Are Boards Forming AI Committees to Oversee the Transformative Tech?
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AI is no longer an abstract idea for boards to consider—it’s a governance issue today. At Berkshire Hathaway, investors are pushing for an AI governance committee. Others argue that successful organizations need to embrace AI as a business transformation and will need the full board’s participation in overseeing such a strategic shift. Meanwhile, activist investors continue to dominate governance news: Starboard is launching a proxy fight at Autodesk, while Engaged Capital has secured board changes at Yeti. An analysis of activism trends from 2024 and a forecast of what to look for in 2025 shows just how pervasive hedge fund activists have become. Finally, ESG remains a lightning rod, with anti-ESG shareholder proposals on the rise and boards navigating shifting investor expectations, while some make a compelling case for considering the needs of all stakeholders to build sustainable, long-term value.
In the Spotlight
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The Berkshire Dilemma
Are boards making the same mistakes on AI governance that they made on cybersecurity?
“To lead or not to lead in the boardroom on AI, that is the dilemma facing the Berkshire Hathaway board and their shareholders… Should AI be driving a new wave of boardroom transformation... Berkshire investor Tulipshare Capital LLC thinks so and has proposed that Berkshire Hathaway transform their corporate governance approach around AI through the addition of an AI committee on the Berkshire board… They are also encouraging Berkshire to set the AI tone-at-the-top for their portfolio companies, to lead against a significant unknown, which is when leadership is needed the most.” FORBES
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How Boards Can Effectively Oversee AI to Drive Value and Responsible Use
In the fast-evolving AI landscape, inaction is a risk that can lead to disruption, so embrace AI to secure and enhance your strategic position
“The board’s role, as with any significant strategic initiative, is to provide oversight and guidance to management. Typically, the full board should be involved in overseeing the company’s AI business transformation given its strategic and risk implications… This technology offers businesses real solutions to a wide range of problems. It shouldn’t be viewed as just a source of productivity or ‘back office’ efficiency. AI’s transformational power and value lie in its ability to unlock new growth and business strategies.” PwC
Across the Board
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Shareholder Activism – 2024 Review and 2025 Outlook
Activity by activist hedge funds, both in the U.S. and abroad, has increased since the end of the pandemic
“In 2024, there was a slight increase in global activism campaigns compared to 2023, which saw a 9% increase in the number of campaigns compared to 2022. Approximately one-fifth of S&P 500 companies currently have a known activist holding more than 1% of their outstanding shares, and there are many other companies at which activists covertly hold through derivatives. Activists’ assets under management have also grown substantially in recent years, with the 50 most significant activists ending 2024 with over $200 billion in equity assets. ?There has also been a proliferation of first-time activists in recent years. The following key trends shaped and defined the 2024 activism season: Continued Use of Settlements…Companies Subject to Multiple Activists and Multi-Year Campaigns…Rise of First Timers and Smaller Players…Activists Targeting CEOs….Some key themes to watch in 2025 include: The Return of M&A Theses….An Increasing Interest in Break-Ups….Potential Asymmetric and Diminished Transparency with New SEC Guidance…Private Placeholder Nominations.” HARVARD LAW SCHOOL FORUM ON CORPORATE GOVERNANCE?
