Citigroup Agrees to Implement Racial Equity Audit After Shareholder Proposal

Corporate Governance, ESG and Diversity & Inclusion

Citigroup has hired law firm Covington & Burling to complete an audit to see whether the bank’s business practices contribute to racial inequity and discrimination. Interestingly, the audit appears more focused on Citi’s business practices than on racial equity concerns with the workforce. Citi is the first major bank to undertake such an effort. In fact, other large banks have resisted efforts to encourage similar audits, highlighting initiatives to close racial gaps in investments and access to credit.

Citi is taking the step despite having initially opposed the effort. It appealed to the SEC to remove a CtW-submitted racial equity audit shareholder proposal from the annual meeting ballot, but the appeal was denied. Citi then actively encouraged shareholders to oppose the proposal. Ultimately, the proposal received support from 39% of shares outstanding and Citi elected to conduct the audit. 

While Citi is the first major bank to conduct such an audit, BlackRock announced a similar audit in April 2021 which will be completed next year. Meta (formerly Facebook) and Airbnb have also conducted investigations and Starbucks recently hired Covington & Burling to complete its audit process. 

ISS surveyed investors on racial equity audit views recently and found that 44% of investors feel most companies would benefit from an audit regardless of the existence of diversity programs or any racial equity controversies while 47% felt an audit should be determined by the specific circumstances. Citi’s willingness to implement the audit may increase activist pressure at other banks and financial companies, and similar shareholder proposals may see increased support at 2022 annual meetings.