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. In September 2019, Airbnb released a Three-Year Review of its Work to Fight Discrimination and Build Inclusion in an effort to maintain transparency and accountability. The perceived race information generated in this project will be aggregated and only be used to analyze past interactions on the platform, exclusively to develop anti-discrimination work. . Data collected through Project Lighthouse will help the company create tools and policies to combat bias against Black users and other people of color, Brian Chesky, Airbnb's CEO and co-founder, told USA TODAY. In 2016, this team launched the Airbnb Community Commitment, a prompt that asks Airbnb users to treat all people on the platform with respect, and without judgment or bias. Only those who accepted the commitment were allowed to continue using Airbnb. Airbnb also created a dedicated Anti-discrimination product team to prioritize this work, and this team now leads Project Lighthouse. (go back), 38See e.g., Opinion: Companies Have a Duty to Defend Democracy, NPR, Brett Bruen, July 7, 2020, available at https://www.npr.org/2020/07/07/887628306/opinion-companies-have-a-duty-to-defend-democracy (discussing corporations ability to be more responsive to critical issues to voters on the macro-level, such as gun control and climate change, as well as on a more personal level including Twitter, Uber and Blue Apron announc[ing that] they would give employees a paid day off when their country holds elections). [12] Governance has long been a key focus of shareholder activists as corporate governance best practices, including accountability of a companys board of directors to its shareholders, robust disclosure on executive compensation and independence of a board of directors from management, have been found to have a readily apparent correlation with increased returns to shareholders. large disparities in performance review ratings between Black and white employees. Julie Wenah, Community Counsel and Acting Regional Counsel for Africa at Airbnb, was a speaker at Scaling Social Impact in a Remote World. [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. ESG initiatives, including Racial Equity Audits, are likely to continue to gain momentum during the coming proxy seasons. (go back), 43Webinar, Vivian Gray, SEIU Pension Fund Trustee, supra note 23. Amazon, the second-largest employer in the US, faces numerous shareholder proposals attempting to address its lack of transparency relating to risks associated with internal and external racial justice issues. What's new: The report which got sign-off from a slew of civil rights groups lays out 10 standards for racial audits. [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 2016, Airbnb partnered with the Color of Change to launch a three year review of the company's platform and . For many, the scrutiny is welcome. [30], The impact a Racial Equity Audit may have on a company may be felt in many ways. 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. Airbnb was born in 2007 when two Hosts welcomed three guests to their San Francisco home, and has since grown to over 4 million Hosts who havewelcomed 1.4 billionguest arrivals in almost every country across the globe. Using Racial Equity Audits, a company is given a comprehensive report on their standing regarding how they uphold said regulations. Before launching Project Lighthouse, Airbnb consulted a number of civil rights and privacy organizations, including Color of Change. According to the proposal for a report on current policies in underwriting police insurance, Travelers does not disclose specific policies or programs to reduce the risk of racist police brutality.. 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. Most recently in 2020, Airbnb launched Project Lighthouse, an initiative to uncover, measure, and overcome discrimination during the Airbnb booking process. 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. In doing so, these companies have argued that they have already taken measures to address racial justice, such as investing in Black entrepreneurs, expanding credit and working to boost diversity within their ranks. [75]. 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 . 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. [53] Advocates believe it is critical that the audit be conducted by an independent third party in order to ensure integrity and credibility throughout the process. The proponents argued that Home Depots political contributions appear to be misaligned with its public statements of its views and operational practices. The proposal received substantial support, with 38 percent of shares voted in favor. 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. This years racial equity audit proposal highlights the companys Corporate PAC giving, as well as high profile incidents at stores such as the suspension and forced resignation of an employee who refused to remove a Black Lives Matter (BLM) logo from his apron. 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]. Airbnb is setting an important precedent by taking measurable steps to examine and dismantle discriminatory online systems. [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. Every day, Hosts offer unique stays and experiences that make it possible for guests to connect with communities in a more authentic way. Bringing in external partners provides critical feedback and, ultimately, produces better products. 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. Airbnb Inc. became the . Airbnbs partnership with Color Of Change does not involve any financial arrangement. Under Rule 14a-8(i)(10), a company is permitted to exclude a shareholder proposal if the company has already substantially implemented the proposal. 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. (go back), 120Amazon investors reject New York retirement funds call for a racial-equity audit, 10 other shareholder proposals, MarketWatch, Levi Sumagaysay, May 28, 2021, available at https://www.marketwatch.com/story/amazon-investors-reject-new-york-retirement-funds-call-for-a-racial-equity-audit-10-other-shareholder-proposals-11622242863. What Makes Patagonia A World Leader in Sustainability, Medium, Tom & Jerry, January 13, 2021, available at https://medium.com/climate-conscious/what-makes-patagonia-a-world-leader-in-sustainability-486073f0daa. (go back), 95For a detailed discussion of BlackRocks decision to implement a Racial Equity Audit, see Section IV.A. [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]. [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. New York State Common Retirement Fund et al. According to CtW, this focus is based on the belief that: the finance industry has played a critical role in perpetuating unequal wealth distribution to communities of color. On July 28, 2021, ISS launched its Annual Benchmark Policy Survey, which included requests for feedback on Racial Equity Audits. JPMorgan's audit will examine the $30 billion commitment it made in 2020 to advance racial equity, which included funding of affordable housing, increasing the number of mortgages it. 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. The racial equity audit proposal at Citigroup Inc. garnered 39% of shareholders' support, while the one at Amazon.com Inc. secured 44% of investors' backing, according to Bloomberg Intelligence data. Trilinc Global, November 4, 2013, available at https://www.trilincglobal.com/what-is-esg/. (go back), 84See J&J No-Action Letter, supra note 78. The following proposals will be put to shareholders at its April 26, 2022 annual meeting, requesting: Historically, the insurance industry has engaged in racist practices impacting customers and potential customers from communities of color, including charging far higher premiums for auto insurance in Black neighborhoods as opposed to white neighborhoods; much lower payouts in homeowner insurance claims for Black neighborhoods; and instances of coverage denial for property owners who accept Section 8 vouchers. A fiduciarys duty is to act in the best interest of their beneficiaries and traditionally translates to acting to obtain the highest return on investment, but it can be equally important that fiduciaries seek to minimize risk. Resolutions calling for racial equity or civil rights audits at major corporations have received substantial shareholder support. Financial institutions and asset management firms have become the focus of Racial Equity Audit shareholder proposals. (go back), 20Proxy Voting Guidelines Benchmark Policy Recommendations, ISS, effective for meetings on or after February 1, 2021, available at https://www.issgovernance.com/file/policy/active/americas/US-Voting-Guidelines.pdf. 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. [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. The policy asks hosts to treat guests with respect and without judgment or bias based on factors like race. Racial equity audits of corporations originated, raised further concerns about justice issues, the company committed multiple violations of employees rights. The activist investor nominated a slate of four director candidates with expertise operating energy companies and utilizing clean technology. And lastly, whether a company has sufficient mechanisms in place to monitor effectiveness. While the company opposed all seven, at least four of those resolutions, including the first racial equity audit proposal at the company, two proposals for reports on the human rights implications of certain surveillance products, and a lobbying disclosure proposal received substantial support of over 30 percent. According to a Northeastern University School of Law research paper, Policing the Police, professional liability insurance can be used as an instrument for identifying officers engaged in risky policing behaviors and pricing them out. Input from civil rights organizations, employees, and customers should be considered in determining the specific matters to be analyzed. Some companies are turning to law firms like Covington to do the work. 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. AI could help you next time. 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. 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