Banks, J&J Ask Shareholders to Vote Against Racial Audits

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Almost a year after corporate America announced bold steps to address racial inequities, numerous companies are pushing back against investor requests to conduct sweeping racial audits of their businesses.

Goldman Sachs Group Inc. joined a growing list of companies, including Citigroup Inc. and Johnson & Johnson, that want shareholders to vote against the proposed audits because they say they’re already doing what’s requested in the resolutions, according to filings. JPMorgan Chase & Co. and Citigroup went as far as to ask regulators to block the proposals. The U.S. Securities and Exchange Commission denied their requests. It has yet to decide on an appeal from Amazon.com Inc.

The New York State Common Retirement Fund, CtW Investment Group and Trillium Asset Management are among the investors that filed resolutions ahead of the upcoming annual shareholder meetings. They were prompted by the killings of unarmed Black citizens last year that sparked protests across the U.S. and put pressure on corporate America to find ways to stamp out workforce inequities.

For investors, the issues can range from a lack of bank branches in certain ZIP codes to discrimination against Black and minority workers. The goal of third-party audits is to pinpoint unfair business practices, and then find ways to mitigate them.

Since racial audits are a new type of proposal, they’re unlikely to garner much support from investors this year, said Rob Du Boff, an ESG analyst at Bloomberg Intelligence.

“The majority of shareholders will likely give companies the leeway to conduct their own analysis, at least initially,” Du Boff said. If, after a few years, corporate executives are still ignoring the issue, then the proposals may gain traction, he said.

Five years ago, Airbnb Inc. was one of the first companies to conduct a racial audit, following patterns of discrimination alleged by non-White guests. In 2018, Starbucks Corp. conducted a civil-rights audit led by former U.S. Attorney General Eric Holder after the coffee company came under fire for an incident where employees called the police on two Black patrons. Starbucks published a 67-page report in response to the incident that set out policies and procedures. Facebook Inc. followed suit.

Wells Fargo & Co. and Bank of America Corp. have joined the other companies this year in asking shareholders to vote against proposals for racial audits.

Resolutions also were filed at BlackRock Inc. and State Street Corp. Both asset managers have said they will push companies in which they invest to add greater ethnic and gender diversity to their ranks. Last month, BlackRock said it’s enacting internal measures to address diversity and inclusion after two former employees leveled discrimination complaints against the company.

In its proxy statement, Citigroup said the company is working to address racial disparities in banking, the wealth gap and other social-justice issues, rendering the shareholder resolution unnecessary. The lender said it has committed more than $1 billion to take steps such as expanding access to credit, investing in Black entrepreneurs and advancing anti-racist practices in the industry. Citigroup said it’s also focused on boosting representation of Black employees in the U.S., especially in senior roles.

Bank of America said in a statement that an audit is unnecessary given its progress on racial equality and regular reporting of that progress. Goldman Sachs said in a statement that it will release more data in 2021 about diversity at the firm. Wells Fargo didn’t respond to an email seeking comment.

Amazon said its pledge to diversity, equity and inclusion is reflected in a number of policy and position statements. J&J said it has committed to racial and social justice through its “Race to Health Equity” platform and an audit would divert resources away from that.

JPMorgan, which said it would commit $30 billion to advance racial equity, declined to comment, as did BlackRock. State Street didn’t respond to messages seeking comment.

©2021 Bloomberg L.P.

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