'THE DAILY CORPORATE GOVERNANCE REPORT’ (for public company boards, the C-suite and GCs)

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? ? ? ? ? ? ? (i) board directors and chief ethics & compliance officers on AI implementation and governance: On March 19/24, members of the Ethics, Culture and Compliance Network (ECCN), convened by professional services firm Tapestry?Networks,?met and "reflected on their experiences in the past year and shared their priorities and goals for the current year." Among the participants were: Jim Byrne, Vice President, Corporate Ethics and Business Conduct at Lockheed Martin; Justin Ross, ?Vice President and Global Chief Compliance Officer at FedEx; Scott Sullivan, Chief Integrity and Compliance Officer at Newmont Corporation; Antonio Fernández, Chief Ethics and Compliance Officer at NYSE-listed FirstEnergy Corp.; and non-executive board members at NYSE-listed Deere & Company?(John Deere) and at NYSE-listed, global health company,?Cigna Group.

? ? ? ? ? ? ? ? This Summary of Themes?report posted by Tapestry on its website this month, "Board directors and ethics & compliance leaders discuss key challenges and priorities", highlights "participants’ reflections on key challenges and priorities in their oversight of ethics, culture, and compliance", including: ?"Fostering trust and transparency as workplace culture continues to evolve"; and "Navigating AI implementation and governance." Below is from the ?section "Navigating AI implementation and governance":

? ? ? ? ? ? ?"AI is way more than a compliance issue. It's a business survival issue. It’s almost existential for some businesses,” said a director. With that awareness in mind, company boards continue to assess implementation opportunities and develop governance approaches “We’re building the plane while we’re flying it,”?one executive said.

? ? ? ? ? ? ?"Designing AI systems to suit company needs: Most organizations are beginning to implement AI in their business, though many are only in the early stages: “[We’re exploring] the development of specific use cases and how they advance the business case and tie back to our strategy,” said one director. An executive said, “There’s a lot for us to consider as far as protecting our systems and ensuring that AI or the people running AI don’t lose control of the tool. So, it's very sandboxed for us right now, and our use cases are very limited." Participants expressed concerns about the use of commercially available AI technologies, a concern that larger companies can address by collaborating with AI technology providers to develop bespoke platforms that fit their business needs. One director said, “We’ve moved away from the commercially available generative AI platforms and gone to a company-specific platform that has some fences and guards around it. It’s designed specifically for our use and was walled off for our needs.” In some cases, the need to move quickly or lack of internal resources makes using commercial tools necessary, however. One executive said, “We've had to mature quickly,” due to the industry in which it was operating. As a result, “We had to embrace commercial AI products to create the platforms and services that our customer needs,” while also working with their customer to develop principles for AI implementation.

? ? ? ? ? ? ? ? "Developing governance of AI: Boards and senior management teams are becoming more involved in AI governance, but 67% of ECCN participants indicated they are still in the early stages of developing their approach. Regarding how executive leadership is collaborating on the development of AI governance, one participant said, “We have a cloud governance council that has taken on AI, so we’re using existing governance frameworks to handle use cases and establish guidelines that have been turned into a formal policy. We’re still in the developing stage, but each quarter we update the audit and cybersecurity committees on progress.” Some boards have joint committee structures to address the operational, legal, and compliance risks of AI.?“We oversee cyber and AI through a meeting of our operations committee and our audit committee. [Operations] has [some] oversight responsibilities for the board because there are operational risks and opportunities with AI that are more related to business operations,” said a director."

