IN-DEPTH: AI-focused investor demands make broad debut in 2024
The 2024 proxy season has seen investors target some of the largest entertainment and tech giants in the U.S. with a new wave of demands to examine the potential risks associated with their use of artificial intelligence (AI).
The 10 AI-related shareholder proposals examined by Diligent Market Intelligence (DMI) that were subject to a vote at U.S.-based companies in the first half of this year secured 19.6% average support, with a demand targeting streaming giant Netflix securing more than 43% backing.
“2023 really was the debut of AI on a broad scale. We saw all of the major tech companies investing many billions of dollars into generative AI and AI more broadly. The investments totaled tens of billions of dollars, and the companies are telling us that they intend to spend even more. That alone was the reason for shareholders to be concerned,” Michael Connor, executive director at Open MIC, the Open Media and Information Companies Initiative, told DMI.
Mitigating harm
In 2024, "Big Five" tech companies Meta and Alphabet were among those targeted with a particular focus on the risks of generative AI (GAI) with the demand securing 17% backing at both annual meetings. The first-time resolutions were co-filed by Arjuna Capital and Open MIC. The demands asked the tech targets to establish metrics and measure their efforts to safely deploy AI to demonstrate that they are living up to commitments. “As long-term shareholders, we want Meta and Alphabet to succeed over the long-run,” said Natasha Lamb, chief investment officer at Arjuna Capital. “Which means our companies must do what they can today to mitigate the generative-AI risks of tomorrow.”
Such risks have been largely focused on the potential creation and spread of misinformation and disinformation in the social media era. While both companies have outlined certain guardrails, proponents have argued that they continue to prioritize GAI product development without addressing the existential risks posed by the technology.
“One has to wonder how tech giants can inject such a potentially dangerous technology into the public discourse without thinking about how they might mitigate the harms that they're creating,” Connor said.
AI oversight
Outside of demands for greater disclosure, the tech sector has attracted many other AI-focused resolutions this season with Amazon facing investor pressure to establish a board committee on the technology. The demand, which was filed by the AFL-CIO Equity Index Fund, called on the online retail giant to create a new committee of independent directors to address human rights risks associated with the development and deployment of AI systems in a move designed to “enhance accountability to shareholders.” Amazon, however, insisted that it would be more effective for its full board to be responsible for such risks as it expects AI to be increasingly integrated into its products and services, as well as its own operations. A similar proposal, which sought the creation of a committee to oversee the use of AI, was also advanced at Alphabet with the proponent arguing that Google had sought to propel itself to the front of the “AI pack,” and that it was increasingly willing to trust AI with sensitive tasks.
“The problem with AI is that most people, even board directors, don't really understand it and they don't understand how it's being implemented. The risk to an enterprise is enormous yet so many companies are rushing into it without really having the corporate governance and management oversight in place,” commented Connor.
The human impact of AI was also on the minds of other investors, with shareholders at Chipotle Mexican Grill calling on the restaurant chain to address the social implications of its growing adoption of AI on its workforce. The proposal highlighted concerns over potential job losses due to the use of AI, citing a report from global consultants Aaron Allen and Associates which estimates that up to 82% of restaurant positions could, to some extent, be replaced.
Entertainment giants Netflix, Paramount Global and Warner Bros. Discovery also felt investor pressure on the subject with demands for transparency on the use of AI in their business operations with concerns around potential discrimination or bias in employment decisions and mass layoffs due to job automation. The demand performed best at Netflix with 43% backing where the streaming giant argued that it views its use cases of AI solutions as a "potentially valuable tool for many internal employee and creator use cases to unlock creativity and innovation and efficiency and serve to assist them, rather than replace their work."
Evolving AI concerns
As investors prepare to engage on a new season, the topic of AI is expected to expand its reach to even more ballot papers with the nature of demands expected to evolve across the tech sector and other consumer facing companies.
The demands have already encompassed climate concerns with As You Sow targeting the upcoming December AGM of Microsoft with a call to report on the risks of providing advanced technology such as AI and machine learning tools, to facilitate new oil and gas development and production.
Danielle Fugere, President of As You Sow, stated that the targeting of the tech sector was always a good start for regulating the use of AI. “It's important to get ahead of this to start ensuring that companies and the developers are looking at where the pitfalls are and what rights need to be protected when it comes to using the technology.”
However, whatever the sector, boards are being advised to truly engage with their investors on the subject. "Companies using AI must listen to the marketplace, organizations and investors who are expressing concern and not reject out of hand those who are voicing concern about how AI is being implemented,” warns Connor.
