Paul Hodgson: The gap between words and actions on racial justice

Everyone from digital print giant Xerox to tiny biopharma Nektar Therapeutics managed to get shareholders to withdraw resolutions calling for board diversity policies by promising to adopt them.

And everyone from financial services titan Mastercard to health IT company Cerner managed to get shareholders to withdraw resolutions for gender and racial pay equity policies by promising to adopt them. 

Meanwhile, hotel chain Choice Hotels International and home improvement megastore Home Depot were able to get shareholders to withdraw resolutions calling for disclosure of Equal Employment Opportunity (EEO) Commission data on the racial, ethnic and gender make-up of their workforces by promising to make the disclosures.

In fact, according to data from Sustainable Investments Institute (Si2) collated especially for RI by Si2 founder Heidi Welsh, the majority of diversity and inclusion (D&I) resolutions were withdrawn and were not voted on. Well over two-thirds of the 85 resolutions filed were withdrawn during the months leading up to proxy season; before the recent racial unrest following the most recent incidents of police brutality against people of colour.

That’s one of the positive stories.

Here’s another. Subsequent to the unrest and protests spreading across the US, support for D&I resolutions has reached a new high. An average of almost a third of investors supported resolutions on board diversity, almost half supported reporting on diversity programmes, a third supported reporting on EEO [Equal Employment Opportunity] and affirmative action.

And nearly 60% supported reporting on board diversity resolutions, and over two-fifths supported disclosing EEO data and reporting on executive diversity data resolutions.

As Welsh said: “Everyone keeps asking about the impact of BLM [Black Lives Matter] on proxy season. All the proposals were filed before this blew up, but the high votes on workplace diversity could not have occurred without big mutual fund support.”

A spokesperson at one of the companies receiving a significant majority vote told RI: “Our corporate secretary would say, certainly for US companies, today’s social unrest has caused these issues to rise to the surface.”

After one of the highest votes, 70% support for reporting on diversity programmes at small IT company Fortinet, in a press release, Meredith Benton, principal at SRI investor Whistle Stop Capital and SRI campaigner As You Sow’s workplace equity program manager said: “This level of unprecedented support for diversity disclosure shows a massive shift in understanding of the materiality of workplace equity.”

Now for the other side of the story. 

New York City Comptroller Scott Stringer, on behalf of several NYC pension funds, sent letters to the CEOs of 67 S&P 100 companies calling on them to “match their recent statements, affirming their commitments to racial equality and diversity and inclusion, with concrete action by publicly disclosing their annual EEO-1 Report data”. The consolidated EEO-1 Report is, continued the press release, the “gold standard” for diversity disclosure and “will enable investors to evaluate the performance of portfolio companies in terms of their ability to hire, retain, and promote employees of color and women”.

“It is not enough to condemn racism in words; systemic change in corporate America will require concrete action and accountability,” said Stringer.

The letters asked companies to provide a written commitment by the end of August 2020 to disclose their next effective EEO-1 Report in 2021. Without such a commitment, the NYC funds – the funds behind the highly effective Board Accountability Project – will file shareholder proposals or oppose the election of directors. The letter demands data that is standardised, quantifiable and comparable.

In other words, walk the talk.

Similarly, US asset manager BlackRock asked companies much earlier to publish disclosure aligned with Sustainability Accounting Standards Board (SASB) standards, which includes disclosing a racial and ethnic profile of a company’s workforce. The investment giant will also continue to engage with companies on the importance of board diversity. Its stewardship report also confirmed votes for the resolution at Fortinet and a fair lending resolution at banking company Santander, which actually only received 12.2% support, so clearly other large institutional investors did not support the resolution.

Despite the large number of withdrawn resolutions, a separate analysis of voting by Eaton Vance’s SRI arm Calvert, noted that every single one of the diversity resolutions that went to the vote was opposed by management recommendations against.

The list includes the IT triumvirate Facebook, Amazon and Alphabet, but also investment bank JP Morgan Chase and holding company Berkshire Hathaway. All have CEOs who have signed onto the new ‘purpose of a corporation’ statement that purports to put employees on a level with shareholders in the new ‘stakeholderism’.

Further humbug is exposed by a Center for Political Accountability report which exposes large, undisclosed donations by US corporations and their trade associations to so-called “527” groups, political groups named for the tax code exemption that covers them. The report “corrects a popular misconception that these companies are not major campaign finance players,” said CPA founder Bruce Freed. The report also points to how “such spending may place companies in the bulls-eye for charges of acting hypocritically; enabling gerrymandering, some racially driven; and supporting reduced access to affordable health insurance and attacks on efforts to address climate change and women’s and LGBTQ rights”.

Freed noted that both boards and investors “need to understand the potential and actual consequences of their company’s election-related spending and ensure those dollars advance rather than erode racial equity”.

If they care about racial justice, continued Freed, “it's time for them [investors] to vote in favour of shareholder proposals that encourage boards… to disclose and more effectively oversee the corporate funds they choose to use for election-related spending”. And for boards not to oppose said resolutions, he might have added.

Finally, in a video, Robert Reich, former US Secretary of Labor under President Bill Clinton and now head of Inequality Media Civic Action, attacks the “hypocrisy of corporate virtue signaling”, starting with Amazon CEO Jeff Bezos, who “says ‘Black Lives Matter’ but refuses to give his predominantly Black warehouse workers paid sick leave”.

He also points to JPMorgan CEO Jamie Dimon, who has been prominent among CEOs calling for inclusivity, but who presides over a corporation where “only 4% of his… top executives are Black”. In the video, Reich also notes that JPMorgan also settled two huge, recent lawsuits; one that said the bank discriminated against non-white ethnic groups in housing loans while the other alleged employment discrimination against non-white ethnic groups at every level of the organisation.

Reich goes on to say that BlackRock CEO Larry Fink says that racism “must be addressed on both a personal and systemic level” but notes that BlackRock is one of the largest investors in the private prison operators GEO Group and CoreCivic. Incarceration affects ethnic and racial minorities disproportionately in the US and BlackRock may be engaging with these companies on this issue, but providing them with capital may not be the best way to go about addressing the problem.

“Don’t be fooled by glitzy press releases and flashy PR stunts. Wall Street and corporations profit from and reinforce systemic racism in America,” said Reich in the video.

Change is coming, but the cliché that actions speak louder than words has never been more appropriate to the reaction of the US establishment – both investors and corporations – to the problems of racism in the US.