The US-based pension scheme the Service Employees International Union Master Trust has failed in a bid to get State Street to undertake a racial equity audit, but 36.8 per cent of shareholders backed its resolution.
Management resisted the call for a racial equity audit, recommending that its shareholders vote against the proposal.
The vote illustrates the potential for organisations operating within the pensions industry to face significant shareholder activity over business practices.
State Street has said it has instituted a programme of actions to address racism and inequality, including a tripling of its Black and Latinx representation in its leadership team. It has also said that racial equity will be one of its two stewardship priorities for the 2021 proxy season.
Campaigners say State Street’s track record highlights why such an audit is needed. In 2017, State Street paid $5m to settle Department of Labor charges based on a pay equity analysis that showed the company paid top female and black workers less than top male and white workers. State Street has not outlined any steps it has taken to audit its pay practices to determine whether a racial pay gap exists more broadly at the company, say campaigners.
In February, a coalition of state treasurers, elected fiduciaries and trustees from funds with assets under management of over $1 trillion called on State Street to re-evaluate its approach to political spending after it was revealed it had donated $67,000 to 20 legislators who continued to deny the results of the 2020 presidential election after the January 6 insurrection at the US Capitol.
The Service Employees International Union Master Trust is a multi-billion dollar scheme for the 2 million members of the SEIU.
SEIU secretary-treasurer Gerry Hudson said: “State Street has a responsibility to shareholders to redress its failures on racial justice, but instead, it’s resisting their calls for action.
“A racial justice audit would bring a sorely needed comprehensive evaluation of how State Street’s corporate behaviour has harmed both its internal and external stakeholders and the risks it poses to the company. State Street must change course to break from their current support of boards that lack racial and ethnic diversity and undermine racial justice resolutions.”
Eli Kasargod-Staub CFA, executive director of shareholder activism group Majority Action said: “State Street should be using its outsized holdings to mitigate the harms that systemic racism creates to long-term investors, but it continues to evade responsibility for this stewardship.”
A State Street spokesperson said of its approach to racial diversity, equity and inclusion: “We are taking voting action at companies in the S&P 500 and FTSE 100 that do not disclose the racial and ethnic diversity of their Boards. Having access to that data will empower us to take voting action against companies that do not have any Directors of color in the 2022 proxy season.
“We are leveraging our existing framework for voting on shareholder proposals related to a company’s role in the political process, as outlined on our website. We expect transparent disclosures on this topic, and are engaging companies in conversations about the importance of preserving the integrity of the democratic process.
“We are carefully evaluating each shareholder proposal related to racial equity audits and other relevant topics, and leveraging engagements and disclosures to assess (a) whether a company’s Board has explicit and structured oversight of racial equity, (b) which risks they oversee, and (c) how the company plans to manage and mitigate those risks. We expect a company to look beyond internal diversity and inclusion and also focus on risks related to the adverse impacts of products, practices, and services on communities of color.”