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June 24, 2024

Shareholders Granted Vote on AI Usage at Apple and Disney After SEC Denial

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Jan 6, 2024

The Securities and Exchange Commission (SEC) recently denied requests by Apple and Disney to omit shareholder proposals requesting reports on their usage of artificial intelligence from proxy materials, paving the way for unprecedented votes on AI accountability.

Shareholder Proposals Spark Closer Look at AI Policies

Shareholders of both companies introduced resolutions last year demanding detailed reports assessing potential harms from AI technologies used in their operations and products. Specifically, the proposals asked for:

  • A report on Disney’s development, use and oversight of artificial intelligence, including:
    • An assessment of the civil and human rights issues raised by their AI technologies
    • Details on Disney’s due diligence process for identifying, assessing, preventing and mitigating actual and potential material, reputational and financial risks posed by their AI systems
  • A report from Apple assessing the actual and potential impacts of concerns like algorithmic discrimination, enabling mass surveillance, violation of privacy and law enforcement or other unintended consequences on civil and human rights linked to their AI technologies

The companies subsequently filed no-action letter requests with the SEC, arguing that they should be allowed to omit the proposals from proxy materials circulated to shareholders ahead of annual meetings based on “ordinary business” and relevance grounds.

However, the SEC was unconvinced by these claims and denied the requests earlier this month, meaning shareholders will now have the opportunity to vote on enhanced oversight of AI usage at the two tech and media giants.

What’s Next After Landmark SEC Decision

The SEC rulings represent a major victory for shareholder activists focused on ensuring companies properly manage risks associated with cutting-edge technologies like AI.

Proponents of greater AI transparency and accountability argue that leaving oversight solely up to management without concrete reporting and assessment requirements is inadequate given the uniquely complex challenges algorithms pose regarding issues like bias, privacy, fairness and safety. Granting shareholders a direct say is thus viewed as a crucial accountability mechanism.

With the proposals now cleared for inclusion on proxy ballots, shareholders will vote on them during upcoming annual meetings, likely happening this spring. While non-binding, significant support would place pressure on executives to comply with the reporting requests and reconsider their AI policies and processes more broadly.

If adopted, the shareholder resolutions would compel Apple and Disney to complete full assessments of their AI systems across divisions within 6-12 months. The resulting reports would then need to be made publicly available, offering rare visibility into the two giant’s AI development practices, risk prevention strategies, and impacts on civil rights.

Broader Implications for Responsible AI and Corporate Governance

The SEC judgement sets an important precedent for shareholder oversight regarding the ethical dimensions of cutting-edge technologies.

It signals that the “ordinary business” exemption cannot be indiscriminately invoked by companies to block proposals related to significant policy issues like AI simply because they touch on corporate strategy. Instead, shareholder resolutions aimed at enhancing transparency, accountability and minimizing societal harms are appropriate for proxy consideration.

If Apple and Disney shareholders end up approving the requests, it would likely inspire activists at other prominent AI developers and users to introduce similar proposals. This could kickstart a wave of tech and media companies being compelled to audit their algorithmic systems and report on steps taken to address concerns over fairness, explainability, bias and privacy.

More broadly, the ruling demonstrates that executives should not take shareholder interest in AI lightly. With algorithms permeating products and operations across industries, companies would be prudent to proactively assess potential issues and establish oversight procedures rather than risk reactive measures forced via shareholder intervention.

The judgments are thus poised to accelerate responsible AI initiatives in Silicon Valley and beyond by empowering shareholders to demand action from management.

Company Details of Shareholder Proposal
Apple Report assessing actual and potential impacts of issues like algorithmic discrimination, enabling mass surveillance, violation of privacy and unintended consequences on civil and human rights linked to their AI technologies
Disney Report on development, use and oversight of AI including assessment of civil and human rights issues raised and details on risk identification, assessment, prevention and mitigation processes

While the coming votes will directly impact only Apple and Disney, the SEC judgement has articulated an expectation for tech companies to take shareholder concerns about AI seriously or risk similar intervention. How executives across the industry choose to respond could shape norms around algorithmic accountability and governance for years to come.

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AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

To err is human, but AI does it too. Whilst factual data is used in the production of these articles, the content is written entirely by AI. Double check any facts you intend to rely on with another source.

By AiBot

AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

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