Exclusive: Apple investors call for civil-rights audit

Apple Inc. has declared its commitment to racial and gender equity, but it is now facing a shareholder call for a civil-rights audit amid employee controversies and slow progress in diversifying its workforce.The first-of-its-kind proposal for Apple
comes on the heels of recent news that the tech giant is being investigated by the U.S. Labor Department for alleged harassment of and retaliation against an employee who raised concerns about workplace safety, as well as other formal complaints from former employees. It is one of several governance- and sustainability-related proposals the company’s investors are expected to face at its annual general meeting in 2022.
The shareholder groups that filed the proposal say the company reportedly shut down employee-run surveys on pay equity, and also mentioned the hiring (and subsequent firing after employee protests) of a manager who had “a history of misogynistic and racist commentary.” In addition, the alliance of three shareholders says that for all of Apple’s publicly stated commitments to racial justice and equity — including $100 million for a racial justice initiative after the Black Lives Matter protests in 2020 — the company’s progress in diversifying its own ranks has been negligible. “It is unclear how Apple plans to address racial inequality in its workforce,” the proposal, shared exclusively with MarketWatch, says. “Apple currently has no Hispanics and only one Black member on its executive team.” Cher Scarlett, a former software engineer on Apple’s security team who left the company in November after filing complaints with the National Labor Relations Board over her allegations of Apple’s actions against employee-wage surveys, told MarketWatch this week that “Apple’s behavior is not reflective of the mission and values they portray to their shareholders and the public.” See: Apple reportedly banned a Slack channel employees created to discuss pay SOC Investment Group teamed up with the Service Employees International Union and Trillium Asset Management on the proposal; the group filed their proposal in the fall but only recently found out it will actually be on the proxy. The SEIU’s pension fund’s holdings include Apple, while SOC owns 21.9 million shares of the company and Trillium said it owned more than 1 million shares of Apple as of the end of the third quarter. “They’re spending money on racial and mostly philanthropic initiatives and don’t really address the company’s own policies,” Dieter Waizenegger, executive director of SOC, told MarketWatch. “The chief diversity officer is not in the C-suite, and there’s a really low percentage of Black officers in the company. Whatever the company’s doing, it seems like there’s a gap.” In 2014, Apple’s leadership was 3% Black and 6% Hispanic. In 2020, those numbers rose to 4% Black and 8% Hispanic, according to the company’s diversity report. Its tech workforce was 6% Black and 7% Hispanic in 2014. In 2020, Black employee representation in its tech workforce remained at 6%, while the Hispanic percentage inched up to 8%. Apple has not announced the date of its annual general meeting, but it is expected to release its proxy in January and hold the meeting soon afterward. An Apple spokesman said the company had no comment on the proposal. Trillium’s chief advocacy officer, Jonas Kron, said Apple and other companies generally emphasize their diversity initiatives, employee resource groups and financial commitments. “That’s all great and commendable,” Kron said. “But it doesn’t mean they don’t have blind spots, or that they have some sort of process for ensuring accountability.” He likens a civil-rights audit to the financial audits that are required of all companies. “Given the importance of gender and racial equality, having this level of review is not only appropriate but highly beneficial,” Kron said. Prompted by the racial reckoning that was sparked by the police murder of George Floyd in 2020 and subsequent statements of corporate commitment to social-justice issues, shareholders submitted what was believed to be a record number of proposals related to racial equity in the 2021 proxy season. Kron said the percentage of votes for those types of proposals were high and could continue to rise. See: Companies declared ‘Black lives matter’ last year, and now they’re being asked to prove it As for civil-rights audits specifically, they have had varying degrees of success at other high-profile companies such as Starbucks Corp.
Facebook parent company Meta Platforms Inc.
and Airbnb Inc.
A 2016 civil-rights audit at Airbnb, spurred by claims of bias, led to the company’s establishment of a non-discrimination policy, while civil-rights auditors this year sharply criticized Facebook for putting civil rights considerations in the “back seat.” After a famous incident in which two Black men waiting for a business meeting were arrested for refusing to leave a Starbucks in Philadelphia in 2018, the coffee chain has since had three civil-rights audits that have examined its diversity, equity and inclusion practices and policies as they affect customers, employees and communities. For more: Starbucks’ muddled ‘community culture’ was a contributing factor in arrest of two black men Although the latest audit released in the spring lauded Starbucks for keeping its baristas employed despite store closures at the beginning of the pandemic, some locations are now seeing some worker discontent. Earlier this month, a Starbucks in Buffalo, N.Y., became the first store to unionize, and other locations are hoping to do so as well. SOC’s Waizenegger pointed to the Starbucks unionization push as proof that no matter how popular a company is, how high investor returns are or what steps they’ve said to have taken to treat their employees or customers fairly, “things can happen quickly sometimes. Even very successful, well-regarded companies have to be mindful of that.” That’s where civil-rights audits could make a difference, he said, and Kron agreed. “A company shouldn’t wait for controversies to arise to do a racial-justice audit,” Kron said, adding that investors need not wait to ask for an audit, either. Apple stock has risen about 28% so far this year, while the S&P 500 Index
is up about 23% year to date. See: Citigroup, Wells Fargo, Bank of America, Goldman Sachs, JP Morgan urge shareholders to vote against racial-equity audits More: Citi reverses course on racial-equity audit, will look at $1 billion pledge made after death of George Floyd

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