morgan stanley racial equity audit

In this case, failure to have a Racial Equity Audit policy or refusal to implement such a policy after shareholders have approved a proposal to implement one may become a criteria an advisory firm would consider in making a recommendation for or against the re-election of a companys chairperson of the governance committee and/or the re-election of other directors at the companys annual meeting. [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. [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. 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. [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. 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. 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. Most of the big banks have not been as interested in these types of transparent audits. The activist investor nominated a slate of four director candidates with expertise operating energy companies and utilizing clean technology. 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. 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. (go back), 31Webinar, Susan Baker, Director of Shareholder Advocacy, Trillium Asset Management, supra note 23; supra note 27. [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. . [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. A racial equity audit is the first step to safeguard against further harm and it's also the smart thing to do. As a firm, we can do more, and here are five steps were taking right now. 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 . Morgan Stanley initially urged its shareholders to reject the audit . We live that commitment through long-lasting partnerships, community-based delivery and engaging our best assetMorgan Stanley employees. 1 launched a proxy campaign in December 2020 to effect change on Exxons board of directors. The audit was led by Laura W. Murphy, a civil rights advocate, with help from a civil rights law firm. In 2007, the firm's co-founder, a former Goldman Sachs and Morgan Stanley banker named Divesh Makan, told a wealth management magazine that he'd even organized clients' parties and helped . Citi announced the move in a blog post last Friday afternoon. [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. ESG initiatives, including Racial Equity Audits, are likely to continue to gain momentum during the coming proxy seasons. (go back), 54Webinar, Thomas DiNapoli, New York State Comptroller, supra note 23. 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. (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. Shareholders at JPMorgan Chase and State Street hold their meetings this week. But that was never going to be enough for racial justice advocates. (go back), 115See, e.g., Bias, disrespect, and demotions: Black employees say Amazon has a race problem, Vox:Recode, Jason Del Rey, February 26, 2021, available at https://www.vox.com/recode/2021/2/26/22297554/amazon-race-black-diversity-inclusion; Black Amazon manager sues the e-commerce giant, accusing it of race and gender discrimination, Washington Post, Jay Greene, March 1, 2021, available at https://www.washingtonpost.com/technology/2021/03/01/amazon-race-discrimination-lawsuit/; Five women sue Amazon, accusing e-retailer of race and gender discrimination and retaliation, Washington Post, Jay Greene, May 19, 2021, available at https://www.washingtonpost.com/technology/2021/05/19/amazon-suit-race-gender-discrimination/. [111] Despite the laundry list of examples Amazon cited in its No-Action Letter, the SEC did not concur that the proposal was excludable under Rule 14a-8(i)(7). [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. (go back), 37Webinar, Cyrus Mehri, Founding Partner of Mehri & Skalet, PLLC, supra note 23. (go back), 88See JPMorgan No-Action LetterFebruary, supra note 77. 1What is ESG?, ADEC Innovations ESG Solutions, available at https://www.esg.adec-innovations.com/about-us/faqs/what-is-esg/. A complicated past The financial institutions in question have recently made diversity, inclusion, and racial equity a significant. A report on the audit, prepared at reasonable cost and . We have the experience and agility to partner with clients from individual investors to global CEOs. 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. 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. Ron S. Berenblat and Elizabeth R. Gonzalez-Sussman are partners at Olshan Frome Wolosky LLP. Professional development and peer engagement are crucial building blocks to a careers strong foundation. hW[oSI+B"!vThKA}4J~-c2)75x>qfg\ Z2X$gp-78Yz|Z8X|^^_&fdrrv1s*Cj=Wo/y>?NW&xUJKW [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]. 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. Companies Negotiated with Shareholders to Withdraw the Racial Equity Audit Proposal. [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. Gorman has also tapped Reid to build Morgan Stanley's new Institute of Inclusion group to promote diversity within Morgan Stanley, which he will chair. 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. [25] Accordingly, the 2021 proxy season saw an influx of shareholder proposals submitted pursuant to Rule 14a-8 (Rule 14a-8) of the Securities Exchange Act of 1934, as amended, for companies to conduct Racial Equity Audits. (go back), 50Webinar, Pamela Coukos, Co-Founder of Working Ideal, supra note 23; supra note 27. [13] Recently, however, activists have begun to realize that social and environmental issues can also impact their investments, in both negative and positive ways. 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. 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. JPMorgan's racial-equity audit falls short for some shareholders SOC Investment accused the bank and its auditor of approaching the process with a "narrow perspective," and said the report fails to look at any internal diversity, equity and inclusion issues. [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. Rachel Wilson became the first head of cybersecurity for Morgan Stanley Wealth Management in the spring of 2017. . [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. On July 28, 2021, ISS launched its Annual Benchmark Policy Survey, which included requests for feedback on Racial Equity Audits. SEIU said in its resolution, which has since been withdrawn, that BlackRock as an investor opposed most shareholder proposals in. 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. 16, 1992)). urge the Board of Directors to oversee a racial equity audit analyzing JPMorgan's adverse impacts on nonwhite stakeholders and communities of color. Multicultural and women entrepreneurs are the cutting-edge leaders of businesses that power markets. . 