. S7-25-97, available at https://www.sec.gov/rules/final/34-40018.htm (citing Reebok Intl Ltd. (Mar. [108] Amazon argued that, regardless of the proposal being framed in the form of a request for a report, this did not change the fact that the subject matter of the proposed report is within [Amazons] ordinary business and thus excludable under Rule 14a-8(i)(7). New York University School of Law. All Homes and Experiences referenced on the Airbnb Newsroom are intended purely to inspire and illustrate. Companies Negotiated with Shareholders to Withdraw the Racial Equity Audit Proposal. In addition to Starbucks, Airbnb and Facebook have completed audits. (go back), 37Webinar, Cyrus Mehri, Founding Partner of Mehri & Skalet, PLLC, supra note 23. [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. The Staff has stated that substantial implementation under the rule does not require the company to have implemented the proposal in full or exactly as proposed by the shareholder. [127], According to SEIU, BlackRock decided that the SEIU proposal is too important to wait until they are voted on at their shareholder meetings [128] and announced its plans to voluntarily conduct an independent racial audit of its operations. In its advertising products, Google has blocked companies from using racial justice terms like Black Lives Matter while allowing advertisers to search and place their content on tens of millions of videos tagged with white nationalist terms like White Power or White Lives Matter. The proponent of the racial equity audit proposal, Nathan Cummings Foundation, is concerned that many of Alphabets business practices are enabling racism and discrimination, posing legal, financial, and reputational risk.. Other external forces that may prompt public companies to adopt Racial Equity Audit policies are the SEC and the securities exchanges. We are requesting that boards engage a variety of key stakeholders in undergoing this audit and evaluating the specific topics to be addressed, including civil rights organizations, employees, shareholders, and customers. Airbnb has consistently engaged in fighting bias and discrimination on its platform since 2016, after its first civil rights audit, authored by Laura Murphy, former Director of the American Civil Liberties Union's Washington Legislative Office and President of Laura Murphy & Associates. For all companies, and especially tech . 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. The tactic in question is civil rights audits, also known as racial equity audits, which are third-party assessments of a company's role in addressing systemic racism. [109], Amazon argued the proposals call to review its impact on civil rights, equity, diversity and inclusion is a broad survey on the impact of the Companys policies, practices, products and services on societal issues, which implicates routine business issues, such as the products and services that the Company offers to its customers, the Companys business practices and operations, the Companys strategic decisions, and the Companys choice of technologies. [110] Similarly, according to Amazon, such an audit would necessarily implicate[] a multitude of ordinary business matters relating to the Companys day-to-day operations, which Amazon argued included decisions relating to, among other things, its charitable donations, hiring decisions, diversity and recruitment initiatives, customer relations, advertising, public relations and communications with its shareholders and the kinds of products it sold. Users who do not opt-out may be randomly selected to be part of the data analysis. Therefore, this analysis and project will not affect an individuals experience on the platform in any way. 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. Public, third-party racial equity audits have supported companies like Facebook and Airbnb in acknowledging areas for improvement and beginning to put in place company infrastructure to prevent and mitigate harm. 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. (go back), 80See J&J No-Action Letter, supra note 78. And lastly, whether a company has sufficient mechanisms in place to monitor effectiveness. (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. Alleged retaliation against employees who raise issues of discrimination. [51], Practitioners also believe that the audit process can be important for companies as a way to build trust with their stakeholders. The banks are fighting back., Markets Insider, Marguerite Ward, April 7, 2021, available at https://markets.businessinsider.com/news/stocks/bank-leaders-buck-shareholder-call-third-party-racial-equity-audit-2021-4 (We believe our progress on the issue of racial equality, and our regular reporting of that progress, make the proposals requested audit unnecessary, a Bank of America spokesperson told Insider.). For example, the SOC Investment Group, formerly known as the CtW Investment Group (CtW), a group that works with pension funds sponsored by unions affiliated with Change to Win, a federation of unions representing nearly 5.5 million members, submitted the following proposal to Bank of America Corporation for inclusion in its proxy statement: RESOLVED that shareholders of Bank of America Corporation (BofA) urge the Board of Directors to oversee a racial equity audit analyzing BofAs adverse impacts on nonwhite stakeholders and communities of color. [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. The California legislature recognized the public desire to move towards greater diversity on public boards and codified set requirements. In 2016, Murphy filed the first ever racial equity audit against AirBnB because there were allegations against the company that Black app users were having more difficulty booking rooms on the . Murphy helped Airbnb and Facebook conduct racial audits in recent years. A National Labor Relations Board complaint alleged that the company enforced its dress code selectively and disparately against workers that displayed the slogan and engaged in other related protected concerted activities.. [141]. (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. Google has blocked companies from using racial justice, Alphabets business practices are enabling racism and discrimination, posing legal, financial, and reputational risk., Shareholder proposal requesting additional reporting on lobbying, Item 9, Shareholder proposal requesting additional reporting on gender/racial pay, Item 11, Shareholder proposal requesting a report on customer due diligence, Item 5, Shareholder proposal requesting a report on customer use of certain technologies, Item 13, A Racial and Gender Board Diversity Report, Item 7, A report on Respecting Indigenous Peoples Rights, Item 8, Shareholder proposal relating to a racial equity audit, Item 7, Shareholder proposal relating to insuring law enforcement, Item 8, Shareholder proposal relating to lobbying, Item 4, Shareholder proposal regarding political contributions congruency analysis, Item 7, Shareholder proposal regarding gender and racial equity on the board of directors, Item 8, Shareholder proposal regarding racial equity audit, Item 10, Stockholder proposal regarding a lobbying report, Item 5, Stockholder proposal regarding a racial equity audit, Item 9, Stockholder proposal regarding a report on concealment clauses, Item 10, Stockholder proposal regarding a human rights assessment of data center siting, Item 13, Stockholder proposal regarding a report on data collection, privacy, and security, Item 14, Stockholder proposal regarding algorithm disclosures, Item 15, Stockholder proposal regarding misinformation and disinformation, Item 16, Stockholder proposal regarding a report on external costs of disinformation, Item 17, Stockholder proposal regarding a report on board diversity, Item 18, Stockholder proposal regarding the establishment of an Environmental Sustainability Board Committee, Item 19. . Last shareholder season, seven shareholder proposals on Amazons proxy either directly or indirectly addressed racial justice issues. AI could help you next time. The good news is that some tech companies have been promoting racial equity and justice long before these latest protests and the tragedies that inspired them. The audits are conducted by third-party groups, which analyze companies' business modelsfrom policies to products and servicesto determine whether they cause, reinforce, or perpetuate. Companies that dismiss these concerns or lag behind their peers in addressing ESG matters may find themselves in the crosshairs of investors and proxy advisory firms, or even state legislatures and federal agencies. [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. In general, Racial Equity Audit proposals ask the board of directors of a company to oversee such audits analyzing the companys business modelsfrom policies to products and servicesto determine whether they cause, reinforce or perpetuate discrimination. [67]. ; see also Human Rights, Amazon, available at https://sustainability.aboutamazon.com/people/human-rights?workerCount=true&engagementProgram=true&productCategory=true. Under Rule 14a-8(i)(10), a company is permitted to exclude a shareholder proposal if the company has already substantially implemented the proposal. All rights reserved. In setting this precedent, it is important to understand that there are technology platforms that have already left irreversible marks on Black communities and communities of color around the country that need to be addressed. , whether a company has sufficient mechanisms in place to monitor effectiveness that the proposals did not on. 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