morgan stanley racial equity audit morgan stanley racial equity audit

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 . An example of a project with high-impact priority elements is The Villages of East River. [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]. 14B, September 15, 2004, available at https://www.sec.gov/interps/legal/cfslb14b.htm. Civil rights advocates and proponents of social justice have long touted the moral and ethical considerations of closing the racial divide in America. No two companies are identical. 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. CtW dropped the Morgan Stanley proposal after the bank agreed to conduct a racial equity audit. As . Currently, neither the SEC nor the major U.S. securities exchanges mandate publicly traded companies to make disclosures regarding Racial Equity Audit initiatives. With offices in more than. [22]. At Morgan Stanley, youll find trusted colleagues, committed mentors and a culture that values diverse perspectives, individual intellect and cross-collaboration. Trilinc Global, November 4, 2013, available at https://www.trilincglobal.com/what-is-esg/. (go back), 36Johnson & Johnson, 2021 Notice of Annual Meeting & Proxy Statement, Schedule 14A, filed with the SEC on March 10, 2021, available at https://www.sec.gov/Archives/edgar/data/200406/000020040621000011/jnjproxy2021.htm [hereinafter J&J Proxy Statement]. 1 launched a proxy campaign in December 2020 to effect change on Exxons board of directors. BlackRock, with $8.7 trillion of assets under management, said in a memo to employees Thursday that an external review of how its diversity, equity and inclusion policies impact stakeholders will. [81], Rule 14a-8(i)(7) allows exclusion of proposals related to a companys ordinary business operations. (go back), 78Rule 14a-8 No-Action Letter re: Stockholder Proposal to Citigroup Inc. from CtW Investments Group, Citigroup Inc., December 23, 2020, available at https://www.sec.gov/divisions/corpfin/cf-noaction/14a-8/2021/ctwcitigroup022621-14a8.pdf [hereinafter Citigroup No-Action Letter]; Rule 14a-8 No Action Letter re: Johnson & Johnson2021 Annual Meeting, Omission of Shareholder Proposal of Christopher and Anne Ellinger and co-filers, Skadden, Arps, Slate, Meagher & Flom LLP, December 16, 2020, available at https://www.sec.gov/divisions/corpfin/cf-noaction/14a-8/2021/ellingeretaljohnson021221-14a8.pdf [hereinafter J&J No-Action Letter]. 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. Prior to the ESSA, IDRA developed the Six Goals of Educational Equity (2006). 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. 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. Assumed . Published Mon, Apr 18 2022 4:50 PM EDT Updated Mon, Apr 18 2022 6:22 PM EDT. 30-10825; 34-89670; File No. Facebook, Inc. (Facebook) also conducted its own version of a Racial Equity Audit in 2018. identify and address racial and other inequities in the accounting profession. Washington, D.C. Our Impact-Risk-Profitability (IRP) framework will guide us to deeper and more intentional impact. (go back), 88See JPMorgan No-Action LetterFebruary, supra note 77. We have the experience and agility to partner with clients from individual investors to global CEOs. Equity audits guide schools in conducting a critical review of their data to inform ways of addressing systemic inequities. (go back), 93See J&J No-Action Letter, supra note 78. Global institutions, leading hedge funds and industry innovators turn to Morgan Stanley for sales, trading and market-making services. According to certain proponents, the point of a Racial Equity Audit is not necessarily to critique a companys current platforms and efforts. 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 . In our recent survey, we found by just how much. Morgan Stanley is also donating $5 million . [61], Pursuant to Rule 14a-8, shareholders may submit proposals to be included in a companys proxy materials for its annual or special meetings of shareholders. 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. The request for BlackRock to do one came from SEIU, which withdrew its resolution after the firm agreed to undergo the racial-equity audit. (go back), 95For a detailed discussion of BlackRocks decision to implement a Racial Equity Audit, see Section IV.A. Supporting the progression of women into senior roles is a key strategic priority for Morgan Stanleys senior leadership worldwide. (go back), 25Remarks by New York State Comptroller Thomas P. DiNapoli at SEIU Capital Stewardship Program and CtW Investment Group Webinar Entitled Racial Equity Audits: A Critical Tool for Shareholders, NYS Comptroller, Thomas P. DiNapoli, April 13, 2021, available at https://nyscomptroller.medium.com/remarks-by-new-york-state-comptroller-thomas-p-397b006d1d5c. (go back), 50Webinar, Pamela Coukos, Co-Founder of Working Ideal, supra note 23; supra note 27. The big Wall Street banks have all talked a good line about supporting the Black Lives Matter movement. We deliver active investment strategies across public and private markets and custom solutions to institutional and individual investors. [104] The proposal was submitted by Comptroller DiNapoli, as trustee of New York States Common Retirement Fund for public employees, which owns shares in Amazon. 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. Concerns related to workforce diversity, treatment of minority workers, environmental justice in communities of color, surveillance, and civil rights are just some of the controversies that have troubled Amazon. [114] For example, current and former Amazon employees have accused the company of allowing racism to permeate its operations. Shareholder Proposal of CtW Investment Group Securities Exchange Act of 1934Rule 14a-8, Gibson Dunn, January 25, 2021, available at https://www.sec.gov/divisions/corpfin/cf-noaction/14a-8/2021/nyscrfamazon012521-14a8-incoming.pdf [hereinafter Amazon No-Action Letter]; J&J No-Action Letter, supra note 78. 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. 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. 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. 