Featured Report
Equity in the Boardroom: How Asset Manager Voting Shaped Corporate Action on Racial Justice in 2021
While 2020 brought a swell of protests for racial justice and an outpouring of statements from corporations acknowledging the existence of systemic racism and their responsibility for addressing it, 2021 brought into sharp relief many corporations’ failure to adjust their policies and practices accordingly, including their ongoing support for elected officials implicated in the Capitol Insurrection and voter suppression efforts across the country.
Earlier this year, ahead of annual shareholder meetings, more than 140 racial justice leaders and allies signed a full-page ad in the Financial Times calling on the biggest asset managers to stand by their public statements of support for the Black Lives Matter movement and use their power as large shareholders to address corporate contributions to systemic racism. Instead, as Equity in the Boardroom: How Asset Manager Voting Shaped Corporate Action on Racial Justice in 2021 demonstrates, major asset managers failed to use their outsized proxy voting power to hold corporate boards accountable for harmful and inequitable practices and governance.
KEY FINDINGS:
The four largest asset managers, BlackRock, Vanguard, State Street, and Fidelity, failed to support the majority of shareholder proposals calling for enhanced oversight and disclosure of political spending and lobbying at S&P 500 companies. Fifteen such shareholder proposals would have received majority support but for large asset manager votes against - including at ExxonMobil, Chevron, JPMorgan Chase, and Home Depot, all companies known to be substantial contributors to elected officials driving voter suppression and/or backing the January 6th Insurrection.
Large asset managers rubber stamped key directors in charge of political spending oversight at companies like AT&T, Home Depot, and Delta, which had been challenged by activists and shareholders to reform their political spending policies after their support for state-level officials driving voter suppression was exposed.
Vanguard and Fidelity voted against every shareholder proposal calling for a corporate racial equity audit, including at Amazon. If only Vanguard had voted in favor of that proposal at Amazon, or if Fidelity and T Rowe Price had supported it, the racial equity audit demand would have received majority shareholder support, overcoming Jeff Bezos’s opposition. State Street joined Vanguard and Fidelity in voting against a similar racial equity audit proposal at JPMorgan Chase, a bank with a highly controversial track record on racial equity and justice; the proposal would have received majority support but for those three managers’ votes against.
Shareholders proposed that Facebook report on the misuse of its platform to promote disinformation and violence. BlackRock and Vanguard voted against that proposal. If they had voted in favor of the proposal, it could have received majority support from outside shareholders, sending a strong message of shareholder concern to the company’s board and controlling owner Mark Zuckerberg.
Many major asset managers overwhelmingly voted in favor of directors at companies with all white boards, or boards with a single director who is a person of color. While PIMCO, State Street, and Northern Trust supported fewer than half of nominating committee chairs at companies with an all-white board in the S&P 500, Fidelity voted in favor of every director at every company with an all-white board at which it voted.
RECOMMENDATIONS:
The report recommends that large asset managers must use their power and responsibility to promote racial justice by:
Conducting comprehensive racial equity audits of their own investment processes, stewardship activities, and proxy voting guidelines and decisions
Upgrading proxy voting policies to vote against directors with responsibility for nominating directors on boards with insufficient racial and ethnic diversity, vote against directors at companies with inadequate oversight of political spending, support full and comprehensive disclosure of policy influence activities, and support resolutions seeking to improve oversight of risks driven by systemic racism, in particular those calling for racial equity audits
Setting an expectation that boards take responsibility for overseeing the risks associated with systemic racism, and hold boards accountable that fail to properly oversee such risks.