- BlackRock said this spring it would conduct a racial equity audit after the SEIU’s proposal.
- The union, with some 2 million workers, is now pushing for similar disclosures elsewhere.
- Other firms appear less amenable. Still, the agreement highlights growing calls for transparency.
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Edgar Hernández was shocked. It was late March when he got word that BlackRock, the world’s largest asset manager and among the most influential institutional shareholders, agreed to the proposal his team worked on for months: that BlackRock carry out an independent racial equity audit, analyzing the firm’s impact on nonwhite communities.
Hernández, assistant director in the Service Employees International Union’s strategic initiatives department, has typically felt leaders understand the issues the union is pushing them to address, but are largely hesitant to conduct these types of audits.
“No one likes to be told what things are wrong, and what things they can improve upon,” he told Insider. “Once we heard back from them, I was really pleasantly surprised.”
The SEIU, which represents some 2 million janitors, security officers, child care providers, and other workers in the US, Canada, and Puerto Rico, is one of the most powerful unions. It submits shareholder proposals through its vast pension plan program along with CtW Investment Group, which works with a coalition of unions that includes the SEIU and pension plans with some $250 billion in assets.
Still, firms don’t jump at the chance to release more information unless it is required or stakeholders pressure them. Some, like JPMorgan and Bank of America, the two largest US banks, have urged shareholders vote against proposals seeking racial equity audits because they say they are already taking steps to address systemic racism internally and externally.
But as BlackRock has agreed to conduct that audit, which it will complete in 2022, the SEIU and CtW are riding a burst of momentum.
“While we understand we have this moment now, we have to do all we can, because who knows what things are going to be like a year from now,” Hernández said. “I don’t think we’re going to achieve racial justice in a year’s time, but I understand that there is a cycle to things and everything’s got a shelf life.”
‘Investors want to see more than just basically glossy reports’
The SEIU and CtW are pushing the financial-services industry, among others, to take action on societal issues firms are increasingly under the gun to address. That includes political spending disclosures and curtailing exorbitant executive pay relative to the rest of firms’ workforces.
They have focused on big banks this proxy season, engaging with financial firms to allow independent racial audits.
Dieter Waizenegger, executive director of CtW, told Insider he was encouraged to hear Citi Chief Executive Jane Fraser reconsider its initial stance that it would not need to complete the racial audit CtW requested.
BlackRock’s agreement represents a unique win for the SEIU and CtW. The New York-based money manager, which oversaw some $9 trillion as of March, has nearly unparalleled voting power as a shareholder.
That power was on full display during oil giant Exxon’s shareholder meeting this spring — after criticism that BlackRock and rival fund managers have not challenged management enough.
The review of how BlackRock’s diversity, equity, and inclusion strategy is impacting the firm’s stakeholders will provide it “useful feedback in assessing our progress in areas for future focus,” the company said during its shareholder meeting in May. In the last year, BlackRock has vowed to improve the diversity of its own workforce and the way it handles employees’ complaints.
In a memo to employees on April 1, Manish Mehta, BlackRock’s global human resources head, and Michelle Gadsden-Williams, global diversity, equity, and inclusion head, said the review would conduct the review next year after laying the groundwork of the firm’s improved DEI strategy it presented the month prior.
Shareholders’ average support for resolutions this proxy season linked to diversity, equity, and inclusion at US companies has risen from 39% to 47% in a year — controlled for the influence of insiders with large holdings — according to an analysis for Insider by Morningstar’s director of investment stewardship research, Jackie Cook.
“The proposal and results show that there’s a real recognition that investors want to see more than just basically glossy reports from the companies, and lists of activities that they’re taking,” Waizenegger told Insider. “They want to see, really, an independent assessment of the effectiveness of all these programs.”