Accountability for inclusion ratchets up with JPMorgan critique, Knight Foundation report

JPMorgan Chase  & Co. released a racial equity report, and SOC Investment Group is not impressed.

“Jamie Dimon took the knee after George Floyd, and now they have to share the results. Instead, they put it in the smallest box they could,” said Dieter Waizenegger, executive director at SOC, referring to a common recognition of racial justice solidarity invoked in the wake of the May 2020 murder of Black Minneapolis resident George Floyd.

SOC is an advocacy group that challenges corporations on racial, social and other issues. Its public critique of JPMorgan’s racial equity audit is evidence of mounting pressure on large companies and nonprofits to reveal not just raw numbers but also the rationale for those results … and their responses.

Last week, the Knight Foundation released its annual analysis of the representation of women- and minority-owned asset management firms hired by major philanthropic groups and foundations.

The report parallels analysis by the House Committee on Financial Services of the proportion of women and minority-owned asset management firms hired by banks, investment firms and insurance companies.

The Knight Foundation invited 55 major foundations to respond to its 2022 survey; 35 did, up from 26 when the foundation started its annual survey. Collectively, of the $78.6 billion in assets of those foundations, 18.1% is managed by firms run by women, ethnic minorities or other underrepresented groups. That’s up from 16.2% in 2020.

In the decade since it first challenged itself to align its assets with its values, the Knight Foundation itself has made considerable progress: Now 42% of its U.S. assets, or $931 million, is managed by managers from underrepresented groups.

Meanwhile, the essence of SOC’s criticism of the JPMorgan audit — which was prompted by an SOC request –— is that the audit’s methodology was fatally flawed.

JPMorgan hired PWC, one of the Big Four accounting firms, to apply generally accepted accounting practices to detect racial disparities both internally, in its workforce, and externally, with customers. JPMorgan reported that it had made progress of $18.2 billion toward its $30 billion public promise to a racial equity commitment. But the report did not detail specific results of the pledge, such as how much preexisting programs counted in that $18.2 billion or direct changes in the makeup of the bank's workforce.  According to its 2021 workforce composition disclosure. JPMorgan Chase counts ethnic minorities as 10% of its board; 23% of its executive team; and 63% of its campus and internship roster.

JPMorgan Chase emailed a statement to InvestmentNews about the critique: “This report did exactly what it was designed to do: it examined our racial equity commitment to date and found that we’re making substantial progress with more work to do.”

Waizenegger said he considers the report as just the opener for the 2023 corporate annual report and meeting season.

“They focused on the audit component, not on the racial equity component,” he said. “They can say, ‘We spent X amount of money in 2021,’ but what the audit won’t tell us is whether it made any impact. And that was the point.”