morgan stanley racial equity audit

I am very proud to announce that I have been named in Morgan Stanley's prestigious 2023 Pacesetter's Club, a group of the Firm's successful Financial Advisors. [38] Racial Equity Audits can be designed to help identify if and where these issues exist within a company so that management can address them most effectively. (go back), 21Cal. (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. 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. Facebook, Inc. (Facebook) also conducted its own version of a Racial Equity Audit in 2018. BlackRocks response to the Racial Equity Audit proposal that SEIU submitted for inclusion in its proxy statement was an outlier among the other financial and asset management firms that faced similar proposals. A report on the audit, prepared at reasonable cost and omitting confidential or proprietary information, should be publicly disclosed on BofAs website. 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. 30-10825; 34-89670; File No. Indeed, the House Financial Services Subcommittee on Diversity and Inclusion is currently reviewing legislation that would require banks to conduct Racial Equity Audits every two years in an effort to promote diversity and equity. [26] For example, following a racially-tinged incident at a Philadelphia Starbucks in 2018 where two African-American men who were waiting for a business meeting to begin were arrested, the company performed a Racial Equity Audit, which found that, among other things, racial sensitivity and the elimination of implicit biases are correlated to Starbucks core business plan of creating an inclusive and equitable working environment, as well as a welcoming third place between home and work for customers. [27] In addition, the W.K. Our firm's commitment to sustainability informs our operations, governance, risk management, diversity efforts, philanthropy and research. Exxon has faced pressure from shareholders to shift practices to reduce greenhouse gas emissions. Source: SEC Filings. [65] Certain of these racial justice proposals submitted by shareholders included proposals calling for Racial Equity Audits. We offer scalable investment products, foster innovative solutions and provide actionable insights across sustainability issues. (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. IS s+i-T"sl7fMIa0d4` #? We all want to do something to try to change the course we find ourselves on. NEW YORK-- ( BUSINESS WIRE )--Citi and the Citi Foundation announced today the Action for Racial Equity initiative has already invested $1 billion in strategic initiatives to help close the. Intentional investing approaches can allow you to have an impact on racial equity, while pursuing your financial goals. (go back), 100Goldman Sachs Proxy Statement, supra note 35. (go back), 40Delivering through Diversity, McKinsey, Vivian Hunt, Sara Prince, Sundiatu Dixon-Fyle and Lareina Yee, January 2018, available at https://www.mckinsey.com/~/media/mckinsey/business%20functions/organization/our%20insights/delivering%20through%20diversity/delivering-through-diversity_full-report.ashx. [17], Improved ESG criteria is not a new area for activist investors. Id. 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. endstream endobj 336 0 obj <>stream Civil rights. (go back), 74Big US companies pushed to tally progress on racial justice, Yahoo! (go back), 31Webinar, Susan Baker, Director of Shareholder Advocacy, Trillium Asset Management, supra note 23; supra note 27. We offer timely, integrated analysis of companies, sectors, markets and economies, helping clients with their most critical decisions. 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]. The Black Leaders Forum brought together senior leaders from Wealth Management for targeted conversations, development and actions to achieve success. Morgan Stanley is a leading global financial services firm providing a wide range of investment banking, securities, investment management and wealth management services. Morgan Stanley did not respond to a request for comment. 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. Stay abreast of the latest trends and developments. 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), 34Starbucks Steps Up Its Racial Justice Outreach With $100 Million Pledge, Forbes, Kori Hale, January 20, 2021, available at https://www.forbes.com/sites/korihale/2021/01/20/starbucks-steps-up-its-racial-justice-outreach-with-100-million-pledge/?sh=53b94b63389c. (go back), 125Rule 14a-8 No Action Letter, CtW Investment Group, November 12, 2020, available at https://www.sec.gov/divisions/corpfin/cf-noaction/14a-8/2021/ctwjpmorgan032621-14a8.pdf. [16] Enhanced performance in these areas can lead to less scrutiny from environmental regulators, increased customer loyalty, more productive employees, reduced employee turnover, more lucrative business partnerships and increased profitability. The two leading proxy advisory firms, ISS and Glass Lewis & Co. LLC (Glass Lewis), have generally taken opposing views on Racial Equity Audits. [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. 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 . (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. [112], In a webinar hosted by CtW, Comptroller DiNapoli explained the importance of racial equity at Amazon and why shareholders should vote in favor of the proposal, and argued that racial inequity is harming the United States economy. [113] DiNapoli argued that the pattern and magnitude of issues repeatedly facing the company demonstrate a need for a more in-depth review . [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. 