By Anthony May

Supreme Court Justice Ruth Bader Ginsburg once said, “Fight for the things that you care about, but do it in a way that will lead others to join you.” RBG stands at the top of our nation’s most historical activist leaders in the fight for equality and justice. Indeed, activism gives us the opportunity to identify a problem, voice our objections, and stand on the right side of history. In this respect, we typically think of legal activists, civil rights activists, etc. But how often do we think of corporate shareholders as activists?

In my blog series Algorithmically Excluded, I’ve discussed the uncharted waters of artificial intelligence in the context of employment, including the pitfalls and responsible use thereof. But it is not enough to be aware of these dangers; we must actively prevent them. To do so, companies can turn to some of the most influential leaders and decision makers within their ranks—corporate shareholders.

Shareholder activism is the concept wherein “an interested subset of a corporation’s shareholders seek to influence a company’s operations or direction[.]” While some offer competing views as to the value shareholder activists bring, corporate shareholders can be instrumental in pushing a company toward the responsible use of AI and protecting the company from future litigation arising from AI’s discriminatory or unethical use. In this blog, I provide a few tips to the would-be shareholder activist to fight for the appropriate use of AI and to lead others to ensure that it is implemented in a way that maximizes benefits and mitigates risks.

I. Fight for Policies 

It goes without saying that shareholders—whether activists or not—owe a fiduciary duty to act in a company’s best interests. Among other things, shareholders and directors have a duty of supervision, i.e., the obligation to ensure that the corporation’s information and reporting system is, in concept and design, adequate to assure a board of directors that appropriate information will come to its attention in a timely manner as a matter of ordinary operations. This includes guaranteeing that companies institute policies to comply with laws governing AI.

For example, Colorado recently became the first state to pass a law targeting AI developers and requiring companies to “use reasonable care to avoid algorithmic discrimination in the high-risk system.” Starting in 2026, the law will put the onus on both developers and companies using AI to, among other things, report to the Colorado Attorney General “any known or reasonably foreseeable risk of algorithmic discrimination” within 90 days of discovery, though businesses with fewer than 50-full time employees may be exempt from certain provisions.

 Accordingly, shareholders must be diligent to ensure that their companies adopt adequate policies and procedures to ensure compliance with ever-evolving standards. A recent Law360 article discussed the U.S. Department of Labor’s (DOL) standards and principles for adopting policies that will clearly set forth a company’s expectations for the use of AI, including: 1) allowing worker input into the development, testing, and training of AI; 2) ensuring that workers’ rights and well-being are protected when using AI; and 3) putting into place governance and oversight systems. Counsel can be hired to assist shareholder activists in drafting, reviewing, and adopting corporate AI policies that suit the needs of their individual companies.    

II. Fight for Transparency 

Shareholder activists must also fight for full transparency when a company relies on AI in any form. The American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) recently filed a proposal demanding greater transparency from five major companies’ (Apple, Comcast, Disney, Netflix and Warner Bros.) use of AI. On January 3, 2024, the U.S. Securities and Exchange Commission concluded that Disney’s and Apple’s respective boards of directors must consider the proposal and that they could not ignore them entirely.

Similarly, company shareholders should insist on transparency, including making AI systems known and visible to both the company’s board and employees. Shareholders should also mandate appropriate training for themselves so that they are educated in the nuances of how AI systems are used, monitored, and evaluated. When in doubt, shareholders should not be hesitant to acquire independent counsel to advise on their roles for demanding appropriate safeguards in AI implementation.

III. Fight for Oversight

Finally, shareholder activists should be directly involved in overseeing AI as information becomes available to them. A recent whitepaper explained that a board can violate its duty of supervision if it shows a “lack of good faith as evidence by sustained or systemic failure of a director to exercise reasonable oversight.” One way a board can satisfy this duty is by requiring a company to create an AI oversight committee “charged with additional oversight of GenAI risks and opportunities.” And, as referenced above, the DOL has issued guidance on how companies can promote human oversight to monitor outputs and discern whether AI used results in unintended, and potentially illegal, consequences.

By leading the fight for responsible corporate AI implementation, activist shareholders can lead others, including employees, to better scrutinize AI’s day-to-day use, empower employees to speak out when AI is being abused or resulting in discrimination, and promote the ethical and responsible use of these tools. Independent counsel can help guide this process and advise shareholders who are taking appropriate steps to fulfill their fiduciary duties and prevent litigation in the future.

I have written and presented extensively on the intersection of AI and employment law, most recently presenting on this topic at the Society for Human Resource Management (SHRM) Talent Conference & Expo in April 2024. I will also be sharing insight on this subject at the 2024 National Employment Lawyers Association (NELA) Annual Convention in June 2024. If you have questions about this matter or are interested in learning more about how you can take steps now to prevent future litigation, please call us at 410-962-1030 today for a consultation and learn more about my practice here.