Shareholders, investor groups and other key stakeholders are increasingly urging companies to conduct civil rights or racial equity audits. A civil rights audit is a comprehensive review of a company’s policies, practices, products and services and their discriminatory impact. Conducted by independent civil rights experts like Ms. Khera, a civil rights audit can strengthen a company by preparing it for any potential legal, public relations or regulatory risks and by addressing concerns from key stakeholders.
In recent years, many companies have been doing more to increase workforce diversity, board diversity and pay equity. At the same time, discrimination and equity concerns remain, both in the workforce, as well as in the companies’ products and services. For example, Google has yet to fully address complaints of both workplace and product discrimination, particularly its YouTube product, which allegedly amplifies racial and religious bigotry. Over a recent five-year period, 46 complaints of discrimination and sexual harassment were filed by workers against Tesla, Inc. As workers, consumers, and other key stakeholders demand nondiscrimination and responsible corporate action, companies can proactively address these concerns by conducting a civil rights audit.
As Laura Murphy, a civil rights expert and pioneering leader in civil rights audits, wrote in her report, The Rationale for and Key Elements of a Business Civil Rights Audit, successful civil rights audits should have three key components: they must be comprehensive, transparent and conducted by independent civil rights experts.
Comprehensive. A successful audit is comprehensive when it includes a full review of each component of a company for any discriminatory impact, including the company’s:
- Entire workforce: the auditor reviews pay equity, opportunities for advancement, and diversity, inclusion and representation among employees, contractors and board members.
- Products and services: the auditor reviews whether the company’s product or service is having a discriminatory impact on individuals or communities based on race, religion, ethnicity, national origin, age, disability, sex, sexual orientation or gender identity.
- Community impact: the auditor reviews the discriminatory impact of a company’s grants and philanthropic activities and policy and political advocacy.
Most importantly, the audit should be sure to include a review of any issues that are already known to the company. For example, when Starbucks conducted its audit, it began with a review of an incident at a Starbucks location in Philadelphia in early 2018 in which two African American customers were improperly removed from the premises, but its review went further to include a review of the company’s promotion policies and practices, supplier diversity and inclusion, and recommendations for strengthening communities.
Transparent. A successful audit must also be transparent. For the audit to have credibility with key stakeholders, including those who requested the audit, the company should agree to have the final report and any interim reports made public. These reports should be clear about the scope of the audit and its methodology, findings, expected outcomes and recommendations.
Independent Civil Rights Experts. Finally, a successful audit must be led by independent civil rights experts. Just as a company hires experienced accountants to conduct financial audits, a civil rights audit should be conducted by experts in civil rights laws and policies. The expert should have independence and not have a pre-existing financial relationship with the company that could give rise to an actual or apparent conflict with the expert’s ability to provide candid, unbiased analysis, advice and recommendations.
Why should a company agree to a civil rights audit?
First, a civil rights audit ensures that a company fully identifies – and then prepares for — all of its potential risks. Similar to a financial audit, a full and comprehensive civil rights audit will uncover legal and regulatory risks, as well as issues that may fall short of legal and regulatory risks but are nevertheless weighty and may affect a company’s products, services or practices, or have public relations implications for the company. For example, when Facebook (now, Meta Platforms, Inc.) conducted a civil rights audit, its auditors reviewed the company’s policies and practices that had given a platform to hate actors to stoke fear and violence and allowed foreign interference in a presidential election, which drew the ire of members of Congress and civil rights and civil society organizations, as well as the attention of federal law enforcement.
The importance of a full and independent audit was aptly described by Color of Change President Rashad Robinson: “It’s like going to the doctor, because if given the option, you certainly shouldn’t stop with a self-examination. And for your annual physical, if your doctor only examined your eyes that would give you plenty of information about your vision but you wouldn’t learn if you have a serious heart problem.”
Second, conducting a legitimate civil rights audit is an opportunity to lead and be responsive to the changing environment, before it is demanded by a majority of shareholders, or required by a legal settlement or court decision. For example, civil rights attorney Ben Crump filed a class action lawsuit on behalf of African American customers challenging Wells Fargo’s discriminatory lending practices. A civil rights audit could have addressed these concerns, which have long plagued the banking industry, and led to the systemic reforms that his lawsuit now seeks.
Companies that have so far rejected or shunned civil rights audits would be wise to conduct such audits to address known and potential risks. Roy Austin, Vice President for Civil Rights and Deputy General Counsel at Meta Platforms, Inc., said, “Just do it. It will make your company stronger.”