? ? ? ? ? ? ? (iii) the rise of the chief AI officer (CAIO): There have been a number of recent articles on the?growing number of CAIO appointments at major U,S. companies, including this NY Times in Jan./24, "Hottest Job in Corporate America? The Executive in Charge of A.I." (see item (ii) from Feb. 8/24), and this MarketWatch article ast month, "Chief AI officer: A necessity for companies or an expensive impediment??(see item (i) from March 6/24). More in this FT article yesterday, "The rise of the chief AI officer", inter alia quoting the CAIOs at Accenture, WPP?and Dell:

? ? ? ? ? ? ? ? ? "As boards grapple with the opportunity and risk of generative artificial intelligence, companies are leaning into a new role: the chief AI officer. The number of companies with a designated head of AI position has almost tripled globally in the past five years,?according to social network LinkedIn. Fawad Bajwa, AI lead at recruiters Russell Reynolds Associates, has “seen the landscape shift” since the launch of ChatGPT. The position was further elevated last month, when the White House announced federal agencies were required to designate chief AI officers “to ensure accountability, leadership, and oversight” of the technology.?

? ? ? ? ? ? ? ? ? "Yet the role’s responsibilities are still being worked out — and with the rise and fall of job titles now a constant in corporate life, it may not stay relevant forever. CAIOs oversee the deployment of AI and generative AI within an organisation: improving workforce efficiency, identifying new revenue streams, and mitigating ethical and security risks. The role requires a?“deep understanding of AI tech, machine learning, data science and analytics,” says David Mathison, who founded the first Chief AI Officer Summit last year. Yet candidates also “need to understand legal” and change management well; many come from leadership roles in data, risk management and compliance......

? ? ? ? ? ? ? ? "Lan Guan, CAIO at Accenture, says her job is?“multidisciplinary, requiring a blend of robust technical knowledge and sharp business insight across fields [as diverse] as AI and machine learning, computer science, statistics, data analytics, ethics, regulatory compliance, and industry-specific expertise”. Technology, she estimates, is?“probably only 35-40 per cent”?of the job — she leads Accenture’s Center for Advanced AI, which develops products for clients. “Having the strategy background and ability to manage the uncertainty, [as well as] to address the potential trade-offs is super important.”?

? ? ? ? ? ? ? ?"Some CAIOs report to the chief executive or chief operating officer; others to the chief tech officer, like Daniel Hulme, who took the role at?WPP?after his company Satalia, which creates AI products and consulting services, was bought by the advertising group almost three years ago. As part of a dual role continuing to lead Satalia, his job is to identify ways AI can help create content for WPP. One initiative trains the technology on client and third-party data — including elements such as tone of voice — to predict how consumers will receive campaigns.?Hulme works closely with WPP’s chief technology officer, but makes the case for a dedicated AI role to keep on top of its rapid advancement.?“It requires somebody to make sure they stay at the forefront, to understand deployment, to enhance offerings to clients and the workforce?.?.?.?to see how they can enhance human creativity.”?

? ? ? ? ? ? ? ? "Accenture’s Guan says part of the role is evangelising for the technology, dispelling some of the “fear and anxiety” about AI. She oversees rollout of workshops and demonstrations, for example showing financial analysts how to use AI to generate balance sheets. “I am clearly an AI optimist,” she says. “It’s super important for people to try — you can’t just stand on the side lines and watch people cook?.?.?.?This experimentation is super important.” So is identifying influencers in the organisation who?“are actively talking about the benefits and lessons learnt. Amplifying the storytelling, bringing the technology to life. This is a culture change, not just a tech conversation — it’s a people conversation.”?

? ? ? ? ? ? ? ?"Jeff Boudreau, CAIO at Dell, also says his role is about reassurance.?Some staff feel especially vulnerable, worrying their jobs will disappear. Hulme says he encourages employees to develop expertise so that they can ask?“better questions of AI”, seeing it not as a threat to jobs but a help to workers. “The thing I talk about with teams is the roles that haven’t been created yet.” Underpinning this, however, is increasing efficiency. “I joke we’re moving from chief AI to chief productivity officer,” says Boudreau. Practitioners must also manage expectations, however. “When I talk to some board members and Exco [executive committee] members in other companies, their aspirations and what the tech can do are not aligned. That’s why the [CAIO] voice is so important — to educate them.”..........

