7/11/24 – Issue 8.73 – Your weekly news on all things board. 

It’s a post-holiday quiet week, yet AI is getting tons of attention. Is it possible this news is writing itself? Here’s what’s happening: Under regulatory duress, Microsoft and Apple are giving up their roles on OpenAI’s board, marking a shift in the evolving landscape of artificial intelligence (AI) governance. The recent appointment of a former Director of the National Security Agency (NSA) to this board, however, suggests robust oversight and technical knowledge still command attention. Gartner reports on the rise of the Chief AI officer, while conjecture continues around when and how we will see AI showing up in the boardroom. Is this AI “hallucinating” or real people doing so, you may ask.

In other news: an insightful look at 2024’s proxy season No Action shareholder requests (governance nerd-alert albeit a worthy read), Southwest takes the poison pill, and Paramount’s board approves merger with Skydance subject to Shari Redstone’s sign-off.

In the Spotlight

Microsoft and Apple Give Up Their OpenAI Board Seats

Both companies are reportedly stepping back in the midst of EU antitrust scrutiny

“Microsoft, which has invested $13bn in the maker of the generative AI chatbot ChatGPT, said in a letter to OpenAI that its withdrawal from its board role would be ‘effective immediately’. Apple had also been expected to take an observer role on OpenAI’s board as part of a deal to integrate ChatGPT into the iPhone maker’s devices, but would not do so…. OpenAI would instead host regular meetings with partners such as Microsoft and Apple and investors Thrive Capital and Khosla Ventures — part of ‘a new approach to informing and engaging key strategic partners’... The move also comes as antitrust authorities in the EU and US examine the partnership between Microsoft and OpenAI as part of broader concerns about competition in the rapidly growing sector. Microsoft accepted a non-voting role on the board following the chaos that engulfed OpenAI last year when its chief executive Sam Altman was abruptly fired by the board, before being reinstated just days later. The attempted boardroom coup threatened OpenAI’s valuation, and with it Microsoft’s multibillion-dollar investment into the company.” FINANCIAL TIMES

What’s Behind OpenAI’s Appointment of an Ex-NSA Director to its Board

Just before the Independence Day break, the board appoints US Army Cyber General to help with safety and security

“OpenAI has appointed a former director of the US National Security Agency (NSA) to its board to help oversee safety and security. The company’s appointment of retired US Army General Paul M. Nakasone is likely motivated by its need to turn a profit…. Aside from sitting on OpenAI’s board, Nakasone will also be a key member of the company’s recently formed Safety and Security Committee, a governance body that will oversee the safety and security of its AI models, as it embarks on the development of a successor to GPT-4.” CIO

Governance in the Era of AI… So Far

As AI influences corporate strategies, many are racing to rethink their leadership roles

“In recent years, AI has rapidly transformed the business world, revolutionizing everything from customer service to product development. Now, AI is making its way into the highest levels of corporate decision-making: the boardroom. As organizations globally grapple with the implications of AI – both positive and negative – they’re realizing that traditional governance structures may no longer suffice. The rise of AI has fundamentally altered how businesses operate. Companies are leveraging AI to automate processes, gain deeper insights from data and create more personalized customer experiences. This technological shift has created new opportunities for growth and innovation, but it has also introduced complex challenges that demand strategic oversight.” TECHNOLOGY MAGAZINE

More Chatter About the Rise of the Robo-Director

How AI might shape the future of corporate boardrooms

“Corporate boardrooms – along with the rest of the world – are waking up to the fact that AI has the potential to reshape industries at breakneck speed. Its impact on how boards operate and how companies handle governance is only just beginning to be realized…. Imagine a board meeting where an AI named ‘robo-director’ offers insights alongside its human counterparts. While it sounds like science fiction, it is happening now. These AI models provide unbiased input by examining vast datasets, although their legal status and liability remain uncertain.” GOVERNANCE INTELLIGENCE

From Boardspan this Week:

The Governance Curve™

Drawing on Boardspan’s governance expertise and our deep knowledge of
how boards collaborate among themselves, we developed The Governance Curve
as a roadmap for board success. At its core, The Governance Curve considers the complexity of the challenges that a board faces relative to the value or contribution that stakeholders receive. Understanding this relationship will help boards align, prioritize, and
maximize their contributions. 

