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Companies say Black Lives Matter. Investors say prove it.

Investors are increasingly looking to see whether companies' actions live up to the rhetoric.

BLM black and white

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After the murder of George Floyd in May, Amazon’s official Twitter account tweeted: "Together we stand in solidarity with the Black community — our employees, customers and partners — in the fight against systemic racism and injustice."

Today, investors would like to see whether the company’s actions, and those of dozens of other corporations, live up to the rhetoric.

For the first time, investors interested in environmental, social and governance (ESG) issues are making systemic racism and the role companies play in perpetuating racial inequality part of the proxy season agenda. Shareholder advocacy groups this year have filed resolutions related to racial justice in unprecedented numbers and scope, Heidi Welsh, founding executive director of the Sustainable Investments Institute (Si2), told me in an email.

Shareholder advocacy groups this year have filed resolutions related to racial justice in unprecedented numbers and scope.

In prior years, there had been one-off resolutions focused on issues such as employee discrimination and predatory lending, but this time around we’re seeing a broad, concerted effort to address structural racism in multiple forms, including in bank lending practices, in healthcare and environmental quality, and in mass incarceration and policing.

Roughly 20 companies face such proposals this year, including eight banks, Johnson & Johnson, Foot Locker and Monster Beverage, according to the 2021 Proxy Preview produced by Si2, As You Sow and Proxy Impact. In short, the resolutions ask these companies to report on how their business practices harm people of color and what they plan to do about it.

And while workplace diversity has long been an issue for ESG-minded shareholders, this season they’ve upped the ante. Resolutions asking companies to disclose real numbers — rather than just commitments — on employee and C-suite diversity doubled from one year ago, to 69, a record.

Beyond philanthropy

Both the diversity and racism-related shareholder proposals consistently draw attention to the dichotomy between words and deeds, something the businesses themselves pretty much invited when they made public statements, such as Amazon’s tweet. Two-thirds of the corporations listed on the S&P 100 declared their solidarity with the Black Lives Matter movement after the killing of Floyd at the hands of a Minneapolis police officer.

Soon after, the New York City Comptroller’s Office, which oversees the city’s various pension funds, wrote to the CEOs of 67 companies calling on them to match their words with action, specifically by making public the race, gender and ethnicity data they file with the federal Equal Employment Opportunity Commission. Most companies agreed to disclose the information and the comptroller’s office filed shareholder proposals with the 24 that didn’t. As additional companies have acquiesced, resolutions have been withdrawn. As of early February, 15 appeared likely to go to a vote, including proposals at Lowe’s and Disney.

Similarly, a group of investors led by CtW Investment Group and the Service Employees International Union has filed shareholder resolutions with eight Wall Street firms — Bank of America, BlackRock, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, State Street and Wells Fargo. These proposals note the banks’ anti-racist statements and investment commitments, along with descriptions of histories fraught with racist policies and business practices. The investors called on the firms to audit and publicly report their adverse impacts on nonwhite stakeholders and communities of color.

At least three banks — Citigroup, Wells Fargo and Bank of America — are urging shareholders to vote against the proposals, saying they’re already doing enough to address these issues. In its proxy released in March, Citi pointed to its $1 billion commitment to increase access to banking and mortgages for communities of color, plus making investments in Black businesses. Bank of America, which also released its proxy in March, said that it has committed $1 billion to supporting minority-owned businesses, jobs initiatives in Black and Hispanic communities, affordable housing and donations to historically Black colleges and universities.

For their part, investors note that philanthropic contributions or financial commitments to Community Development Financial Institutions don’t address the broader adverse effects of discriminatory policies on mortgage lending, checking accounts and small business funding that have perpetuated racism for decades.

Other examples of racism-related shareholder proposals:

  • The resolution at Amazon, filed by the New York State Common Retirement Fund, calls on the company to disclose its racial equity impacts along with a plan for improvement. It specifically notes last year’s firing of Chris Smalls, a Black worker who led a walkout over COVID-19 safety concerns and who was described by the company’s general counsel as "not smart or articulate," as well as the disproportionate number of Black and Latino workers who are "paid low wages and exposed to dangerous working conditions."
  • At Johnson & Johnson, a resolution filed by Trillium Asset Management addressed racial disparities in healthcare, including Black Americans’ underrepresentation in clinical trials and the higher mortality rates for breast cancer among Black women. There is also concern regarding the company’s decision to end the sale of talcum powder — linked to ovarian cancer — in North America while continuing sales globally.
  • The Sisters of St. Francis of Philadelphia filed an environmental justice proposal at Chevron asking for an independent, third-party report "analyzing how Chevron’s policies, practices and the impacts of its business perpetuate racial injustice and inflict harm on communities of color in the United States."

For the most part, the companies facing these resolutions don’t appear especially eager to prove they mean what they say. Several have asked the U.S. Securities and Exchange Commission to exclude the proposals and, when that didn’t work, urged shareholders to vote against them, according to news reports.

We’ll see in the coming months whether the efforts of a small group of shareholder advocates can win the support of their fellow investors. Either way, these proposals should be a clear sign to companies that consumers and investors are listening to what they say — and will be watching what they do.

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