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Racial-Equity Audits Get More Buy-In From U.S. Companies

Meta Platforms’ racial-equity audit progress report, released last November, stated that the company had implemented 65 of its auditors’ 117 actions and recommendations. PHOTO: RAFAEL HENRIQUE/ZUMA PRESS

Welcome back. I’m Joann S. Lublin, a regular Wall Street Journal contributor and its former career columnist. I’ve also written two leadership books about female executives.

Joann S. Lublin

For this week’s newsletter, I’ve gathered guidance from experts and advocates about whether your employer should commission a racial-equity audit.

Also called civil-rights audits, these independent assessments gauge the effectiveness of corporate policies, programs and spending related to racial justice—plus the extent to which a company causes or perpetuates discrimination.

Big U.S. businesses such as Amazon.com Inc. and Citigroup Inc. recently asked outside legal specialists to conduct a racial-equity audit. Meta Platforms Inc., Airbnb Inc. and Starbucks Corp. previously completed theirs.

Some shareholders want more companies to follow suit. Eight of 22 nonbinding resolutions requesting these audits won majority support during 2022 annual meetings held as of mid-June, according to Alliance Advisors LLC, a proxy solicitation firm. “There’s clearly strong investor interest in the issue,’’ said Shirley Westcott, an Alliance senior vice president.

Similar proposals initially surfaced last year and attracted significant support—averaging 33%—in the wake of the Black Lives Matter movement and George Floyd’s murder. 

“In our wildest dreams, we never expected shareholders to accept the racial-equity audit idea this fast,’’ said Renaye Manley, deputy director of the strategic initiatives department at the Service Employees International Union. Half of SEIU’s six civil-rights audit resolutions were approved during annual meetings held so far this year.

Proponents contend these audits help combat systemic racism while expanding corporate accountability for handling employees, customers, product targeting and political contributions.

Even without investor pressure, experts suggest you conduct a racial-equity audit to reduce the chance of high-profile controversies that might increase staff turnover, depress sales and spur regulatory action. 

The extensive review represents “a preventive step to mitigate any potential risk,’’ explained Courteney Keatinge, senior director of environmental, social and governance research for proxy advisers Glass Lewis & Co. 

Yet “this isn’t just about reputation management,” because nondiscriminatory companies with very inclusive cultures perform better, said Jonas Kron, chief advocacy officer at Trillium Asset Management.

The Boston firm, which focuses on socially responsible investing, introduced or co-sponsored five audit resolutions this year, with one—for drugmaker Johnson & Johnson—passing.

However, racial-equity audits can take considerable time and cost at least $250,000 because they often tackle complex and ticklish topics. The choice of topics depends on a company’s unique areas of focus.    

Consider Meta, formerly known as Facebook. Auditors led by civil-rights attorney Laura Murphy published their final 100-page report in July 2020 following a two-year review, the social-media giant has said.

The audit report praised Facebook for making certain meaningful changes, but also found shortcomings with how the company policed hate speech and other problematic content on its platform.

Such audits “should be a company-wide effort,’’ with the chief executive or a board committee as its internal sponsor, said Ms. Murphy, president of consultancy Laura Murphy & Associates and former director of the American Civil Liberties Union’s Washington office.

The audit typically reflects viewpoints of a broadly defined array of external stakeholders. External assessments usually scrutinize news coverage, social-media campaigns and civil-rights litigation as well.

With this approach, these audits help businesses identify blind spots that might ignite harmful controversy. For example, “a company may discover it’s not delivering goods and services in different ZIP Codes equally,’’ Ms. Murphy explained.

“Stakeholder engagement is crucial because a lot of executives have no grounding in civil rights.”

— Laura Murphy, president of consultancy Laura Murphy & Associates and former director of the American Civil Liberties Union’s Washington office

“Stakeholder engagement is crucial because a lot of executives have no grounding in civil rights,’’ she continued.

Ms. Murphy conferred with numerous civil-rights organizations, federal and state regulators, lawmakers, academics, attorneys and travel-industry executives when she conducted a comprehensive civil-rights audit for Airbnb in 2016.

“An audit like this is an opportunity to create a road map and, most importantly, to address issues,’’ said Clark Stevens, Airbnb’s director of stakeholder initiatives and operations. The home-sharing business launched its audit following accusations from renters who said hosts discriminated against them because of race or other traits.

The review “was a really important first step,’’ Mr. Stevens noted. “This is a permanent, long-term focus for the company.”

It’s equally important that you publicize findings from a racial-equity audit without revealing competitive information. The audit report should describe your completed and pending corrective steps—especially measurable ones.

Quantitative actions may include specific goals for hiring, contracting and workers’ antibias training, according to Ms. Murphy.

But be realistic about setting goals because “you don’t want to overcommit,’’ recommended Sahar Hassan, a senior ESG consultant for global professional-services firm Aon PLC.

