USA Trends and Developments Contributed by: Matt Hurd, Melissa Sawyer and Scott Crofton, Sullivan & Cromwell LLP
Glass Lewis has stated it will continue to apply its diversity-related voting policies but will now flag for its clients any recommendations that it makes with respect to the election of directors that are based, at least in part, on diversity con - siderations. The DEI landscape is likely to continue to evolve in the coming months. As a result, it will be important for public and private companies to continue to monitor these developments and periodically review their DEI policies and disclo - sures to assess potential risks. Evolving Approaches to Artificial Intelligence As corporate uses of AI become more common, investors are calling on companies to provide greater transparency into how companies gov - ern, oversee and manage the risks related to AI. For example, according to data from ISS, shareholder proposals related to AI more than quadrupled between 2023 and 2024. These pro - posals typically request that the targeted com - pany (i) disclose information about AI use and/ or management of related risks; (ii) conduct a third-party evaluation about AI-related risks and impacts; and/or (iii) establish a formal board- level committee to oversee AI. In 2024, AI-relat - ed proposals that went to a vote received, on average, support from 20% of votes cast, and none passed. However, a few notable examples received significantly higher levels of support (including 43% at Netflix and 37.5% at Apple). Glass Lewis also added a new section related to AI oversight in its 2025 voting guidelines. Under this policy, while Glass Lewis will generally not make voting recommendations on the basis of a company’s AI oversight practices or disclosure, in cases where there is evidence that insufficient oversight and/or management of AI technologies has resulted in material harm to shareholders,
Glass Lewis may recommend against directors if it finds the board’s oversight of, response to or disclosures concerning AI-related issues to be insufficient. As a result, companies are increasingly including AI-related information in their public filings (most commonly, in their 10-Ks and/or proxy state - ments), including identifying any material risks AI poses to their business and how such risks are overseen at the board and/or management level. Some companies that rely on AI for material ser - vices or operations are, with board oversight, also developing internal frameworks to govern their use of AI, including policies, guidelines and controls to ensure such use complies with their company’s goals and legal, regulatory and ethi - cal obligations. Boards themselves are also employing a variety of methods to deepen their directors’ under - standing of AI, including having directors par - ticipate in education sessions with management about their company’s use of AI and related risks and opportunities, bringing in external special - ists to discuss AI-related trends and develop - ments periodically and/or appointing directors with specific AI experience (though the latter is less common). While corporate practices and disclosures relat - ed to AI continue to evolve, companies should also be aware of a number of recent regulatory enforcement actions and shareholder lawsuits that have been filed against companies (and their executives) for alleged misrepresentations related to their AI capabilities, usage and/or met - rics (often referred to as “AI washing” lawsuits). Companies should consider subjecting any AI-related public statements to similar internal review and compliance processes as their other public disclosures.
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