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. [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. The activist investor nominated a slate of four director candidates with expertise operating energy companies and utilizing clean technology. At Morgan Stanley, we lead with exceptional ideas. [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. S7-25-97, available at https://www.sec.gov/rules/final/34-40018.htm (citing Reebok Intl Ltd. (Mar. [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. (go back), 81See Citigroup No-Action Letter, supra note 78. [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. FlZ240l7_Dl4\'q3c`HBB0d)b@b7TpCR6>[Jn'EP*w"n<7R`/E/=O$H+tgu1wJwD$dAmX,E"AE W?,#( An example of a project with high-impact priority elements is The Villages of East River. On July 28, 2021, ISS launched its Annual Benchmark Policy Survey, which included requests for feedback on Racial Equity Audits. As a firm, we can do more, and here are five steps were taking right now. 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. Assumed . urge the Board of Directors to oversee a racial equity audit analyzing JPMorgan's adverse impacts on nonwhite stakeholders and communities of color. [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 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. Prior, he . h247T0Pw/+Q0,H/-K-0 [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]. 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), 28The Business Case for Racial Equity, a Strategy for Growth, Ani Turner, W.K. CtW dropped the Morgan Stanley proposal after the bank agreed to conduct a racial equity audit. Input from civil rights organizations, employees, and customers should be considered in determining the specific matters to be analyzed. A new Morgan Stanley program spearheaded by employees in its Fixed Income Division aims to create a more diverse and inclusive workplace for experienced hires. The lender pledged in 2020 to spend $1 billion over four years to combat racial and economic. (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). A racial equity audit is the first step to safeguard against further harm and it's also the smart thing to do. In a recent letter to employees, Blackrock announced that they would conduct an. . A 38 percent "yes" vote at Citi was particularly encouraging, given the fact that institutional investors typically follow the corporate board's recommendation. 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. https://www.sec.gov/rules/final/34-40018.htm (citing Reebok Intl Ltd. (Mar. 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. In 2020, we created the Goldman Sachs Fund for Racial Equity to support the vital work of leading organizations addressing racial injustice, structural inequity and economic disparity. [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. Services Employees International Union (SEIU), Unable to concur that Rule 14a-8(i)(7) provides a basis to exclude, Unable to concur that Rule 14a-8(i)(10) provides a basis to exclude, Unable to concur with exclusion on any of the bases asserted, Materially False and Misleading Exception (Vague or Indefinite). [22]. Global institutions, leading hedge funds and industry innovators turn to Morgan Stanley for sales, trading and market-making services. (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. CtW dropped the Morgan Stanley proposal after the bank agreed to conduct a racial equity audit. 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), 108Amazon No-Action Letter, supra note 83. Other external forces that may prompt public companies to adopt Racial Equity Audit policies are the SEC and the securities exchanges. [34]. No two companies are identical. May 2010 - Jul 20122 years 3 months. Equity audits guide schools in conducting a critical review of their data to inform ways of addressing systemic inequities. Across all our businesses, we offer keen insight on today's most critical issues. Most companies who may have been unsuccessful in seeking no-action relief from the SEC to exclude the proposal or in negotiating a resolution with a shareholder to withdraw the proposal have recommended that shareholders vote against the proposals. (AP Photo/J. (go back), 50Webinar, Pamela Coukos, Co-Founder of Working Ideal, supra note 23; supra note 27. [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. (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), 83See Rule 14a-8 No-Action Letter re: Amazon.com, Inc. We rely on our technologists around the world to create leading-edge, secure platforms for all our businesses. 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. 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. Morgan Stanley has committed to an internal review of its workforce and leadership, according to CtW, which also said the bank has agreed to talk about what it will do to ensure equity for. We have shown our commitment to these principles when we set and disclosed our representation goals and shared the results of our pay equity analysis. However, not all companies have been as eager and willing to comply with these requests. Equity audits are a leadership tool used to collect the data that informs the process of removing programmatic barriers that impede full participation, access, and opportunity for all students to receive an equitable and excellent education. Patagonias environmental mission hasnt just been good for the planet its also boosted the bottom line, Business Insider, Richard Feloni, December 21, 2018, available at https://www.businessinsider.com/patagonia-mission-environmentalism-good-for-business-2018-12. 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. The correlation between gender-balanced teams and improved decision-making, innovation and performance aligns with our core value Commit to Diversity and Inclusion. As . [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. Bank of America said last week that an audit is unnecessary given its progress on racial equality. Exxon faces proxy fight launched by new activist firm Engine No. 