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]. Will Corporations Deliver Value to All Stakeholders? (go back), 116See How Amazons Emissions are Hurting Communities of Color, Amazon Employees for Climate Justice, May 26, 2020, available at https://amazonemployees4climatejustice.medium.com/environmental-justice-and-amazons-carbon-footprint-9e10fab21138; Amazon workers demand end to pollution hitting people of color hardest, NBC News, April Gleiser and Leticia Miranda, May 24, 2021, available at https://www.nbcnews.com/tech/tech-news/amazon-shareholders-demand-end-pollution-hitting-people-color-hardest-n1268413. [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. (go back), 106Other shareholders joining the proposal were: (1) the Praxis Growth Index Fund; (2) CommonSpirit Health; (3) the Adrian Dominican Sisters; (4) Catherine Donnelly Foundation; (5) Monasterio Pan de Vida; (6) Reynders, McVeigh Capital Management, LLC; (7) the Congregation of the Sisters of St. Joseph of Peace; (8) the Sisters of the Holy Names of Jesus and Mary U.S.-Ontario Province Corporation; and (9) Newground Social Investment on behalf of the Robert H. and Elizabeth Fergus Foundation and Eric Menninga. 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 . Morgan Stanley is a leading global financial services firm providing a wide range of investment banking, securities, investment management and wealth management services. For 87 years, weve had a passion for whats possible. No major proxy advisory firm has issued official voting guidance on the implementation of Racial Equity Auditsand the two largest advisory firms, ISS and Glass Lewis, have been split on their support for shareholder proposals requesting such audits. We deliver active investment strategies across public and private markets and custom solutions to institutional and individual investors. (go back), 6Final Rule: Modernization of Regulation S-K Items 101, 103 and 105, 17 CFR 229, 239 and 240, Release Nos. 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. [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), 93See J&J No-Action Letter, supra note 78. Bank of America said last week that an audit is unnecessary given its progress on racial equality. No two companies are identical. (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. 2023Morgan Stanley. New York, November 22, 2022 - JPMorgan Chase & Co. (NYSE: JPM) released today a comprehensive report outlining the results of an independent attestation examination of its reported progress of $18.2 billion toward its $30 billion Racial Equity Commitment ("REC").. JPMorgan Chase retained PricewaterhouseCoopers (PwC) to perform the examination. 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. As a global financial services firm, Morgan Stanley is committed to technological innovation. Morgan Stanley and BlackRock, facing shareholder pressure, agreed to similar audits earlier this year. [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. With offices in more than. [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. The $1.9 trillion-asset bank has hired the law firm Covington & Burling to conduct the review and plans . Shareholder activists have advocated for increased diversity in corporate boardrooms for a number of years. (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/. Even with an increase in the number of shareholder proposals requesting Racial Equity Audits, it is possible that companies may not adopt them as quickly or as widely as the public and/or certain legislative bodies would prefer. The New York-based firm said it will start the audit in 2022. Recently, Morgan Stanley ( MS +0.65%) and CtW Investment Group reached an agreement for the bank to conduct an internal diversity review, and to meet shareholders on next steps before its 2022 annual meeting. 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 . The firm reached its decision following successful engagement with and withdrawal of a racial equity audit shareholder proposal by SOC Investment Group and SHARE. The America First Legal Foundation is accusing the IRS of using "racial equity" for audits targeting White and Asian taxpayers. According to certain proponents, the point of a Racial Equity Audit is not necessarily to critique a companys current platforms and efforts. (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/. Corp. Code 301.3, 301.4. 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. New York, NY. . McKensie Mack Group (MMG), a Black-led consultancy that centers around racial equity, released their Sacramento Area Council of Governments (SACOG) racial equity audit. Investing in underserved communities through our products, services, spending, business practices and thought leadership, Supporting underserved communities through philanthropy that drives more equitable outcomes, Attracting, developing and retaining individuals with diverse backgrounds and driving a culture of inclusion. Given current trends in ESG, public companies should stay informed on Racial Equity Audits and their adoption, crafting and implementation. We value our commitment to diverse perspectives and a culture of inclusion across the firm. From our startup lab to our cutting-edge research, we broaden access to capital for diverse entrepreneurs and spotlight their success. (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. At Morgan Stanley, advancing racial equity is about intentional, holistic change at the intersection of what we do, who we are and how we engage our communities. [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. (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. 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. The goals provide a yardstick for school leaders to measure their progress and as a "lightning rod to galvanize change" (IDRA, 2006). CtW dropped the Morgan Stanley proposal after the bank agreed to conduct a racial equity audit. 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. Morgan Stanley is differentiated by the caliber of our diverse team. 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. Morgan Stanley did not respond to a request for comment. endstream endobj 335 0 obj <>stream Like the other companies that received shareholder proposals on Racial Equity Audits in the 2021 proxy season, SEIUs proposal urged BlackRock to assess its behavior through a racial equity lens to identify how it contributes to systemic racism, including where its stated values are misaligned with the impact of its actions. Internal Audits Role in Driving Diversity, Equity and Inclusion Amy Fread, CISA Senior Manager Deloitte & Touche LLP Korynne Bernard . 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. 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. (go back), 137Supra, Goldberg-Zelizer, note 96. To reinforce the firm's commitment to racial equity, JPMorgan Chase today said it intends to retain a third-party to perform an audit of this effort.

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