(go back), 93See J&J No-Action Letter, supra note 78. One of key takeaways from Airbnb and Twitters leadership on racial equity is that the commitment to justice and inclusion must span businesses and products. We are honored to partner with Color Of Change to help us take this work to the next level, to help us understand fully when discrimination occurs, how unconscious bias is manifested on the platform, and the effectiveness of our policies. Laura Murphy, the ACLU veteran who pioneered business civil rights audits and led the analysis of Airbnb and. [31] Following an audit, some companies have used the findings to develop a strategic plan to capitalize on opportunities to address racial equity moving forward. 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. [14], ISS and others have published a number of reports that have found that addressing social and environmental concerns correlates with companies either currently experiencing or having the potential to experience increased growth and profitability. 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. 2017. (citing Exchange Act Release No. Exxon has faced pressure from shareholders to shift practices to reduce greenhouse gas emissions. [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. Using Racial Equity Audits, a company is given a comprehensive report on their standing regarding how they uphold said regulations. 2023 366 Technology. (go back), 22Supra note 10. (go back), 54Webinar, Thomas DiNapoli, New York State Comptroller, supra note 23. 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. According to the proponents, issues relating to racial equity and the companys corporate practices are longstanding, and include multiple lawsuits relating to employment and lending discrimination. Most recently in 2020, Airbnb launched Project Lighthouse, an initiative to uncover, measure, and overcome discrimination during the Airbnb booking process. [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 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. ESG initiatives, including Racial Equity Audits, are likely to continue to gain momentum during the coming proxy seasons. At the start date, users who want to opt-out can do that by turning off the data use settings in their accounts Privacy & sharing page. (go back), 29Webinar, Susan Baker, Director of Shareholder Advocacy, Trillium Asset Management, supra note 23. [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. What's more, BlackRock, Morgan Stanley, and Citigroup have conducted . According to Wenah, Airbnb lost 1.3 million users after launching the Community Commitment. [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 . The two leading proxy advisory firms, ISS and Glass Lewis & Co. LLC (Glass Lewis), have generally taken opposing views on Racial Equity Audits. In 2017, Airbnb released a feature called Instant Book, which sought to combat prejudice by allowing guests to book an Airbnb listing without prior approval. The audit was led by Laura W. Murphy, a civil rights advocate, with help from a civil rights law firm. [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. (go back), 100Goldman Sachs Proxy Statement, supra note 35. Given current trends in ESG, public companies should stay informed on Racial Equity Audits and their adoption, crafting and implementation. (go back), 7Statement on the Review of Climate-Related Disclosure, U.S. Securities and Exchange Commission, Acting Chair Allison H. Lee, February 24, 2021, available at https://www.sec.gov/news/public-statement/lee-statement-review-climate-related-disclosure. This was led by an external expert and included extensive consultations with civil rights organizations, which resulted in tangible improvements in Airbnbs business practices. (go back), 86See J&J No-Action Letter, supra note 78. 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. . From 2016 through today, over 1.3 million people have declined to agree to Airbnbs mandatory Community Commitment and Non-Discrimination Policy, and have therefore been denied use of the platform or had their accounts cancelled. By staying in the project, users will be helping to create a new benchmark to uncover, measure, and fight discrimination on Airbnb. Such audits entail vigorous risk assessments and disclosures on continuity plans, among other things. (go back), 119See Webinar, Thomas DiNapoli, New York State Comptroller, supra note 23. ; see also Comptroller DiNapoli Wants Audit of Amazons Racial Justice Practices, Times Union, Rick Karlin, December 21, 2020, available at https://www.timesunion.com/news/article/Comptroller-DiNapoli-wants-audit-of-Amazon-s-15815322.php. For more information on the study please see Edelman, Benjamin, Michael Luca, and Dan Svirsky. The most wishlisted Design and Creative Space stays for inspiring retreats, Visit North Carolina and Airbnb relaunch partnership to boost rural tourism, Get to know your Host community in Europe: Meet Katerina from Greece. Bringing in external partners provides critical feedback and, ultimately, produces better products. Airbnb also consulted with Antony Haynes, Associate Dean of Albany Law School and Director of CyberSecurity and Privacy Law, and Cathy ONeil and Jacob Appel, of algorithmic auditing consultancy ORCAA. (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. https://www.sec.gov/divisions/corpfin/cf-noaction/14a-8/2021/nyscrfamazon012521-14a8-incoming.pdf, https://www.sec.gov/interps/legal/cfslb14b.htm, https://www.sec.gov/ix?doc=/Archives/edgar/data/1070985/000119312521165313/d184269d8k.htm, https://thehill.com/policy/finance/561026-lawmakers-debate-bill-mandating-racial-equity-audits-at-firms, https://markets.businessinsider.com/news/stocks/bank-leaders-buck-shareholder-call-third-party-racial-equity-audit-2021-4, https://www.sec.gov/Archives/edgar/data/72971/000119312521082907/d71313ddef14a.htm, https://news.bloomberglaw.com/banking-law/shareholder-advisory-firms-take-opposing-views-on-racial-audits?context=article-related, https://www.sec.gov/Archives/edgar/data/1018724/000110465921050333/tm2035374-1_def14a.htm, https://www.timesunion.com/news/article/Comptroller-DiNapoli-wants-audit-of-Amazon-s-15815322.php, https://www.sec.gov/divisions/corpfin/cf-noaction/14a-8/shareholder-proposal-no-action-responses.htm. (go back), 73As You Sow: Racial Justice, available at https://www.asyousow.org/our-work/social-justice/racial-justice. Restoration: The Role Stakeholder Governance Must Play in Recreating a Fair and Sustainable American EconomyA Reply to Professor Rock, https://www.esg.adec-innovations.com/about-us/faqs/what-is-esg/, https://investor.vanguard.com/investing/esg/, https://www.issgovernance.com/library/esg-matters-part-ii/, https://www.sec.gov/rules/final/2020/33-10825.pdf, https://corpgov.law.harvard.edu/2021/02/06/new-human-capital-disclosure-requirements/. 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. (go back), 37Webinar, Cyrus Mehri, Founding Partner of Mehri & Skalet, PLLC, supra note 23. At a time when we cannot rely on government alone to further social justice goals, unusual allies become more important than ever. 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. Home Depot indicated it was pausing all contributions after the events of January 6, but made no commitment to realign policies or permanently end support for election objectors. 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. 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. . However, not all companies have been as eager and willing to comply with these requests. Some, including Starbucks, Facebook and AirBnB, have already commissioned racial equity audits. (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/. Resolutions calling for racial equity or civil rights audits at major corporations have received substantial shareholder support. No two companies are identical. 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. Our partnership with Airbnb on this project has been years in the making, and has led to tangible policy developments to reduce discrimination that should serve as a model for Airbnbs peer tech companies, said Color Of Change President Rashad Robinson. Wenah herself has been working on this project for many years. 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