Harvard Law School Forum on Corporate Governance Publishes Olshan Article on Racial Equity Audits

The Harvard Law School Forum on Corporate Governance, one of the top online resources for discourse on corporate governance, recently published an article authored by Partner Ron Berenblat and Associates Claudia B. Dubón, Rebecca L. Van Derlaske, Ian A. Engoron, and Nikoleta Jaupi titled “Racial Equity Audits: A New ESG Initiative.” The article provides an overview of current environmental, social and governance (“ESG”) considerations at U.S. public companies, focusing on the rise of social justice concerns through an examination of the relatively new phenomenon of shareholder proposals requesting that companies conduct racial equity audits (“Racial Equity Audits”). Racial Equity Audits are an objective review process generally used to analyze a company’s policies, practices, and impact on diversity, equity and inclusion issues and to combat systemic racism. The 2021 proxy season saw the highest number of shareholder proposals for Racial Equity Audits to date and the authors believe this trend will continue. “We anticipate greater interest in Racial Equity Audits and similar initiatives in the upcoming proxy season and accordingly believe companies will be pushed to critically and objectively examine their current internal practices and policies relating to equity and inclusion to identify areas in need of improvement.” The article analyzes the growing influence of ESG concerns in activist campaigns through an examination of shareholder proposals for Racial Equity Audits in the 2021 proxy season, including an overview of the subject companies’ responses to, SEC review of and the ultimate outcome of such proposals.  The article includes an in-depth case study of Amazon.com, Inc.’s response to a shareholder proposal requesting a Racial Equity Audit.  The article also discusses the focus of Racial Equity Audit proposals on the financial industry, including BlackRock’s decision to conduct an audit in response to such a proposal.  The authors ultimately conclude that Racial Equity Audits are likely here to stay and “[g]iven current trends in ESG, public companies should stay informed on Racial Equity Audits and their adoption, crafting, and implementation.”

Read the article in its entirety here.