TD Bank’s racial equity audit offers lessons for other public companies

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Practice makes progress. That’s the take-away of Toronto-Dominion Bank’s racial equity audit, which broke new ground for Canada’s capital markets this week.

As the first chartered bank and likely the first public company in this country to agree to an independent assessment of its diversity and inclusion policies, TD’s report provides a blueprint of sorts for other corporations.

TD’s TD-T executives and directors deserve kudos for showing leadership on this issue. The bank is setting an example for other public companies that also made commitments to dismantle systemic discrimination after the police murder of George Floyd in Minneapolis in 2020.

Even so, TD’s racial equity audit should be regarded as a first effort because of its narrow focus on employment policies and practices. Systemic discrimination, of course, doesn’t just stall the career advancement of marginalized individuals. It also results in broader economic exclusion.

That’s why TD should be swayed by investor feedback and finish the job it started by repeating this audit at regular intervals, while also broadening the scope to include its products, services and business practices.

TD hasn’t committed to another audit. But it hasn’t ruled it out, either.

“We will always be thinking about how we make sure that we’re continuing to get the right inputs externally from stakeholders and making sure that we’re on the right path with this work,” said Diana Lee, TD’s vice-president of diversity and inclusion, in an interview.

The bank’s objective for its initial audit was delivering something manageable in a reasonable time frame, she said. That’s understandable given these third-party reviews are still relatively new in Canada.

TD’s audit was conducted by two law firms, Covington & Burling LLP and WeirFoulds LLP, over 10 months. With the final report now in hand, the bank’s senior executive team is focused on implementing its recommendations.

“Certainly, we see relevance in some of these recommendations in the customer sphere and are going to be acting accordingly,” Ms. Lee added.

So, what is TD doing right? Well, for starters, it recognizes the specific barriers facing Black and Indigenous peoples in its work force.

Companies that use diversity as a catch-all term deflect from the lived experiences of Black and Indigenous peoples. They also risk reinforcing a “vertical mosaic” – or a hierarchy of ethnic groups – that was first decried by Canadian sociologist John Porter decades ago.

TD didn’t give itself cover. Although it reported that 42.8 per cent of its Canadian work force identified as visible minorities, it also provided data about its Black and Indigenous employees.

Some 7.3 per cent of TD’s workers in Canada identified as Black in 2022, with three per cent in senior management and 6.1 per cent in middle and other management roles, the report said.

Indigenous peoples, meanwhile, comprised one per cent of its Canadian work force, with 1.5 per cent in senior management and 0.8 per cent in middle and other management jobs.

Importantly, TD has tied its public commitments to remedying the underrepresentation of Black and Indigenous employees in its leadership ranks.

By 2025, the bank aims to increase Black, Indigenous and minority representation to 25 per cent at the vice-president and above levels in North America. But its report stressed there would be a “specific focus on Black and Indigenous talent.”

TD’s audit, however, provided limited data about the effectiveness of its employment policies including its pay equity practices, said Emma Pullman, head of shareholder engagement and ESG at the British Columbia General Employees’ Union.

BCGEU is the institutional investor that originally approached the bank about conducting a racial equity audit. It is now urging TD to pursue a broader audit that includes its business practices.

It’s a reasonable request. As Ms. Pullman points out, TD’s lending to underserved communities was scrutinized in the United States during its recent attempt to acquire First Horizon Corp.

Moreover, other Canadian banks are already planning racial equity audits that will cover both their employment and business practices, she added.

“The racial equity journey of a bank is a marathon, and we don’t want to see TD kind of stopping after a kilometre and looking for a medal,” Ms. Pullman said. “It has to do the rest of the work and complete this look inside of the entire business.”

Although best practices for racial equity audits are evolving, Ms. Pullman notes that institutional investors expect corporations to use independent auditors with racial equity expertise. Reviews should cover all aspects of a business, but it is acceptable to bifurcate the process, she said.

Proper disclosure is also key. The full report should be made public. Companies in other industries shouldn’t wait for shareholder resolutions before undertaking independent assessments of their equity policies.

“This work has benefits for not just their workers, but their customers and future customers, their suppliers, all across their value chain,” Ms. Pullman said.

As for TD’s Ms. Lee, she, too, has advice for other companies that are planning independent racial equity audits: Success, she said, ultimately depends on leadership’s commitment to change.