Investment Commentary

photoJune 4, 2015

Pun­ish­ment and Inequal­ity: Part 2; Crim­i­nal Back­ground Checks

Sonia Kowal, Pres­i­dent

The per­cent­age of the U.S. pop­u­la­tion with a crim­i­nal record has risen from 13% in 1991 to 22% in 2012 — mean­ing nearly one in four Amer­i­cans has a crim­i­nal record. A crim­i­nal record fol­lows any­one who has been arrested, even if their case was dis­missed or they were found not guilty. Many com­pa­nies won’t hire any­one with a crim­i­nal record, regard­less of whether the can­di­date stole a traf­fic sign in col­lege, was arrested in a protest or was con­victed of a vio­lent crime. And given the dis­parate racial impact of the crim­i­nal jus­tice sys­tem, cor­po­rate bans on hir­ing peo­ple with records dis­pro­por­tion­ately affects com­mu­ni­ties of color. The cycle widens the inequal­ity gap and needs to be bro­ken. Employ­ing low-​risk, qual­i­fied peo­ple with records presents an oppor­tu­nity to address some of our eco­nomic and labor chal­lenges while still pro­tect­ing vul­ner­a­ble populations.

We are inter­ested in this issue not only from a social jus­tice and pub­lic safety per­spec­tive, but also from an eco­nomic and work­force devel­op­ment stand­point. Our econ­omy is less effi­cient because a large and grow­ing cross-​section of soci­ety is left idle and unem­ployed as a result of dis­crim­i­na­tion against his­toric or irrel­e­vant offenses. At the same time, we have mas­sive skills short­ages all around the country.

To do our part, we are urg­ing com­pa­nies to insti­gate a more thought­ful review of their hir­ing prac­tices while rec­og­niz­ing that there are legit­i­mate con­cerns about the risk of hir­ing work­ers with crim­i­nal his­to­ries. We have been work­ing with local and national non-​profits to iden­tify best-​practice crim­i­nal back­ground check poli­cies that com­pa­nies can use to improve their hir­ing pro­ce­dures while pro­tect­ing their employ­ees, their cus­tomers and the pub­lic. These include con­sid­er­ing changes such as omit­ting ques­tions about crim­i­nal his­tory on an ini­tial appli­ca­tion form, only con­sid­er­ing con­vic­tions and pend­ing cases, con­sid­er­ing the nature and age of an offense, and giv­ing the appli­cant the abil­ity to con­test the accu­racy and rel­e­vance of the offense. We have asked com­pa­nies for their poli­cies and shown them how these poli­cies com­pare to best prac­tices. We have found a wide dis­per­sion in how com­pa­nies approach crim­i­nal back­ground checks, although most haven’t con­sid­ered this issue thor­oughly. We have also been work­ing with local leg­is­la­tors to tighten reg­u­la­tions about how crim­i­nal back­ground infor­ma­tion is obtained and used. How­ever, any reforms such as “Ban the Box” – a cam­paign that is aimed at per­suad­ing employ­ers to remove from their hir­ing appli­ca­tions the check box that asks if appli­cants have a crim­i­nal record – will, in our view, only have a mar­ginal impact on improv­ing the employ­ment prospects of peo­ple with records, unless com­pa­nies them­selves ini­ti­ate a more thought­ful review of their hir­ing processes.

Our goal is to remove bar­ri­ers to employ­ment for qual­i­fied appli­cants who do not pose a threat to other employ­ees, cus­tomers, or the gen­eral pub­lic. Part of our analy­sis of poten­tial invest­ments in sus­tain­able busi­nesses focuses on the abil­ity of com­pa­nies to recruit and retain the best work­ers. Because the num­ber of peo­ple with crim­i­nal records is so high, com­pa­nies who auto­mat­i­cally dis­qual­ify any­one with a record from their appli­cant pool are arti­fi­cially lim­it­ing their access to the best employ­ees. As investors, we call on com­pa­nies to adopt fair crim­i­nal back­ground check poli­cies as a part of a broader com­mit­ment to act­ing as socially respon­si­ble employ­ers. We are work­ing on an investor let­ter on this topic to be sent to S&P 500 com­pany CEOs to get the issue on their radar screens. This will help raise aware­ness about this issue with com­pa­nies who can fairly eas­ily start mak­ing a dif­fer­ence in the lives of mil­lions of peo­ple by giv­ing them a chance at good employment.

Sonia is a mem­ber of Zevin Asset Management’s invest­ment com­mit­tee where she incor­po­rates sus­tain­abil­ity issues into invest­ment deci­sion mak­ing. She over­sees envi­ron­men­tal, social, and gov­er­nance research, proxy vot­ing, as well as the cor­po­rate engage­ment strate­gies of the firm.