Proxy Voting Policy Language for Racial Equity Audits
Majority Action recommends the following model language for adoption into proxy voting guidelines.
Given that corporate actions that perpetuate systemic racial inequalities can create risks and harms at both the issuer and portfolio levels and the opportunities and benefits that can arise from ameliorating those disparities, [fund name] will generally support shareholder proposals that ask companies to conduct a racial equity audit to assess the impact of company policies and activities on stakeholders and communities of color. However, proposals that seek to undermine racial equity auditing or propose audits that would not in good faith assess racial inequalities to which companies contribute will not be supported. These can often be identified by proposals that request a racial equity or civil rights audit, but also ask that the audit assess “non-discrimination” or “returns to merit”; refer to diversity, equity and inclusion (“DEI”) programs or trainings as discriminatory against “non-diverse” people; assert that DEI programs are or are likely unlawful; and express skepticism about the existence of, or harms caused by, systemic racism by placing words like racism, anti-racist and equity in quotation marks.
Criteria for a Racial Equity Audit (REA)
A high-quality racial equity audit should:
Be conducted by an independent third-party auditor with expertise in civil rights and racial justice
Feature active engagement and cooperation from the company’s executive management and oversight by the Board of Directors, including granting the auditor access to necessary information and people
Go beyond workforce DEI issues to include a comprehensive review of company policies, practices, and products
Consult with a wide range of internal and external stakeholders and be transparent about which stakeholders were consulted. The company and the auditor should make a clear commitment that any stakeholder who engages in the audit will be protected from retaliation, intimidation, or disciplinary action.
Identify a clear plan of action and timeline for the company to implement audit recommendations, and publish a public report summarizing these findings
Involve a process of ongoing review, revision, and oversight no less often than every 5 years, including periodic progress reports on implementation
Examples of investors’ policy language on Racial Equity Audit (REA) proposals
There is a growing adoption of policy language around REA proposals by investors. Below are investors that have policy language around REA proposals:
Irish Life Policy: "ILIM will generally vote in support of shareholder proposals that seek to promote an inclusive culture, including proposals requesting disclosure of: (i) diversity and inclusion policies; (ii) disclosure of CEO, gender, race and ethnic pay gaps and equity audits; and (iii) disclosure of policies related to anti-discrimination and anti-harassment. This list is not exhaustive." (https://www.ilim.com/media/2011/ilim-global-proxy-voting-guidelines.pdf, p. 5)
Mercy Investment Services: “We support resolutions requesting a company to oversee a third-party racial equity or civil rights audit that assesses and produces recommendations for improving the racial impacts of the company’s policies, practices, and products, above and beyond legal and regulatory matters.”
Trillium Asset Management:
Racial Equity and/or Civil Rights Audit: “Always vote for proposals requesting that a company conduct an independent racial equity and/or civil rights audit, considering company disclosures, policies, actions, and engagements.” (proxy voting guidelines, p. 25)
Zevin Asset Management:
On Environmental & Social Issues
For proposals improving diversity, equity and inclusion (DEI), especially regarding gender and race, of the company’s workforce, including its extended or contracted workforce, and including disclosure, gaps, and policies
For proposals asking for the implementation of diversity policies or programs to increase workforce diversity among BIPOC, LGBTQ+, disability, and neurodiverse groups
For proposals calling for racial equity or civil rights audits (Info Sheet for Proxy Voting, p. 2)