Apple and The Walt Disney Company are set to face votes at their 2024 AGMs on their use of AI after the SEC denied their requests for permission to keep the shareholder proposals off their proxy materials.
The SEC decisions under Rule 14a-8 are among the agency’s first of this year’s proxy season, setting the tone for other tech companies that may face similar resolutions. The rapid rise to prominence of ChatGPT in late 2022 meant there was not sufficient time for shareholder advocates to file proposals ahead of last year’s proxy season.
Segal Marco Advisors has filed each of the proposals, which are broadly similar. In the case of Apple, it requests that the company ‘prepare a transparency report on [its] use of [AI] in its business operations and disclose any ethical guidelines the company has adopted regarding the company’s use of AI technology.’
In its supporting statement, the proponent writes: ‘We believe adopting an ethical framework for the use of AI technology will strengthen our company’s position as a responsible and sustainable leader in its industry. By addressing the ethical considerations of AI in a transparent manner, we can build trust among our company’s stakeholders and contribute positively to society.’
It notes that AI raises important social policy issues, such as the potential for discrimination in human resources uses, job losses due to automation, customer privacy and the dissemination of false information in political elections. Segal Marco Advisors also argues that adopting ethical guidelines for the use of AI can ‘help improve our company’s bottom line by avoiding costly labor disruptions’, noting that last year’s strikes by Hollywood actors and writers were in part over concerns that AI will replace artists and infringe on intellectual property.
In the case of Disney, Segal Marco Advisors has filed a resolution on behalf of the AFL-CIO Equity Index Funds requesting that the company release ‘a transparency report that explains the company’s use of [AI] in its business operations and the board’s role in overseeing AI usage [emphasis added], and sets forth any ethical guidelines the company has adopted regarding its use of AI.’ The proponent raises similar arguments in support of this resolution as it does regarding the Apple proposal.
Company objections
Apple had asked the SEC for no-action relief to omit the proposal from its proxy statement on the grounds that, per Rule 14a-8(i)(7), it relates to the company’s ordinary business operations and seeks to micromanage the company.
Apple wrote: ‘For the company, [AI] and machine learning are fundamental technologies that are integral to virtually every one of its products… The company is committed to responsibly advancing its products that use these technologies, and its teams around the world push forward with their work to infuse Apple’s deeply held values into everything it makes.’
The proposal, Apple said, requests a report that ‘could encompass potentially every aspect of the company’s business operations, including whether and how it chooses to use AI/machine learning (if at all) in the course of routine business operations such as product development and research, supply-chain management and financial management and planning.’
The SEC did not agree, writing in its response: ‘In our view, the proposal transcends ordinary business matters and does not seek to micromanage the company.’
Disney also sought no-action relief to omit the proposal on the grounds that the subject matter directly concerns the company’s ordinary business operations. It argued in part: ‘The company leverages innovative technological strategies and maintains an understanding of emerging technology trends to continuously improve the guest experience and build strong connections with audiences. This includes the development and use of AI and machine learning as fundamental technologies that are integral to a wide variety of applications within the business…
‘[T]he report requested in the proposal could encompass potentially every aspect of the company’s business, including whether and how it chooses to use AI/machine learning (if at all) in the course of routine business operations such as content development and distribution, supply-chain management and financial management and planning, as well as in managing the company’s use of applications and algorithms throughout its daily processes.’
The SEC’s response was, again, that ‘[i]n our view, the proposal transcends ordinary business matters and does not seek to micromanage the company.’
An Apple spokesperson had no comment beyond the company’s SEC filing. A request for comment from Disney was not returned immediately.
Apple’s 2023 AGM took place on March 10. Disney’s 2023 meeting took place on April 3.