SVB Financial Group – Racial Justice Audit (2023)

Outcome: Annual Meeting not held.

Resolved: Shareholders of SVB Financial Group (“SVB”) urge the board of directors to oversee a third-party audit (within a reasonable time and at a reasonable cost) which assesses and produces recommendations for improving the racial impacts of its policies, practices, products, and services, above and beyond legal and regulatory matters, outside of the Access to Innovation program. Input from stakeholders, including civil rights organizations, employees, and customers, should be considered in determining the specific matters to be assessed. A report on the audit, prepared at reasonable cost and omitting confidential/proprietary information,  should be published on SVB’s website.

Racial gaps cost the United States economy an estimated $16 trillion over the past twenty years.[1] Racial equity audits engage companies in a process that internal actions may not replicate, potentially unlocking value, uncovering blind spots, and examining the external impact a company has on communities of color. State Street, BlackRock, Citi, JPMorgan Chase, and Wells Fargo have committed to such audits.

SVB publicly committed to a racial equity audit limited to its Access to Innovation program in 2022. We believe the company would benefit from expanding the scope to parts of the business that have more financial and operational impact.

SVB has set diversity goals for 2025, but it is unclear how it plans on mitigating bias in business processes until then. The leadership teams of SVB Capital (its venture fund investments arm) and portfolio companies appear to significantly lack representation from underrepresented communities. With only 2.6 percent of funding going to Black and Latino founders in 2020, racial bias in investment decisions may be present through the value chain.[2] Given SVB Capital accounted for nearly a quarter of SVB’s 2021 net income, we believe it is important to rigorously assess the potential impact of this business line.[3]

Moreover, there appear to be zero named executive officers and only one director on the board who are people of color.[4] Multiethnic perspectives reportedly reduce groupthink, which is correlated with better decision-making and risk management.[5]

Furthermore, an audit of the investment due diligence process and political activities may help ensure SVB does not advance products or legislation that cause racial harm. For example, venture-backed startups have faced scrutiny for racial insensitivity and reinforcement of racial hierarchies.[6] SVB is also a member of the Securities Industry Financial Markets Association, which lobbied most frequently against the Wall Street Tax Act of 2019.[7] Supporters argue that the revenue raised through the tax could fund measures such as student loan forgiveness and the Green New Deal, which could mitigate impacts of systemic racism.[8]

We urge the company to conduct a full racial equity audit to examine its total impact and help dismantle systemic racism. 

[1] https://ir.citi.com/NvIUklHPilz14Hwd3oxqZBLMn1_XPqo5FrxsZD0x6hhil84ZxaxEuJUWmak51UHvYk75VKeHCMI%3D

[2] http://about.crunchbase.com/wp-content/uploads/2020/10/2020_crunchbase_diversity_report.pdf

[3] https://d18rn0p25nwr6d.cloudfront.net/CIK-0000719739/4b031df0-621a-429e-95ec-1ba5f88b029d.pdf

[4] https://s201.q4cdn.com/589201576/files/doc_downloads/2022/SVB-2021-Form-DEF14A-(1).pdf

[5] https://illinoistreasurergovprod.blob.core.usgovcloudapi.net/twocms/media/doc/il%20treasurer%20white%20paper%20-%20the%20investment%20case%20for%20board%20diversity%20(oct%202020).pdf

[6] https://thenextweb.com/news/bodega-problem-disruption, https://www.insider.com/ai-startup-sanas-accent-translation-technology-call-center-racism-2022-9

[7] https://my.sifma.org/Directory/Member-Directory, https://www.opensecrets.org/orgs//summary?id=D000000229

[8] https://thehill.com/blogs/congress-blog/economy-budget/463361-a-wall-street-tax-can-help-pay-for-bold-policy-solutions/; https://www.cfo.com/accounting-tax/2019/05/bernie-sanders-introduces-plans-for-wall-street-speculation-tax/, https://www.marketwatch.com/story/you-have-a-degree-but-who-do-you-know-why-student-debt-is-a-racial-justice-issue-2020-06-15; https://www.cjr.org/covering_climate_now/green-new-deal-climate-justice.php