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. The audit was led by Laura W. Murphy, a civil rights advocate, with help from a civil rights law firm. We offer scalable investment products, foster innovative solutions and provide actionable insights across sustainability issues. [50] Accordingly, auditors are encouraged to solicit information directly through surveys and interviews, and to review historical records and a companys performance against its peers. Amid a pandemic and social unrest, we gathered senior multicultural business leaders to focus on the challenges and opportunities of this indelible moment in history. (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. Rachel Wilson became the first head of cybersecurity for Morgan Stanley Wealth Management in the spring of 2017. Among the many ESG developments bubbling to the forefront of the markets in recent years is the desire of investors to see companies address social justice concerns. (go back), 22Supra note 10. [97] Wells Fargo Co. (Wells Fargo) said it is conducting a human rights impact assessment, and that it will update its Human Rights Statement to better align with the expectations of companies under the United Nations Guiding Principles on Business and Human Rights. (go back), 79See Citigroup No-Action Letter, supra note 78; JPMorgan No-Action LetterFebruary, supra note 77. [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. Dismissal and neglect of these concerns led to Engine No. Racial equity audits started catching on after the events of 2020 prompted a racial reckoning in the U.S. The global presence that Morgan Stanley maintains is key to our clients' success, giving us keen insight across regions and markets, and allowing us to make a difference around the world. Tagged: 2020, Regulatory letters Newer PostCtW letter to DoorDash dual class Older PostCtW Racial Equity letter to Morgan Stanley Back to Top 1900 L Street NW, Suite 900 Washington, DC 20036 Morgan Stanley team with $715 million joins . 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. (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). . [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 . [126] The resolution included in SEIUs proposal also noted that: A 2020 report on proxy voting found that BlackRock did not use its clout as a significant owner to advance racial justice. Most of the big banks have not been as interested in these types of transparent audits. As discussed earlier, Starbucks undertook a Racial Equity Audit in 2018. At Morgan Stanley, we lead with exceptional ideas. 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. 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. Specifically, SEIU stated that Goldman underwrites municipal bonds whose proceeds pay police brutality settlements. [35] Similarly, Trillium, on behalf of Christopher and Anne Ellinger, submitted a Racial Equity Audit proposal that was included in Johnson & Johnsons proxy statement for its 2021 annual meeting of shareholders, in which Trillium expressed concerns with claims that the company continues to market its talc-based baby powder to Black and Brown women after its talc supplier included the WHOs possibly carcinogenic label on shipments. [36] Proponents of Racial Equity Audits argue that a reassessment of internal policies and practices via such audits can identify the right levers to pull to begin to shrink these racial divides. [6] Since then, SEC leadership has signaled that more comprehensive ESG-related disclosure could be mandated in the near future, with SEC Commissioner Allison Herren Lee issuing statements earlier this year directing the Division of Corporation Finance to enhance its focus on climate-related disclosure in public company filings [7] and inviting input from investors, registrants, and other market participants on climate change disclosure. [8] Former Acting Director of the SECs Division of Corporation Finance John Coates also stated earlier in the year that the SEC should help lead the creation of an effective ESG disclosure system so companies can provide investors with information they need in a cost-effective manner. [9] Based on these statements, we believe there is a strong likelihood that the current SEC-mandated human capital management disclosures will soon be expanded to require additional disclosures covering environmental and other social initiatives and metrics, further supporting a view that ESG awareness, stewardship and reporting at public companies are here to stay. Our culture of access and inclusion has built our legacy and shapes our future, helping to strengthen our business and bring value to clients. The firm reached its decision following successful engagement with and withdrawal of a racial equity audit shareholder proposal by SOC Investment Group and SHARE. hj0_NtJ)=;nhuB)ex(X V *pwztOxqzYr22#LPL>/k~i6jEi|MR CK%@q)4rK!u\r94 !5@@yb#8u(:uI&UsRmndt>&. Get the latest insights, analyses and market trends in our newsletter, podcasts and videos. In the U.S. market there are now over 600 ESG funds and exchange-traded funds for investors to choose from with approximately $161 billion in assets under management (AUM), which is more than double the AUM of ESG funds in 2010. [141]. Sarah Anderson May 17, 2021 Inequality.org If a company lags behind in this quickly developing area, we believe shareholders may become more willing to launch shareholder campaigns focused on ESG issues, including demanding objective results through Racial Equity Audits. (go back), 84See J&J No-Action Letter, supra note 78. public statements. [125]. The $1.9 trillion-asset bank has hired the law firm Covington & Burling to conduct the review and plans . 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. 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. Some companies are turning to law firms like Covington to do the work. McKensie Mack Group (MMG), a Black-led consultancy that centers around racial equity, released their Sacramento Area Council of Governments (SACOG) racial equity audit. 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. 