Across the Board

Shareholder Proposal No-Action Requests in the 2024 Proxy Season

The SEC received and granted more “No Action” requests than in the past – what does that tell us about who has the influence

“Shareholder proposals submitted for 2024 annual meetings continued to cover a wide range of environmental, social and governance (ESG) topics. And companies seeking to exclude shareholder proposals they deemed inappropriate or deficient once again turned to a process of submitting no-action requests... For the 2024 proxy season, some noteworthy patterns emerged. Companies submitted approximately 50% more no-action requests than they did for the 2023 season — to overall success, with the Staff granting more than two-thirds of requests (excluding withdrawals). The season followed a tumultuous one in 2022, when the Staff denied a significant number of no-action requests and the grounds for obtaining no-action appeared to have narrowed, and 2023, when companies appeared less willing to challenge some proposals…. The results this proxy season show that the no-action process remains a viable option for many companies to consider if they want to exclude inappropriate or deficient shareholder proposals.” HARVARD LAW SCHOOL FORUM ON CORPORATE GOVERNANCE

Elliott Threatens Southwest Airlines Proxy Fight for Leadership Changes
The activist firm argues Southwest needs leadership change to revive a lost culture of innovation

“Activist investor Elliott Investment Management on Monday warned of a proxy fight to push for leadership changes at U.S. budget carrier Southwest Airlines. In a letter to Southwest's board, Elliott said while it is open to collaboration, it plans to ‘move expeditiously to give shareholders a direct say on the necessary leadership changes.’ The investment management firm, known for pushing changes to boost shareholder returns, has called for a reconstitution of Southwest's board with ‘new, truly independent’ directors possessing expertise in airlines, customer experience and technology…. Last week, Southwest said the activist investor had made filings with antitrust authorities that would allow it to acquire an even larger voting power as early as July 11. It prompted the company to adopt a ‘poison pill’, used by corporate boards to thwart hostile takeover bids, to deter Elliott from raising its stake. Elliott said it is not seeking control of Southwest, but added the airline's board has put its own ‘self-interest ahead of the company's’ by adopting the ‘poison pill.’” REUTERS

Southwest Adds Former US Airways CEO to Board as It Battles Activist
The board appointment of Rakesh Gangwal was not universally well received, no surprise
 

“Southwest Airlines announced Monday that it is adding former US Airways CEO Rakesh Gangwal to its board of directors. The appointment comes as it seeks to fend off an activist push from Elliott Management. The latest defensive maneuver aims to blunt Elliott’s accusations that Southwest’s board is long-tenured and insular. The two sides have been in conversation since Elliott first announced it had an 11% economic interest in the airline in June. Gangwal was CEO of the now-defunct US Airways in the late 1990s and early 2000s, before founding Indian low-cost carrier IndiGo in 2006. IndiGo has since grown into the largest airline in Asia…. Elliott is seeking the ouster of Kelly, Southwest’s CEO before becoming executive chair, and Bob Jordan, who has served as Southwest’s CEO since 2022.” CNBC

Paramount Board of Directors Approves Skydance Deal
The agreement now awaits final approval from controlling shareholder Shari Redstone

“Paramount Global’s board of directors have unanimously approved a deal that will see David Ellison’s Skydance Media merge with the studio after acquiring controlling shareholder Shari Redstone’s National Amusements…. Skydance and National Amusements had reached a tentative agreement that was set to be referred to Paramount’s special committee. Under that new deal, Ellison would pay Redstone $1.75 billion to acquire her holding company, which controls about 77% of Paramount’s class A voting stock… Given what happened last time a deal between Paramount and Skydance looked close, it’s prudent to remember it’s not over until a deal is signed. A previous bid, which Redstone scrapped a month ago, was opposed by the company’s minority shareholders. They argued it prioritized Redstone at the expense of Paramount’s other investors.” THE WRAP