Regular updates are another good idea. Airbnb’s 2019 update said that more than one million new and existing hosts and guests had been denied access or removed from the platform because they refused to agree to treat everyone in its community with respect and without judgment or bias.

Meta’s audit progress report, released last November, stated that the company had implemented 65 of its auditors’ 117 actions and recommendations.

How often should you repeat your racial-equity audit? Certain advocates favor annual efforts. Others believe every few years should suffice.

The number of companies facing investor demands for such audits undoubtedly will keep climbing. “In 2023, we are very likely to see many more racial-justice audit proposals filed,’’ Trillium’s Mr. Kron predicted. “And many more such resolutions will win majority support.”

Continued Below: Are Racial-Equity Audits the New ESG Initiative?; How to Keep Your Job, or Find a Better One, if There’s a Recession

 
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Research Spotlight: Are Racial-Equity Audits the New ESG Initiative?

Some companies, such as Starbucks, have used the findings of racial-equity audits to develop a strategic plan to capitalize on opportunities to address racial equity. PHOTO: DAVID PAUL MORRIS/BLOOMBERG NEWS

Shareholders are increasingly calling on public companies to report on environmental and social issues. They are paying particular attention to civil rights and social justice issues and requesting companies to conduct racial-equity audits.

Shareholder proposals called on companies to stop financing fossil fuels, reduce plastic waste and assess their positions on racial justice, among other issues, according to a review of filings by The Wall Street Journal. The number of votes on proposals asking companies to report on how they were tackling racial justice rose to 21, from 10 a year ago, according to the Sustainable Investments Institute. Average support rose to 46% from 34%. 

“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,” write Ron S. Berenblat and Elizabeth R. Gonzalez-Sussman, partners at law firm Olshan Frome Wolosky LLP, in a post on the Harvard Law School Forum on Corporate Governance website.

Mr. Berenblat and Ms. Gonzalez-Sussman say that the impact a racial-equity audit may have on a company may be felt in many ways. They write that these audits can focus on various aspects of a company’s business, including the treatment of customers at a company’s physical locations, the diversity of senior management, the targeting of products and even political contributions.

Following an audit, some companies, such as coffeehouse chain Starbucks Corp., have used the findings to develop a strategic plan to capitalize on opportunities to address racial equity moving forward, according to the authors. Racial-equity audits may also find that a company’s existing policies and practices aren't sufficient to address or may be perpetuating systemic social issues.

Proponents of racial-equity audits say such assessments would be beneficial for companies that have faced scrutiny on how their policies and practices have adversely affected communities of color.

Access the full report.

 
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Taking a Break Without Breaking Your Career

🎧 LISTEN: Thinking about taking a career break? But can stepping away from work hurt your chances of getting back in the game? Hear from three people who went through it, and how they came back. Also, Carol Fishman Cohen, CEO of the career re-entry company iRelaunch, gives us tips for how to take a break without breaking your career. Listen here.

 

How to Keep Your Job, or Find a Better One, if There’s a Recession

ELENA SCOTTI/THE WALL STREET JOURNAL, SHUTTERSTOCK; PIXELSQUID

The job market is still really hot. But concerns about the economy have many people wondering if their jobs are secure enough to survive.

In the past week, Tesla said it would lay off 10% of its white-collar workers and there have been layoffs and hiring freezes or slowdowns at Netflix, Carvana and Robinhood, among others. Several CEOs of major banks have warned that a recession could be on the horizon. Now, some workers are quickly shifting from demanding raises and promotions to volunteering for extra assignments in case the market takes a turn for the worse, employees and recruiters say.

There is no way to guarantee that your job will be safe, career advisers say. But you can control how much facetime you have with colleagues and put in extra efforts, say hiring managers and career advisers, several of whom advise people who work remotely to think about going into the office or visiting more.

Tessa White, a career coach who spent two decades in corporate human resources, including at UnitedHealth Group and Vivint Solar, said she’s now telling clients not to ask for raises and to keep their current jobs rather than jump ship to new opportunities.

“The pendulum is going back to employers again,” said Ms. White, founder of the Job Doctor, a firm that focuses on helping employees map their career paths.

She says the current mood among her clients is a massive shift from mere weeks ago when many felt they could push for more money and continued remote work—or just quit and find a new job quickly.

“Now is not a time to change a job, unless you really hate your job, because the last one hired is typically the first one let go,” Ms. White said.

 

What Else We Are Reading

  • Workers Don’t Feel Quite as Powerful as They Used To (WSJ)
     
  • The New Workplace: What Young Starters Need to Know (Financial Times)
     
  • How Forced Arbitration in the Workplace Became the Norm (Fast Company)
     
  • Small Businesses Fall Behind on Hiring as Inflation Takes a Toll (WSJ)
 

About Us

Chitra Vemuri curated and edited this newsletter.

✍️ Feedback on this newsletter? We would love to hear from you, so please get in touch. And be sure to visit us at The WORKPLACE REPORT

 
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