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]. Amazon to conduct racial-equity audit led by former Attorney General Loretta Lynch. SEC interpretations of this rule provide that proposals that concern ordinary business matters but focus on significant social policy issues would not be excludable because the proposals would transcend the day-to-day business matters. [82] In seeking to exclude Racial Equity Audit proposals, companies argued that these audits concerned day-to-day aspects of their ordinary business operations, including: (i) product sales and advertising; [83] (ii) customer relationships; [84] (iii) the nature of the companys public relations, messaging, and communications with its shareholders and other constituents; [85] (iv) workforce management; [86] (v) relationships with suppliers; [87] (vi) community impacts; [88] or (vii) decisions regarding the products and services [the company] offers. [89] Furthermore, these companies contended that the proposals did not focus on a significant policy issue that transcended their ordinary business. Yesterday, the audit proposal also went to the vote at Wells Fargo, the result has not yet been disclosed. (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. 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. [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. (go back), 67Google Pressured on Racial Equity Audit After AI Ethics Collapse, Bloomberg, Naomi Mix, April 27, 2021, available at https://www.bloomberg.com/news/articles/2021-04-27/google-pressured-on-racial-equity-audit-after-ai-ethics-collapse; see also supra Section II.A. [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]. In particular, shareholders have begun to request that companies conduct racial equity audits (Racial Equity Audits), which generally seek 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. Racial Equity Audits may also find that a companys existing policies and practices are not sufficient to address or may be perpetuating systemic social issues. BlackRock, the worlds 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. These three employees, alums of Historically Black Colleges and Universities, are helping the firm support the next generation of Black students through our Morgan Stanley HBCU Scholars Program. The proxy advisory firms level of guidance may take varying formsat the low end, proxy advisory firms may increase a companys ESG or corporate governance score for having in the past or recently conducted a Racial Equity Audit. The New York-based firm said it will start the audit in 2022. [51], Practitioners also believe that the audit process can be important for companies as a way to build trust with their stakeholders. The organization designed an audit process through a SACOG-wide survey that collected qualitative and quantitative research. 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. 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. . While the majority of investors perceive the funding landscape as balanced, their actual investments in multicultural and women-owned businesses are highly skewed. (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. The firm's $10 million grant will help expand financial literacy, workforce development and access to capital programs in communities where the civil rights organization operates. 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. Prior, he . [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. BlackRock opposed nearly all shareholder proposals directly addressing racial justice issues, including two proposals at Amazon seeking disclosure regarding hate-promoting products and effects of its facial recognition technology on people of color. [45]. 1 grew impatient with Exxon after years of declining financials and long-continued dependency on fossil fuels, with no indication of future change. In November, SEIU's Capital Stewardship Program and. And lastly, whether a company has sufficient mechanisms in place to monitor effectiveness. . (go back), 81See Citigroup No-Action Letter, supra note 78. At Morgan Stanley, giving back is a core valuea central part of our culture globally. 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. 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. As the area develops (and if more companies voluntarily implement these audits), Racial Equity Audits could become viewed as good corporate governance, particularly if top proxy advisory firms issue official guidance supporting the implementation of such audits. As a result, Engine No. In SEC filings,. (go back), 32Webinar, Pamela Coukos, Co-Founder of Working IDEAL, supra note 23. [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 . 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. 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. [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. While we witnessed an increase in shareholder proposals related to Racial Equity Audits in the 2021 proxy season, all such proposals were either withdrawn or defeated. [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. Id. However, not all companies have been as eager and willing to comply with these requests. 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. [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. As a global financial services firm, Morgan Stanley is committed to technological innovation. [i]f CEO Jeff Bezos shares (70,616,270 shares, 14%) were to be removed from those voting against it, the proposal received majority support. [122]. With this process, leaders can assess the extent to which equity is present in such areas as teacher . It received the backing of 38.6 percent of votes cast during the company's AGM in April. [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. (go back), 123Racial Equity Audit, SOC Investment Group, 2021, available at https://www.socinvestmentgroup.com/racial-equity-audit. 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/. Discover who we are and the right opportunity for you. (go back), 91See SEC, Division of Corporate Finance Staff Legal Bulletin No. Annie Palmer @annierpalmer. In 2020, partners at the Interfaith Center on Corporate Responsibility(ICCR) filed 12 resolutions calling for racial equity audits. 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.