US racial justice audits on the rise
November 04, 2022
In this analysis, Minerva’s Senior Stewardship Analyst, Thomas Bolger, examines trends identified in connection with racial justice audit shareholder requests in the 2021 and 2022 US proxy seasons.
With 2022 another record year for environmental, social and governance (ESG) shareholder proposals in the US, the “S” in ESG is getting more attention from shareholders. One area that has emerged as a focus area is social justice concerns and calls for companies to conduct a racial equity and/or civil rights audit.
In June 2020, following the high-profile murder of George Floyd, growing awareness of the Black Lives Matter movement, and a wave of protests and civil unrest, many companies made public statements supporting racial justice and committed billions of dollars in promoting racial equity and economic justice.
Within this context, companies have faced pressure from shareholders to undertake independent racial-equity or civil-rights audits to consider how their policies, products and practices affect the civil rights and equality among employees, customers, and stakeholders. This has resulted in an increasing number of resolutions filed by shareholders asking companies to commission independent third-party audits.
Minerva has identified nine racial justice audit proposals filed by shareholders in 2021 and 35 in the first eight months of 2022: a 289% increase. With the continuing dialogue about race in America, racial justice audits look set to become an established shareholder initiative.
Racial Justice Audit Proposals Filed
The increase in the number of proposals filed has been matched by an increase in the range of proposals filed. Whilst the wording of the proposals may vary, there is a common request for an independent audit of companies’ practices related to racial equity and/or civil rights to address racial or civil injustice. Minerva has identified seven categories of racial justice audit requests: civil rights audits; culture audits; diversity and equity audits; environmental justice audits; non-discrimination audits; racial equity audits, and racial impact audits.
Whilst proposals requesting racial justice audits did not receive majority votes in 2021, they did receive high shareholder support for a first-time resolution; with over 40% votes in favour recorded at both Amazon.com and JPMorgan, and average support of 32.27%. 2022 has maintained the high level of shareholder support, with one exception; non-discrimination audits have averaged very low levels of votes in favour from shareholders.
Votes in Favour on Racial Justice Audit Proposals
In 2022 there were eight successful proposals, or 22.86% of all racial justice audit proposals voted on. This is a high level of success rate for a new type of resolution.
Institutional investors are paying more attention to how companies are advancing racial justice goals and expect companies to demonstrate and evaluate the effectiveness of policies and practices in combating systemic racism. This new resolution category will be one to watch as social issues rise up the agenda at many company AGMs in the coming years.
This article was based on a longer report written by Minerva’s Senior Stewardship Analyst, Thomas Bolger. Access the full analysis via the button below.
Last Updated: 4 November 2022