Several large asset owners, including the manager of Norway’s trillion-dollar sovereign fund, have thrown their weight behind a pioneering artificial intelligence (AI) misinformation and disinformation proposal at Microsoft on Thursday.
US activist Arjuna Capital is behind the resolution, which calls on the US tech giant to report on how it is managing financial risks and those to “public welfare” that may arise from its “role in facilitating misinformation and disinformation disseminated or generated via artificial intelligence”.
In January, Microsoft entered a “multi-year, multi-billion dollar investment” with OpenAI, the home of ChatGPT, extending investments it made in 2019 and 2021. The tech giant owns 49 percent of OpenAI and also has an observer seat on the firm’s board, following a management shake-up last month.
Arjuna co-founder and managing partner Natasha Lamb told Responsible Investor in October that Microsoft is one of several technology stocks in its portfolio it plans to engage with on the issue.
Given that 2024 is an election year in the US, she added, “we are acutely aware of the risks that disinformation and misinformation pose to our democratic process”.
Norges Bank Investment Management (NBIM), which pre-discloses its vote ahead of annual meetings, said in reference to the AI resolution that it supports proposals it considers to be “well-founded” and that call for “reasonable disclosure”.
The Office of the New York City Comptroller, which oversees the city’s five pension funds, has revealed that it will also back the AI proposal, as has Californian public pension giant CalSTRS.
Microsoft is opposing the resolution, arguing that its programme for dealing with misinformation is “longstanding and effective”.
RI understands that influential proxy adviser ISS is not supporting the resolution in its main advice but has backed it in its dedicated SRI offering.
Rival proxy adviser Glass Lewis is also opposing the shareholder proposal, arguing that the company’s existing and planned disclosures are “sufficient to allow shareholders to understand how the company is managing and mitigating AI-related risks”. However, it acknowledges that the issue is “not static or simple”.
Glass Lewis is, however, supporting two other shareholder proposals on the ballot at Microsoft, one on tax transparency and another on risks linked to military weapons development.
Danish pension fund AkademikerPension is a co-filer on the tax transparency proposal at Microsoft for the second year in succession. The 2022 resolution attracted support of 23 percent – a tally which was also buoyed by Glass Lewis support.
The other proposal supported by Glass Lewis calls on Microsoft to commission an independent, third-party assessment into the financial and reputational risks posed by the firm’s involvement in the development of military weapons.
Last year, the proposal, filed by US activist Harrington Investments, secured 10.5 percent support.
In its rationale, Glass Lewis said that, while it did not believe the company should be necessarily limited in what contracts it can pursue, “given the financial, reputational and human-capital-related risks that could be realised via its work with the military, we believe that a more robust discussion on this issue should be disclosed”.
NBIM and New York City are supporting the tax transparency resolution but opposing the weapons one. CalSTRS by contrast is opposing the tax proposal but supporting the weapons one. The Californian fund has focused on engagement on the issue, including “ghost guns”.
Disney seeks to exclude AI and living wage requests
Microsoft is not the only US firm facing shareholder questions on AI oversight, which seems to be an emerging issue for the upcoming proxy season.
US union fund AFL-CIO has filed five proposals on the topic at Apple, Comcast, Disney, Netflix and Warner Brothers Discovery. These call on the entertainment giants to publish an “AI transparency report” disclosing whether they have “adopted any ethical guidelines to protect workers, customers and the public from harms related to the use of AI”.
RI reported in October that Apple is seeking to exclude the proposal via the US Securities and Exchange Commission’s (SEC) “no action” process, the mechanism by which companies ask the regulator to prevent a proposal from going to the vote.
It argued that the resolution falls foul of the SEC’s rule on micromanagement – Rule 14-8(i)(7) – by delving too deeply into the day-to-day running of Apple.
Disney is requesting a “no action” verdict on the same grounds. The SEC has yet to rule on the request.
The entertainment giant is also seeking to exclude another resolution which calls on it establish wage policies that will provide workers with “the minimum earnings necessary to meet a family’s basic needs”.
Filed by US non-profit the Nathan Cummings Foundation, the new proposal describes Disney’s recent decision to raise its minimum wage to $18 per hour as “good progress”. It notes, however, that the living wage in 2022 was “$25.02 per hour per worker annually for a family of four (two working adults)”.
The proposal also calls for any policy introduced by Disney to “include reference to established living wage frameworks and timeframes for adoption and to comply with relevant legal obligations”.
Last year, a living wage proposal filed at UK supermarket group Sainsbury’s secured 17 percent support, but divided members of ShareAction’s Good Work Coalition. UK fund manager Schroders was asked to leave the fair pay investor group after publicly revealing that it would oppose the resolution.
In the 2022 proxy season in the US, proposals on low wages at US fast food firms Denny’s and Dine Brands attracted low levels of support, at 12 and 4 percent respectively.
Filed by US faith investors, the resolutions called for a report on “the feasibility of increasing tipped workers’ starting wage to a full minimum wage, per state and federal levels, with tips on top to address worker retention issues and economic inequities”.
OGMP! Engagement win at Exxon
In what has been billed as an engagement win, US oil giant ExxonMobil last week agreed to report on its methane emissions under the Oil and Gas Methane Partnership (OGMP), the UN Environment Programme’s flagship oil and gas reporting and mitigation framework.
In April, 36 percent of shareholders backed a proposal filed by US faith investor Sisters of St Francis Dubuque Charitable Trust, which called on Exxon to issue a report analysing the reliability of its methane emission disclosures using the OGMP framework.
Majority-supported ESG proposals were thin on the ground in the 2023 proxy season, but one on methane at Coterra Energy was backed by close to three-quarters of shareholders.
Eight other proposals on the reliability of methane emission disclosures were withdrawn following commitments to join an industry initiative to improve monitoring. The firms targeted included oil and gas firms EOG Resources and Williams, which joined OGMP in January.