? ? ? ? ? ? ? ?"Harrick Vin, chief technology officer at Tata Consultancy Services, does not believe a separate CAIO role is needed.?“It isn’t about having one person and one role. Every function — whether sales, marketing, or software engineering is getting redefined leveraging AI.” Like innovation, AI is?“everyone’s business. One person can’t be an expert.” However, there needs to be a point person, whatever their title, says Vin. “The actual transformation needs to be decentralised but the operation needs to be centralised. This is not a one-time transformation. The machines will get better and better. As they become more intelligent, more avenues become open. It’s like driving continuous transformation.”

? ? ? ? ? ? ? ? "According to Gartner, the research firm, responsibility for AI generally still lies largely in the domain of the chief technology officer and chief information officer, which respectively take the lead on AI initiatives in 23 per cent of organisations.?Foundry records that only 21 per cent of companies have plans to create a CAIO position...."

? ? ? ? ? ? ? (iii) Microsoft assistant general counsel on being a 'real AI lawyer': ?Ben Glatstein?is Microsoft Assistant General Counsel, having joined the company in 2009 as a senior copyright attorney, and in 2017 becoming assistant general counsel for artificial intelligence and research. Below are from remarks he made in an online conversation with University of California, Berkeley School of Law’s Irene Liu as part of its Executive Education Program, and which appeared in this Corporate Counsel blog post last Wednesday, "Microsoft's Ben Glatstein on How to Be a Real AI Lawyer, Not Just One Who Throws the Acronym Around":

? ? ? ? ? ? ? ? ? ? ?"Generative AI is quickly changing the way lawyers work, and ignoring how the technology functions is no longer an option, according to Microsoft Assistant General Counsel Ben Glatstein.?“Just to be a mediocre lawyer in general, you have to understand AI,” he said. “If you want to be a great AI lawyer, I think you should be playing around with the technology, you should be curious and you should be experimenting.”

? ? ? ? ? ? ? ? ? ? "Liu.....asked Glatstein how he stays on top of new developments. “It’s advancing so fast,” Liu said, “and many lawyers that have not practiced in AI are now adding AI to their titles. So you sort of wonder how many genuine AI lawyers there are, as well. And for those that are, how did you ramp on it and how do you stay abreast of all of the developments that are happening at Microsoft and AI, which I’m sure are vast and varied.”

? ? ? ? ? ? ? ? ? ??"Glatstein said he’s lucky that his team sits with Microsoft’s engineers, and can ask questions about how a model is built and fine-tuned. “Now, these are all terms I’m super-familiar with now, but I wasn’t at one point. And so I was lucky that I could just go in and ask something,”?he said, admitting that while this “obviously isn’t scalable” to the rest of the legal world, there are many opportunities for lawyers to become at least somewhat versed in how the technology works.

? ? ? ? ? ? ? ? ? ?"For starters, reading the?European Union’s?AI Act can help a lawyer understand underlying principles and terminology. “We all became privacy lawyers when GDPR became law, and we had to go and learn what is the controller, what is the processor, what do these things mean?” Glatstein said.?“And there’s really no substitute for just digging in and doing the work,” Glatstein said.?“The AI Act is extremely long, I have it in a Word document that is 180 pages long. So it’s a big piece of legislation. But you have got to read it. You’ve got to attend those CLEs. The good news is there are tons of opportunities to hear what people who are experienced in this area of practice are thinking about things.”.......

? ? ? ? ? ? ? ? ?“Another thing I did recently was you can create custom GPTs where you load in the AI Act and ask questions about it,” he said. 'Would I say I’ve done my definitive research? No. But it’s a great way to check to make sure you didn’t miss anything. Or if you’re trying to find that one provision that you just can’t remember where it is, that’s a great resource, as well. So there are lots of ways that people can and should be using this technology to help teach them.'......."

