Supporting statement: Such an audit may jeopardize Home Depot’s value by elevating divisive identity politics above its commitment to excellence, while also raising serious legal and commercial risks for the company.
Racial equity audits do not benefit the companies that conduct them. They are non-neutral evaluations designed to embarrass the companies who elect to conduct them, and there is no evidence to suggest that such audits increase shareholder value. The 2022 proposal essentially admits as much as the evidence cited for the audit focused on Home Depot’s philanthropic and political donations noting, “Home Depot has donated to police foundations in Detroit and Atlanta… The Atlanta Police Foundation has funded a network of 11,000 surveillance cameras… surveillance technology has been used to target communities of color and nonviolent protestors.” And “[d]uring the 2019-2020 election cycle, Home Depot’s political action committee (“PAC”) gave $465,000 to 63 Republican Congress members who objected to the 2020 election results, an action some viewed as ‘a direct attack on the voting rights of people of color.’”1
Racial equity audits also increase in-company racial division rather than ameliorating it. They distract leadership and staff from focusing on core business concerns. They promote claims about “white supremacy” in America that many Home Depot employees, shareholders, and customers don’t accept. They sow division among employees and consumers. They’re also expensive: some auditors reportedly charge more than $2,000 per hour.
Racial equity audits generally do not help the audited companies: the publication of such reports often trigger more negative news, criticism, and boycotts of the company by certain consumers, while also alienating other consumers who disapprove of the company’s decision to conduct such an audit in the first place. Such reports may also fuel unwarranted government investigations, employee grievances, and meritless discrimination claims.
Home Depot’s board was correct to oppose the 2022 proposal. The board strongly opposed the proposal noting that its firm “commitment to diversity, equity and inclusion for our associates, customers and the communities we serve.” Given this commitment, combined with the rest of the board’s opposition statement, conducting such an audit now would not serve a recognizable business interest for Home Depot.
Such an audit is therefore far beyond the Company’s fiduciary remit. That remit requires that Home Depot make decisions so as to maximize the objectively determined and financially measurable return on shareholders’ investment. To the extent that Home Depot hires, promotes, or trains on the basis of any metrics other than merit, it violates its fiduciary duties by privileging considerations that cannot enhance the financially measurable return on shareholder investment.2