ISS Discusses 2022 Shareholder Resolutions Requesting Civil Rights Audits

More shareholder resolutions were filed in the 2022 proxy season than in the previous year, with approximately 932 environmental, social, and governance shareholder proposals submitted at U.S. companies so far, compared to 903 proposals submitted in 2021, according to ISS Voting Analytics data. The number of proposals focusing on environmental and social issues is estimated to have risen from 500 submissions in 2021 to approximately 588 proposals in 2022. Though many proposals have since been withdrawn, many have been or will be voted on. According to data from ISS Corporate Solutions, 578 shareholder resolutions on ESG issues have either been voted on or are pending in annual meetings through November this year.

What Are Civil Rights Audits?

In this snapshot, we examine the results for a new type of shareholder resolution – on civil rights audits. A typical description of a civil rights audit comes from a proposal at Apple, which has already received majority support: “a third-party audit analyzing the adverse impact of Apple’s policies and practices on the civil rights of company stakeholders [including employees], above and beyond legal and regulatory matters, and to provide recommendations for improving the company’s civil rights impact.” Resolutions requesting civil rights audits arose following the widespread protests over the killing of George Floyd in 2020, and the subsequent statements by corporate leaders supporting racial justice and seek to test whether such statements are reflected in company policy and governance. The audits cover topics such as workforce demographics, hiring policies, advertising, privacy and misuse of technology.

The proposals examined include the following:

  • Report on Civil Rights Audit
  • Report on Workplace Non-Discrimination Audit
  • Report on Third-Party Racial Equity Audit
  • Report on Civil Rights and Non-Discrimination Audit
  • Report on a Civil Rights, Equity, Diversity and Inclusion Audit

Voting Results

Some 23 racial/civil rights proposals have been voted on this year. Vote results were tabulated based on company filings up to August 8 this year. Among voted proposals, eight passed, at Apple, Waste Management, Johnson & Johnson, Home Depot, McDonalds, Altria Group, medical services company Stericycle and IT company MAXIMUS. Average support for this type of proposal was 44.5 percent of votes cast FOR and AGAINST.

In addition to the eight proposals that passed, 12 other resolutions received high levels of support (defined as greater than 30% of votes cast), with proposals at American Water Works, Mondelez International, Chevron and The Travelers Companies narrowly missing majority support.

Voting support for these very new resolutions is extremely high and some companies have already conducted audits, such as Meta (Facebook), Starbucks, BlackRock and Airbnb. A resolution was withdrawn at Amazon, when it agreed to conduct a racial equity audit in April this year.

In parallel with ‘racial and civil rights’ shareholder resolutions, a different set of ‘civil rights and non-discrimination audit’ proposals have appeared on ballots this year. These proposals seek to counterbalance the resolutions discussed above. Proponents of these resolutions argue that civil rights and racial audits may disadvantage ‘non-diverse’ employees through an overt focus on increasing opportunities for, for example, people of color. These resolutions are often filed at companies that have already conducted civil rights audits. Unlike the resolutions discussed above, these proposals received very low levels of support. Among the 11 such proposals that went to a shareholder vote in 2022, support levels (FOR votes) averaged 2 percent of votes cast FOR and AGAINST, with no proposal exceeding support of more than 4 percent of votes cast.