? ? ? ? ? ? ? (iv) how widely is generative AI being adopted in the business world?: Below is from this WSJ article last Monday, "Generative AI Isn’t Ubiquitous in the Business World—at Least Not Yet", inter alia with the observations on the use of generative AI of Aaron Gwinner, Chief Information Officer of tobacco company Reynolds American (subsidiary of LSE/NYSE-listed British American Tobacco p.l.c., BAT):?

? ? ? ? ? ? ? ? ? ?"ChatGPT and other forms of generative artificial intelligence have experienced meteoric growth, but many businesses are hesitant to rush headlong into the technology. Tobacco company?Reynolds American, for instance, is taking a go-slow approach, testing gen AI in a limited capacity. It is experimenting with using AI to improve analysis of large data sets, but not in high-risk finance applications or in customer-facing roles, said Chief Information Officer?Aaron Gwinner.?“There’s some inherent risks with gen AI,” Gwinner said.?“Before we run off and we just start doing AI projects, we need to get the foundations and the basics in place.”......

? ? ? ? ? ? ? ? ? ??"Broad surveys of business sentiment show many, like Reynolds, are proceeding with caution.?U.S. Census Bureau data released in March found only an estimated 5.4% of businesses use AI of any type to produce goods or services. Businesses in the information sector and large businesses use AI more than others, the bureau’s data show.?Companies most likely to say they intend to adopt generative AI are life sciences, oil and gas, and communication-service providers, with 42% to 49% in those industries reporting that intent, according to a report published in March by Gartner, a research company. Most companies that say they are going to adopt AI, though, ultimately don’t do it, many surveys have shown, a phenomenon Gartner calls a “gap between ambition and achievement.”

? ? ? ? ? ? ? ? ? ??"Organizations are still trying to see how useful generative AI actually is, said?Daniel Colson, the co-founder of the AI Policy Institute, a research and advocacy group.?“That’s been really unclear for quite a while. And I think that’s led to uncertainty about whether language models are actually that valuable for business applications,” Colson said, referring to the AI systems behind ChatGPT and other programs. Some have concerns that generative AI isn’t worth the cost. Many organizations simply can’t yet see a use case......

? ? ? ? ? ? ? ? ? ?"So-called hallucinations, a phenomenon in which an generative AI gives a confident but made-up answer, have been well-documented in the ChatGPT era......Though large businesses are more likely than smaller ones to have adopted generative AI, they also see its potential to pose security risks.?Ninety-two percent of respondents to a recent Cisco Systems' survey of privacy and security professionals said they believed generative AI was fundamentally different from other technologies and required new techniques to manage data and risks. More than a quarter had gone as far as banning its use......

? ? ? ? ? ? ? ? ? ?"Reynolds American is trying to balance the competitive gains that can come from moving quickly against the risk of moving too fast, Gwinner said.?“If you think about the revolutions in the last 100 years in technology, this is going to be one of the biggest,” Gwinner said.?“[But] it’s going to take us time to be ready for it.”

? ? ? ? ? ? ? (v) press release/precedent of the day (employment offer letter with chief commercial officer): Levi Strauss & Co. announced last Thursday in this press release?the appointment of a new Chief Commercial Officer from outside the company, reporting to the CEO, as follows:

? ? ? ? ? ? ? ? ? ??"Levi Strauss & Co. today announced the appointment of Gianluca Flore as executive vice president and chief commercial officer,?effective July 29.?Reporting to Michelle Gass, president and chief executive officer, Flore will join the company’s executive leadership team and will be responsible for the commercial operations of the Levi’s? brand across all global channels, including stores, e-commerce and wholesale.....Flore?brings more than 20 years of international commercial experience in the luxury apparel and lifestyle sector. He joins LS&Co. from Burberry, where he was appointed chief commercial officer in 2021....."

? ? ? ? ? ? ? ? ? ? In connection with the appointment, the new chief commercial officer entered into this Employment Offer Letter, as summarized in the related Current Report?filed with the SEC.

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