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. [121] Comptroller DiNapoli described the vote as an immense success for a first-time proposal . (go back), 97Citigroup Proxy Statement, supra note 69. [66], Similar Racial Equity Audit proposals were submitted by shareholders at several public companies during the 2021 proxy season with substantially the same resolution clause copied above, but with different issues highlighted. The investigation will be conducted by attorneys at Covington & Burling, according to an external blog post on Citi's website. 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. 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), 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. 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. Currently, neither the SEC nor the major U.S. securities exchanges mandate publicly traded companies to make disclosures regarding Racial Equity Audit initiatives. In light of the protests sparked by the murder of George Floyd in June 2020, the CtW Investment Group has requested systemically important financial institutions to conduct a racial equity audit that identifies, prioritizes, and remedies the adverse impacts of the bank's policies and practices on non-white stakeholders and communities of color. 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. Kellogg Foundation has found that [b]y 2050, our country stands to realize an $8 trillion gain in GDP by closing the U.S. racial equity gap. [28]. The racial equity audit would include a review of existing documents regarding program information and evaluation, member surveys, human resource policies and procedures, marketing materials, GIA website, and other pertinent documents in order to develop a more comprehensive picture of the organizational climate in relation to its goal of . (go back), 47The Best ESG Funds for Great Returns & Low Costs, Forbes, Rob Berger and Benjamin Curry, July 1, 2021, available at https://www.forbes.com/advisor/investing/best-esg-funds/. hW[oSI+B"!vThKA}4J~-c2)75x>qfg\ Z2X$gp-78Yz|Z8X|^^_&fdrrv1s*Cj=Wo/y>?NW&xUJKW [20] State governments have also codified ESG initiatives into lawCalifornia leading the charge with the passage of Senate Bill 826 and Assembly Bill 979, which require a certain percentage of directors on the boards of public companies headquartered in the state be composed of females and individuals from underrepresented communities. Measurement and transparency are important components of the work Citi is doing to advance diversity, equity and inclusion, both at our bank and through our contributions to our communities and society more generally. Racial equity audits started catching on after the events of 2020 prompted a racial reckoning in the U.S. (go back), 88See JPMorgan No-Action LetterFebruary, supra note 77. [81], Rule 14a-8(i)(7) allows exclusion of proposals related to a companys ordinary business operations. Recently, Morgan Stanley and CtW Investment Group reached an agreement for the bank to conduct an internal diversity review . Resolutions were withdrawn at BlackRock, CoreCivic, Morgan Stanley and Amgen based on their commitments to conduct internal audits. These funds have explicit mandates to make ESG-focused investments, from mutual funds whose portfolio companies must score a high grade on ESG metrics to investment firms dedicated to ESG impact investing. Why did nearly all of the banks urge "no" votes on the audit proposals? 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. (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/. While the majority of investors perceive the funding landscape as balanced, their actual investments in multicultural and women-owned businesses are highly skewed. That movement, together with the disproportionate impacts of the COVID-19 pandemic have focused the attention of the media, the public and policy makers on systemic racism, racialized violence and inequities in employment, health care, and the criminal justice system. Morgan Stanley is also donating $5 million . All rights reserved. With this process, leaders can assess the extent to which equity is present in such areas as teacher . [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. 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. [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]. This 202-unit, scattered-site property comprising 16 buildings is located in the predominantly Black neighborhoods of Wards 7 and 8 of . Companies Negotiated with Shareholders to Withdraw the Racial Equity Audit Proposal. In 2020, partners at the Interfaith Center on Corporate Responsibility(ICCR) filed 12 resolutions calling for racial equity audits. See how you can make meaningful contributions as a student or recent graduate at Morgan Stanley. Some companies are turning to law firms like Covington to do the work. (go back), 122NYS Comptroller DiNapoli Statement on Major Support for Racial Equity Audit at Amazon, Office of the New York Comptroller, May 28, 2021, available at https://www.osc.state.ny.us/press/releases/2021/05/nys-comptroller-dinapoli-statement-major-support-racial-equity-audit-amazon. In light of the protests sparked by the murder of George Floyd in June 2020, the CtW Investment Group requested systemically important financial institutions, like big Wall Street firms, to conduct a racial equity audits. [51], Practitioners also believe that the audit process can be important for companies as a way to build trust with their stakeholders. Our culture of access and inclusion has built our legacy and shapes our future, helping to strengthen our business and bring value to clients. 16, 1992)).