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Shareholder-Advisory Firms Take Opposing Views on Racial Audits

April 17, 2021, 1:00 PM

Two of the leading shareholder-advisory firms are on opposing sides of a new investor proposal: racial audits.

Shareholder resolutions filed with Inc., Johnson & Johnson and some of the biggest U.S. banks request that the companies undergo independent racial audits to see if, and how, their business models cause, reinforce or perpetuate racial discrimination. Glass, Lewis & Co. recommends shareholders vote in favor of most of the proposals when they gather at annual meetings in coming weeks; Institutional Shareholder Services advises voting against.

Glass Lewis and ISS clients include managers of the largest pension plans and investment funds, and the proxy-advisory firms provide guidance on thousands of shareholder resolutions each year. Investors, including the New York State Common Retirement Fund, CtW Investment Group and Service Employees International Union, have filed proposals calling for civil-rights audits in response to widespread U.S. protests that have focused on racial injustice.

Glass Lewis has broadly said conducting the audits would help companies reduce risks of high-profile controversies that may result in customer and employee attrition, regulatory inquiries and significant fines. “Given broad societal changes, it is particularly important for consumer-facing companies,” which depend on their customers’ trust and loyalty, “to address issues of racial equity,” the firm writes in its reports.

Read more: BlackRock Breaks Wall Street Ranks With Planned Racial Audit

ISS says racial audits aren’t warranted because companies are taking “sufficient meaningful actions” to address racial inequities such as expanding opportunities for people and communities of color, as well as improving the diversity and inclusion of its workforces.

Subodh Mishra, a spokesman for ISS, said the firm doesn’t comment on specific resolutions beyond what’s in their reports.

“It isn’t unusual that Glass Lewis’s analysis and recommendations differ from other proxy advisers’ given that each firm independently reviews proposals based on unique voting policy guidelines,” said Jennifer Thompson, a Glass Lewis spokeswoman.

In one case, ISS and Glass Lewis both recommended that investors vote against a racial audit at Wells Fargo & Co. The bank has hired a third party to conduct a human-rights assessment that includes a specific focus on racial equity. Wells Fargo said the review is being conducted this year and a summary of the results will be published.

BlackRock Inc., the world’s largest asset-management firm, and CoreCivic Inc., which operates private prisons, also have agreed to conduct independent audits after receiving questions from shareholders.

At Johnson & Johnson, Goldman Sachs Group Inc., Citigroup Inc. and Bank of America Corp., ISS has recommended shareholders vote against the racial-audit proposals, while Glass Lewis has advised investors vote in favor.

ISS and Glass Lewis haven’t made their recommendations yet on Amazon’s resolution. The company wants shareholders to reject a racial audit.

To contact the reporter on this story:
Saijel Kishan in New York at

To contact the editors responsible for this story:
Tim Quinson at

Daniel Taub

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