Increase in Shareholder Concerns Over AI Risks in Reflects Growing Investors Scrutiny, According to FTI Consulting Report

Report Examines AI Trends and Developments in Shareholder Proposals in the United States

Dublin, 9 September 2024 — Institutional investors across the United States have increasingly voiced concerns about the risks associated with artificial intelligence (“AI”) in 2024, which marks a notable shift from previous years, according an analysis report published by FTI Consulting, Inc. (NYSE: FCN). The report, which examines shareholder proposals in the United States reveals a sharp rise in AI-related recommendations, with 16 proposals filed between January and June 2024, compared to just seven in 2023 and four in 2022.

FTI Consulting’s report, Unveiling Key Trends in AI Shareholder Proposals reviews 23 AI-related proposals and provides insights into the filers, company and proxy advisor responses and the subsequent voting results.

“While AI continues to dominate headlines in 2024, shareholder concerns have been brewing since 2019, when the first AI-related proposal was filed,” said Arnaud Cave, a Director in the Strategic Communications segment at FTI Consulting. “Those early proposals signalled broader concerns that are now rippling across industries as investors demand stronger governance, board oversight, risk management and transparency related to AI. With AI becoming integral to company operations, we anticipate more shareholder proposals and increased investor scrutiny from investors on AI practices in 2025.”

The report findings highlight:

Grow in number, scope and ambition

• A key driver for the more than doubling of the number of AI-related proposals in 2024 was a new type of proposal filed by the AFL-CIO union fund demanding greater transparency on companies’ AI usage and ethical guidelines, with six companies receiving such proposals.
• The scope and ambition of AI-related proposals have expanded beyond calls for transparency. In two instances, shareholders requested specific attributions of board responsibilities to enhance AI oversight.
• Whilst Big Tech continues to receive the majority of proposals (nine out of 16), 2024 has seen AI-related demands directed at smaller media and entertainment companies, a restaurant chain, and a healthcare company for the first time.

Corporate reactions: resistance and reluctant acceptance

• Some corporations unsuccessfully attempted to exclude these proposals from their AGM ballots by engaging with the U.S. Securities and Exchange Commission (“SEC”). Others adopted a more conciliatory approach, agreeing to improve their disclosures, leading to the withdrawal of some proposals.
• The majority of proposals made it to the ballot, with boards typically advising shareholders vote against them, pointing to existing policies and processes, and the potential risks of disclosing sensitive strategic information.

Investors backing the call for transparency

• Despite none of the proposals achieving majority support, some received significant backing. The three highest-scoring proposals, all receiving over 20% support, were filed by the AFL-CIO and called for transparency reports on companies’ AI use and ethical guidelines.
• Notably, the Netflix proposal garnered 43.3% of the vote, falling just 6.7% short of the majority threshold, while the Apple proposal received 37.5%. It highlights the importance investors place on understanding AI-related risks and the measures companies take to manage them.

Changes to board responsibilities was less successful

• Proposals seeking changes to board responsibilities for AI oversight received some of the lowest levels of support, with less than 10% of votes in favour. Investors likely viewed these proposals as overly prescriptive, contributing to the lower support levels.

The future of AI shareholder activism

• The management of AI-related risks is emerging as a material concern that requires more attention.
• The impact of AI and automation on the workforce may surface as a prominent issue in 2025. Two proposals, filed at Ryder System and Republic Services in 2024 sought information on how advanced technologies or autonomous vehicles would impact workers and communities.

Mr. Cave added, “AI proposals are only one aspect of shareholder activism on AI and investors are increasingly vocal about their expectations and initiating engagement campaigns on this topic. Companies must be prepared to address these growing concerns by establishing robust governance processes and enhancing their disclosures.”

To read the full report, click here.

Methodology
Based on company proxy statements and company statements (8-K), this report provides a comprehensive review based on 23 AI proposals submitted by shareholders at US companies between 1 January 2023 and 30 June 2024.

About FTI Consulting
FTI Consulting, Inc. is a global business advisory firm dedicated to helping organisations manage change, mitigate risk and resolve disputes: financial, legal, operational, political & regulatory, reputational and transactional. With more than 8,000 employees located in 33 countries and territories, FTI Consulting professionals work closely with clients to anticipate, illuminate and overcome complex business challenges and make the most of opportunities. In certain jurisdictions, FTI Consulting’s services are provided through distinct legal entities that are separately capitalized and independently managed. The Company generated $3.49 billion in revenues during fiscal year 2023. More information can be found at www.fticonsulting.com.

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Investor Contact:
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Media Contact:
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Source: FTI Consulting, Inc.