Large banks
But as the votes have been tallied at annual meetings, supporters of these proposals have been encouraged by the results. While the majority of shareholders at Bank of America, Wells Fargo, Citigroup and Goldman Sachs voted against requiring racial equity audits, a sizable minority backed the idea.
“We are happy with the result,” said Dieter Waizenegger, executive director of CtW Investment Group, a shareholder that formally proposed the idea at several companies, including BofA. “We think the boards need to pay attention to these results.”
The audits would formally examine bank lending practices, branch locations and other business decisions for signs of “adverse impacts” on people of color. The proposals have also included a measurement of diversity within the companies’ ranks and an assessment of whether massive philanthropic investments announced in the wake of George Floyd’s death in police custody and the civil unrest that unfolded last year address the economic issues the banks are targeting with the money.
Not counting those who abstained from voting, more than 38% of Citigroup shareholders supported the racial equity audits, followed by 31.1% at Goldman and 26.5% at Bank of America. Wells Fargo faced the fewest votes in favor of the proposal at about 13%. The San Francisco bank’s executives have said they are in the middle of a human rights impact audit that involves a third party and would cover much of the same ground.
“The difference is our focus on racial equity is part of a broader assessment that also includes other aspects of human rights,” Wells Fargo Chairman Charles Noski said April 27 at the annual meeting.
Banking leaders were spared some of the typical fiery questions from shareholders during the meetings that were once again held virtually because of the COVID-19 pandemic. But those supporting the racial equity proposals were allowed to make their pitch.
During the Citi meeting on April 27, Tejal Patel, corporate governance director at CtW Investment Group, pointed to recent examples of racial inequality. She said that large banks prioritized existing clients in the early days of the Paycheck Protection Program and questioned how
“Given such a significant sum, investors need assurances that the bank’s policies are effective at addressing this issue and that Citi is not acting in other ways that negate any positive impact,” Patel said.
Citi’s new CEO Jane Fraser addressed the concerns during the meeting even though the bank urged shareholders to reject the proposal as “not necessary.”
“Given Citi’s commitment to addressing racial disparities, social justice and the racial wealth gap … I would say that Citi is already addressing this proposal, although we fully recognize that there is a lot more work to do, and we’re committed to continue doing so,” Fraser said.
Several of the proposals cleared upcoming requirements from the Securities and Exchange Commission that they meet certain thresholds before they can be resubmitted. The highest bar is that a shareholder measure must get 25% of the vote, excluding abstentions and broker non-votes on its third attempt. Many racial wealth audit proposals passed this mark in their first year in a signal about how they may fare under the rules that go into effect next year.
The largest bank in the U.S. by assets, JPMorgan Chase, is scheduled to hold a highly anticipated vote on the proposal during its annual meeting on May 18.
The proposals have been supported by major public investment groups like the California Public Employees' Retirement System and the New York City Pension Funds, according to Waizenegger.
“We anticipate this sentiment will only become more urgent in the coming years, as Bank of America and other institutions face blowback for the adverse impacts of their practices and policies on communities of color,” Waizenegger said.
Bank of America urged shareholders not to support the measure in its proxy materials and pointed to ongoing efforts to report the bank’s impact on issues surrounding race.
“We believe our actions and focus in making progress on the issue of racial equality, and reporting on our progress regularly, render the proposal’s requested audit unnecessary,” the bank said in its proxy statement.
New York State Comptroller Thomas P. DiNapoli, who oversees state pension funds and supports the racial equity audit proposals, said in a statement that it’s important for the large banks in which the pension funds invest to address racial equity issues.
“The results so far are encouraging, particularly for a new proposal, and show that a significant percentage of investors recognize the risks that failure to address racial injustice presents to their long-term value,” DiNapoli said. “All investors should be asking their portfolio companies if their policies, practices, and products are fair and nondiscriminatory.”
