CANADA Trends and Developments Contributed by: Bill Gilliland, Dentons
or within group companies, and may also deter - mine that conflicts of interest exist. Further, it also reviews multiple board interlocks among non-insiders (ie, multiple directors serving on the same boards at other companies) for evidence of a pattern of poor oversight. Glass Lewis has expanded its policy on inter - locking directorships to consider both public As generative AI continues to grow with an unprecedented speed of adoption, it is accom - panied with demand from stakeholders for board oversight and guardrails. Regulators across the globe are exploring legislation that would curtail the use of certain types of AI. In 2023 in the US, for the first time there were shareholder propos - als calling for disclosure on the board’s oversight of AI and ethical guidelines on the use of AI. Davies Governance Insights 2024 suggests that boards and management can take a number of actions to address such concerns, including: (i) understanding the use cases of current AI tech - nology for the business; (ii) understanding the risks inherent in the use of AI technology; and (iii) developing an AI governance policy to help address current risks and to provide a frame - work to address what is yet to come. On 5 December 2024, the CSA published “Staff Notice and Consultation 11-348 – Applicabil- ity of Canadian Securities Laws and the Use of and private companies. Board Oversight of AI
Artificial Intelligence Systems in Capital Markets” to clarify how existing securities laws apply to the use of AI systems by participants in capital markets. The CSA identified “AI washing” as a disclosure deficiency and a form of overly pro - motional disclosure which can be misleading to the public or constitute a misrepresentation. Effective for shareholder meetings held after 1 January 2025, Glass Lewis has established a new policy addressing board oversight of AI. Glass Lewis believes issuers that use or devel- op AI technologies should adopt strong internal frameworks that include ethical considerations, ensure effective oversight of AI, and expect clear disclosure on how boards are overseeing AI. To ensure effective oversight, Glass Lewis recom - mends that boards engage in continued board education to expand their collective expertise and understanding in this area and/or appoint directors with AI expertise. Glass Lewis believes that clear disclosure on how boards are overseeing AI and expanding their expertise is likely to be of value to share - holders. While Glass Lewis will not make voting recommendations solely based on a company’s AI oversight practices and disclosure, it may recommend against the re-election of account - able directors if there is evidence that insufficient management of AI technology has resulted in “material harm” to shareholders.
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