CANADA Trends and Developments Contributed by: Bill Gilliland, Dentons Canada LLP
On 5 December 2024, the CSA published Staff Notice and Consultation 11-348 – Applicability of Canadian Securities Laws and the Use of Artificial Intelligence Systems in Capital Markets to clarify how existing securities laws apply to the use of AI systems by par - ticipants in capital markets. The CSA identified “AI washing” as a disclosure deficiency and a form of overly promotional disclosure which can be mislead - ing to the public or constitute a misrepresentation. Effective for shareholder meetings held after 1 Janu - ary 2025, Glass Lewis has established a new policy addressing board oversight of AI. The policy continues to apply to shareholder meetings held after 1 January 2026. Glass Lewis believes issuers that use or develop AI technologies should adopt strong internal frame - works that include ethical considerations, ensure effective oversight of AI, and expect clear disclosure on how boards are overseeing AI. To ensure effec - tive oversight and address skills gaps, Glass Lewis recommends that boards engage in continued board education and/or appoint directors with AI expertise. Glass Lewis believes that companies that develop or employ the use of AI should provide clear disclosure concerning the role of the board in overseeing issues related to AI, including how companies are ensuring directors are fully versed on this rapidly evolving and dynamic issue. While Glass Lewis will not make vot - ing recommendations based solely on a company’s AI oversight practices or disclosure, it may recommend against appropriate directors if there is evidence that insufficient oversight and/or management of AI tech - nologies has resulted in “material harm” to sharehold - ers.
The Globe and Mail Board Games has similarly expanded its governance scoring to encompass AI. Its revised 2025 methodology introduced a “Cyber - security and Artificial Intelligence” criterion, awarding full marks only where disclosure explicitly addresses both AI and cybersecurity oversight and identifies the responsible committee, or describes how and how often the board reviews those risks. AI and AI-related tools have begun to play the role that proxy advisers have historically filled for institutional shareholders. Several large institutional investors, including JPMorgan Asset Management, have already reduced their reliance on external proxy advisory firms in favour of proprietary AI tools that analyse proxy materials and governance data across thousands of companies. AI is also changing how activists identify and pur - sue campaigns. Activist investors have long relied on governance benchmarking and financial analysis to flag underperforming companies or weak govern - ance structures, and while AI has not yet substantially altered the activism landscape, AI tools dramatically expand those capabilities, enabling the analysis of large datasets on board composition, compensation structures, performance metrics, and governance dis - closures across a much larger universe of companies. As these tools mature, activists will be positioned to identify governance weaknesses and performance gaps more quickly, increasing the likelihood of sophis - ticated, data-driven campaigns.
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