Federal Officials Step Down from Health AI Group’s Board Amid Political Tensions
Resignations come shortly after CHAI received pushback from Republican lawmakers concerned about the FDA’s participation in the group

“Two federal government officials have stepped down from the board of directors at the Coalition for Health AI, an industry group working to create standards for artificial intelligence in healthcare. Micky Tripathi, the national coordinator for health information technology, and Troy Tazbaz, director of the digital health center of excellence at the Food at Drug Administration, resigned their posts as federal observers on the coalition’s board of directors…. CHAI, a private sector group of more than 2,500 nonprofit and for-profit healthcare and technology organizations, formed in 2021 to develop a set of guidelines for the safe and responsible use of AI in healthcare — a major concern for experts and policymakers who’ve raised questions about the risks of the technology without adequate oversight… Tripathi is now stepping down due to a potential conflict of interest between CHAI and his role as acting chief artificial intelligence officer and co-chair of the HHS’ AI task force.” HEALTHCARE DIVE

Seat at the Table

• Pfizer appoints to its board Cyrus Taraporevala, former President and CEO of State Street Global Advisors

• HanesBrands elects to its board Sharilyn Gasaway, former EVP and CFO at telecommunications firm Alltel Corporation

• Commercial Real Estate firm CBRE Group welcomes to its board Gunjan Soni, CEO of fashion platform Zalora

• GoodRx names to its board Ian Clark, former CEO of Genentech

• Walgreens Boots Alliance welcomes to its board Dr. William Shrank, Venture Partner of the Bio + Health Team at venture capital firm Andreesen Horowitz

• Automotive insurance provider Hagerty adds to its board Anthony Kuczinski, former CEO of Munich Reinsurance US Holdings

• Nextdoor elects to its board Elisa Steele, former CEO and President of Jive Software

• Utilities firm Anterix nominates to its board Scott Lang, Founder and former CEO and President of Silver Spring Networks; William Heard, Founder, CEO and Chief Investment Officer of Heard Capital; and Mark Fleishhauer, former Partner and Assistant Portfolio Manager at Owl Creek Asset Management

• Selective Insurance Group appoints to its board Kate Sampson, former VP of Risk Solutions at rideshare firm Lyft

• NextEra Energy announces to its board Geoffrey Martha, Chairman and CEO of healthcare firm Medtronic

• Restaurant firm Brinker International elects to its board Frank Liberio, former EVP and Global Chief Information Officer at Restaurant Brands International

• Information management software OpenText names to its board Annette Rippert, former Group Chief Executive of Strategy and Consulting at Accenture

• Motion control firm Parken Hannifin welcomes to its board Jean Savage, President and CEO of rail transportation firm Trinity Industries

• ONE Gas adds to its board Yves Siegel, Founder and Principal of Siegel Asset Management; and Sanjay Meshri, former Chairman of Advance Research Chemicals

• Professional services firm Marsh McLennan elects to its board Jan Siegmund, former CFO of Cognizant Technology Solutions

About Boardspan
Boardspan is the leading provider of digital governance solutions for boards across all sectors. Our cloud-based assessments, benchmarking analytics and governance education programs complement our board search and advisory services to deliver a holistic approach to governance. Boards of all sizes and stages rely on Boardspan to deliver analytics, insights and outcomes that improve their effectiveness and performance. Clients include KKR, The Kellogg Foundation, Ingersoll Rand, Farfetch, McAfee, Beyond Meat, Box, e.l.f. Beauty, Satellite Healthcare and the U.S. Olympic & Paralympic Committee.