Last year, the consultants at McKinsey & Company set out to study racial equity in the financial sector. The firm’s report concluded that the industry gets dramatically whiter the further you go up the corporate ladder. McKinsey’s research also painted a bleak picture of the workplace experiences of Black, Latinx and Asian employees in the financial sector.
You might not be shocked, especially if you are familiar with corporate culture in the world of financial services. Such findings are nonetheless fueling demands from shareholders for banks to evaluate racial equity within their walls. And three of the largest banks in the United States—Citigroup, Wells Fargo and Bank of America—are pushing back against the requests.
The three companies received similar shareholder proposals this year from institutional investors calling for the banks’ boards of directors to oversee audits of the companies’ “adverse impacts on nonwhite stakeholders and communities of color.” The proposals noted that as protests in support of racial justice swept the country last summer, CEOs Charles Scharf of Wells Fargo, Brian Moynihan of Bank of America and Michael Corbat of Citi commented in support of the movement. They also pointed out that the banks pledged to promote diversity and fight racial inequity in their own workforces and society at large.
You could read the proposals as holding the financial services companies accountable for promises they’ve already made. But the banks have recommended that shareholders vote against the proposals.
For its part, Wells Fargo pointed out that it has already engaged a third party to conduct a “human rights impact assessment” for the company that includes racial equity. The board also detailed several existing efforts that it indicated should address the concerns underlying the proposal.
Bank of America’s board made a similar case in its recommendation, suggesting that the proposed audit would be redundant considering “our actions and focus in making progress on the issue of racial equality, and reporting on our progress regularly.” Likewise, Citi’s board cited a host of similar initiatives it has undertaken.
It bears mentioning that JP Morgan Chase and Amazon received similar proposals. The two companies have requested no-action letters from the Securities and Exchange Commission; in order to succeed, however, they will have to make stronger arguments than the three banks, all of which had to include the proposals in their proxy statements.
Are these companies doing the kind of self-assessments necessary to achieve their stated goals in terms of racial diversity and inclusion? We’re still in the early days of developing rigorous programs to evaluate companies on such objectives.
These shareholder proposals, however, illustrate the commitment of some investors to ensure that companies walk the walk on these issues. And while they are focused on financial services for now, other industries should expect to be held to account in future proxy seasons.