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Activist Starboard Prepares to Launch Proxy Fight at Autodesk
Starboard has a more than $500 million stake and plans to nominate a minority board slate
“Starboard said Wednesday morning that it has a more than a $500 million stake in Autodesk and intends to nominate a minority slate of director candidates ahead of the tech company’s coming annual meeting…. Autodesk said in response that the company has had constructive engagement with Starboard over the past year. Should Starboard proceed with nominating a slate of directors, the company said it would consider them as part of a regular evaluation process.” WALL STREET JOURNAL
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Yeti Expands Board by Two After Discussions with Activist Engaged Capital
The company was already working on refreshing its board and Arens was introduced to the company by Engaged
“Outdoor goods company Yeti Holdings which makes cooler boxes and insulated cups, on Monday said it would add two new directors, expanding the size of its board after months of discussions with activist investor Engaged Capital… Magnus Welander, former chief executive of lifestyle and outdoor company Thule, and Arne Arens, former chief executive officer of footwear brand Boardriders, will join eight directors, increasing the board's size to 10… Engaged, which owns roughly 2% of Yeti's common shares, has held talks for months with management and has told people that the company's stock price could triple over the next three years if management pursues growth strategies and returns cash to shareholders.” REUTERS
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Activists Filed More Anti-ESG Proposals and Activist Campaigns In 2024
Among Russell 3000 companies, anti-ESG proposals more than quadrupled, from 23 in 2021 to 112 in 2024
“The changing political climate and economic uncertainty in the U.S. led to an increase in anti-ESG shareholder proposals and shareholder activist campaigns last year, and corporate board members should expect more of the same in 2025… the number of shareholder activism campaigns doubled from 206 in 2021 to 411 in 2024. During the 2025 proxy season, these trends are expected to continue. Diversity, equity and inclusion initiatives have come under greater scrutiny since the Trump administration has come into office, which may encourage anti-DEI activists to file more shareholder proposals this year.” CORPORATE BOARD MEMBER
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The Enduring Nexus Between Value and Values
Although ESG has become a widely criticized and politically charged acronym, the paradigm of stakeholder governance continues to offer the best path to creating sustainable business success
“As the ESG backlash continues to unfold, some observers have suggested that criticism of ESG applies with equal force to the notion of stakeholder governance and, relatedly, vindicates Milton Friedman’s theory of shareholder primacy. This erroneously assumes that ESG is congruent with stakeholder governance, and that the two concepts are inextricably intertwined. To the contrary, as the pendulum swings back and forth, the enduring relevance and common sense of stakeholder governance has become even more salient.” HARVARD LAW SCHOOL FORUM ON CORPORATE GOVERNANCE
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‘Anti-Woke’ in the U.S., DEI at Home: the New Playbook for European Companies
Firms that operate in the U.S. and Europe are rowing back diversity and inclusion policies in the U.S. while keeping them in place elsewhere
“Companies with operations on both sides of the Atlantic have a new formula when it comes to DEI—and it depends on the location. Grocery store chain Aldi, investor-advisory firm Institutional Shareholder Services and lender Banco Santander are among the businesses to have recently recalibrated their diversity, equity and inclusion policies to vary by region. In some cases, companies are excluding the U.S. from what were once global commitments. In others, they are scrubbing buzzwords and acronyms—such as LGBTQ—from American websites and annual reports, while still promoting DEI goals elsewhere.” WALL STREET JOURNAL
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FHFA Director To Head Fannie Mae, Freddie Mac Boards Amid Shake-Ups
The moves come after the appointment of FHFA Director William Pulte on Friday
“The Federal Housing Finance Agency has shaken up the boards of Fannie Mae and Freddie Mac, putting its own director at their helm. The FHFA on Monday removed eight members from the board of the Federal National Mortgage Association, known as Fannie Mae, which buys mortgages from large commercial banks. At the same time, it added four new board members, including newly appointed FHFA Director William Pulte. The agency additionally culled six members from the board of the Federal Home Loan Mortgage Corp., or Freddie Mac.” WALL STREET JOURNAL
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Protecting Directors from Board Burnout
Directors can handle spurts of higher demands, of course, but the risk of hitting capacity is undeniable when people are carrying heavier workloads for indefinite periods
“If you could build the perfect environment for board burnout, it might look something like the current business landscape. Corporate directors are tasked with guiding companies in the midst of what some are calling the Great Disruption. They’re dealing with a U.S. presidential administration whose policies are creating deep uncertainty, eroding investor confidence, and exposing employees to stress and layoffs. Directors are also tracking incoming regulations from the EU, while watching for geopolitical risks in unexpected places.” FORTUNE
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