesting additional reporting on lobbying, Item 9, Shareholder proposal requesting additional reporting on gender/racial pay, Item 11, Shareholder proposal requesting a report on customer due diligence, Item 5, Shareholder proposal requesting a report on customer use of certain technologies, Item 13, A Racial and Gender Board Diversity Report, Item 7, A report on Respecting Indigenous Peoples Rights, Item 8, Shareholder proposal relating to a racial equity audit, Item 7, Shareholder proposal relating to insuring law enforcement, Item 8, Shareholder proposal relating to lobbying, Item 4, Shareholder proposal regarding political contributions congruency analysis, Item 7, Shareholder proposal regarding gender and racial equity on the board of directors, Item 8, Shareholder proposal regarding racial equity audit, Item 10, Stockholder proposal regarding a lobbying report, Item 5, Stockholder proposal regarding a racial equity audit, Item 9, Stockholder proposal regarding a report on concealment clauses, Item 10, Stockholder proposal regarding a human rights assessment of data center siting, Item 13, Stockholder proposal regarding a report on data collection, privacy, and security, Item 14, Stockholder proposal regarding algorithm disclosures, Item 15, Stockholder proposal regarding misinformation and disinformation, Item 16, Stockholder proposal regarding a report on external costs of disinformation, Item 17, Stockholder proposal regarding a report on board diversity, Item 18, Stockholder proposal regarding the establishment of an Environmental Sustainability Board Committee, Item 19. 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