What Are Civil Rights Audits, and Why Are Companies Doing Them?

(Bloomberg) -- Calls for U.S. companies to perform what are known as civil rights audits grew in the wake of the protests that erupted across the U.S. in 2020 after the murder of George Floyd. They've been promoted by advocates as a way to help corporations understand and address their role in creating or sustaining racial disparities. They've also been dismissed by JPMorgan Chase & Co. Chief Jamie Dimon for adding “bureaucracy and BS,” although his company later agreed to conduct a narrow analysis. Shareholders of Apple Inc. and Johnson & Johnson approved resolutions calling for audits at their annual meetings this spring, while Chevron Corp., AT&T Corp. and others also face shareholder votes on whether to follow suit.

1. What are civil rights audits?

Also known as racial equity audits, they are independent examinations of whether the company causes or perpetuates discrimination. Advocacy groups and investors who support such audits argue they are a way to help address ongoing systemic racism. For example, banks have been criticized for contributing to economic disparities by charging Black customers higher fees for checking accounts and issuing them fewer mortgages as a result of policies that disfavor minority communities. That's different than, say, discriminatory actions driven by racism on the part of individual bank employees. 

2. What do they cover? 

Some audits are very broad, while others focus only on specific parts of a business. They can go beyond standard topics such as hiring and promotions into areas including: 

• Digital practices. Audits can examine things like the advertising tools used by social media platforms, and their impact in spreading targeted information and political messages to low-income groups. Some audits look at the algorithms companies use to see if they perpetuate biases against people of color. For instance, algorithms used by some hospitals to allocate health care to patients have been found to discriminate against Black people.
• Social justice pledges. JPMorgan's audit will examine the $30 billion commitment it made in 2020 to advance racial equity, which included funding of affordable housing, increasing the number of mortgages it underwrites for Black and Latino households and philanthropy in minority communities. Citibank Inc. is conducting an audit that will focus on its $1 billion commitment to efforts to close the racial wealth gap in the U.S.
• Labor practices. Amazon.com Inc., which had also opposed such reviews, in April 2022 announced that it was hiring former U.S. attorney General Loretta Lynch to lead one. Amazon's will target its treatment of nearly 1 million hourly employees in the U.S. -- a workforce that's largely made up of members of minority communities.

3. Who else is doing them? 

Companies from tech giants to Wall Street banks, from fast food chains to prison operators have been asked to undergo audits. 

• Airbnb Inc. in 2016 became the first major U.S. corporation to conduct an audit, after what Brian Chesky, its co-founder and chief executive, called “painful stories” emerged from customers whose requests to book rooms were rejected because of their race.
• Two years later, Starbucks Corp. agreed to an audit after coming under fire for an incident where a store manager called the police on two Black patrons who were waiting for a business meeting.
• Facebook Inc., now called Meta Platforms Inc., followed with an audit because of pressure to address issues relating to its content moderation.
• BlackRock Inc., the world's largest money manager, and private prison operator CoreCivic Inc. were among those that agreed to do audits after shareholders asked them to. Investors had pressed BlackRock, whose Chief Larry Fink had said his firm needs to consider where racial disparity exists within its business, to examine the dearth of Black people in its upper ranks and how its voting on shareholder resolutions at other companies affects people of color.

4. What kind of pushback has there been? 

Amazon and JPMorgan were among those that initially resisted calls for audits. They cited measures they have taken such as working with historically Black colleges and universities to recruit more graduates, along with taking steps to boost diversity, equity and inclusion across leadership. JPMorgan had also promised to channel billions of dollars into projects meant to help close the racial wealth divide. McDonald's Corp asked regulators to omit a shareholder proposal for a racial audit from the ballot at the company's 2022 annual meeting, citing pending lawsuits by Black franchisees and employees -- a request that was denied. Other companies including Home Depot Inc. will face votes at their upcoming annual meetings. 

5. Who performs the audits?

Companies generally hire law firms or civil rights experts such as Laura Murphy, a pioneer of the audits. Starbucks hired former U.S. Attorney General Eric Holder to conduct its review. Once the analysis is done, the auditors work with companies to publish reports with their findings and recommendations. Depending on the company and industry, an audit can take months or, in Facebook's case, two years. Audit results are in general made public, something Facebook initially resisted.

6. What kinds of recommendations do they make?

In addition to recommending things like training to promote diversity in the workforce and management, audits can include more specific suggestions. 

• Facebook last year hired a former U.S. Department of Justice official under President Barack Obama to set up a team to oversee its civil rights policy.
• Airbnb asked hosts to agree to a policy that they wouldn't discriminate against guests on its home-rental platform. The company said more than a million hosts declined to do so.
• Starbucks shut thousands of its stores to run anti-bias training after its audit.

7.  What kind of impact do audits have?

In some cases, there's clear evidence of changes resulting from audit recommendations. When Facebook suspended Donald Trump after the January 6 riot, some saw the effect of its racial audit, which had criticized the company for what the auditors saw as its enabling of misinformation from his account. In the case of Airbnb, while racial justice advocates lauded the company for the strides it made with its audits, they have said that the company needs to extend its online anti-discrimination policies to the actual experiences of Black users. 

The Reference Shelf

• Links to audits done on Airbnb, Starbucks, Facebook and more recently CoreCivic.
• A Bloomberg Intelligence Analyst Briefing: What Is a Racial Audit?
• A Bloomberg profile on Laura Murphy, a lawyer who is performing many civil rights audits.
• A white paper on civil rights audits by Murphy.
• A Bloomberg story about banks and racial audits.

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