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8/24/23 – Issue 8.31 – Your weekly news on all things board. 

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What do you know about AI and Governance? Even if you have some information, it’s likely that you want more. Boards are hungry for trusted advice on how to proceed as AI begins to come of age, technologically speaking. This week, new thoughts on AI decision making in the boardroom, balancing AI adoption with security and privacy concerns, and AI risk oversight. And register to hear Dr. Ayesha Khanna, one of the world’s leading experts on business and AI in our second Boardspan Webinar.

 

In other news, the Federal Trade Commission joins the Department of Justice to crack down on directors serving on boards of competing companies; challenges faced by overlapping directors; and understanding new SEC Breach Notification Rules and the National Cybersecurity Strategy Implementation Plan.

 

In the Spotlight

 

AI In The Boardroom: The Inevitable Evolution Of Decision-Making
How can new technology augment the complex decision-making process for boards?

 

“Given the trajectory of AI's influence is seemingly preordained, the central question now revolves around the allocation of decision-making authority between AI systems and their human counterparts. In the ever-evolving landscape of corporate governance, cutting-edge technology has become a defining element of boardroom dynamics. Amid these innovations AI is emerging as a transformative force, recalibrating the mechanisms of decision-making and redefining the essence of interactions. The impending impact of AI on the boardroom is undeniable, as it offers organizations strategic avenues to amplify efficiency, bolster efficacy, and ultimately foster sustainable growth.” FORBES

 

Companies Grapple With Limits in Bringing AI Into the Boardroom

How much reliance on Generative AI is wise, or permitted?

 

“The newest member of the corporate boardroom may add just the impersonal touch companies are looking for. Increasingly, some companies are using generative artificial intelligence in corporate governance decisions—from sales and marketing issues to finance and legal services. Many boards are treading slowly, however, both due to privacy and security concerns and because, according to recent surveys, most directors aren’t knowledgeable about using AI tools. Nonetheless, directors see advantages in bringing Gen AI into their decision-making process expecting their co-pilots are leading them to better conclusions. It lightens their burden and provides the best options backed with massive amounts of data produced in real time.” BLOOMBERG LAW

 

Board Responsibility for AI Risk Oversight

How AI impacts the regulatory landscape and overlaps with hot issues like ESG

 

“As more companies adopt artificial intelligence and algorithmic decision-making becomes integral to many core business functions, directors on corporate boards are considering their oversight obligations in this area. The promise of AI is evident from recent corporate spending. Stanford University’s 2023 AI index report found that private investment in AI in 2021 was approximately $91.9 billion — 18 times what it was in 2013. Balanced against AI’s promise are significant business risks…Specific regulatory oversight obligations aside, board-level oversight of AI risks may be important for companies in light of potential Caremark claims. In order to prevail on a Caremark claim, a plaintiff must establish either that there was an “utter failure to attempt to assure a reasonable information and reporting system exists” or, if such a system exists, that the board consciously failed to monitor or oversee its operations.” DIRECTORS & BOARDS

 

From Boardspan this Week:

 

NEW WEBINAR: AI and Governance: What Every Board Needs to Know

 

Wednesday, September 27, 2023

12pm ET

 

What is the true impact of AI? What is real, and what is hype? And what is the
board’s role in governing AI as the technology touches every part of the business? Join CEO Abby Adlerman and Dr. Ayesha Khanna, Co-Founder and CEO of Addo.ai, public company board member,  and one of the world’s leading experts and advisors on AI governance,  for this webinar focusing on the board and AI. To register, click the button below.

Register for the Webinar

 

Across the Board

 

US Regulators Raise Pressure on Board Members at Competing Companies
Two Board Members at Pinterest step down from Nextdoor board amid increased scrutiny of overlap

 

“US antitrust agencies are taking a harder line on directors who sit on the boards of competing companies, signaling a broadening crackdown in cases that violate federal law. So-called interlocking directorates at competing groups are prohibited in the US in most cases, as they raise the risk of illicit coordination across businesses. The Department of Justice this week announced that two directors at Pinterest had stepped down from the board of social media platform Nextdoor in response to agency scrutiny, taking the number of board resignations triggered by its antitrust unit to 15.” FINANCIAL TIMES

 

Think Twice Before Becoming An Overlapping Board Member

The challenge for current and potential directors is one of advance diligence

"Serving as a corporate director can be fun, rewarding and intellectually stimulating. For the individual board member, it provides an opportunity to leverage expertise and wisdom, and can serve as a useful entrée to career-expanding relationships. And sometimes directors can ‘double their fun’ through simultaneous board service on companies that might share similar interests, strategies or perspectives. This can leverage skill sets, and can also lead to meaningful efficiencies, information flow and coordination between the companies. That’s why the use of such ‘overlapping board’ structures can make a great deal of sense from governance and strategy perspectives. Except, of course, when it doesn’t.” FORBES

 

From Cyber Strategy to Implementation

What Boards need to know about the National Cybersecurity Strategy Implementation Plan

 

“The White House frames this shift as making the biggest, most capable and better-positioned entities — in both the public and private sectors — assume a greater share of the burden for mitigating cyber risk.” HARVARD LAW SCHOOL FORUM ON CORPORATE GOVERNANCE

 

Understanding the New Incident Notification Rule

A deeper dive into the notification policy of the new SEC cybersecurity rules

 

“Boards of Directors for public companies across the country are likely to be taking stock of their company's’ cybersecurity practices and strategies after the Securities and Exchange Commission’s adoption of the Cybersecurity Incident Disclosure Rule on July 26. Although the SEC removed the requirement for corporate boards to include members with cybersecurity expertise, it still intends for the Rule to result in greater transparency of companies’ cybersecurity governance and to aid in investor understanding.” JD SUPRA

 

Esmark Drops Out of Bidding for U.S. Steel

After making a surprise $7.8B bid, Esmark changes course after United Steelworks backs a competing bid

 

“Esmark Chief Executive James Bouchard said last week that he was prepared to offer $35 a share in cash for the steelmaker, a day after Cleveland-Cliffs revealed that it presented the company with a cash-and-stock offer for about the same amount.
Bouchard said Wednesday that he decided to back away from the deal after the steelworkers union said it would only support Cleveland-Cliffs’ offer. The union has warned that it would use its power under its contract with U.S. Steel to block other companies’ attempts to acquire U.S. Steel.” WALL STREET JOURNAL

 

Michael Bloomberg Announces New Company Leadership

New appointments hint at company succession plan if Bloomberg steps down

 

“Michael R. Bloomberg, the founder of the financial data colossus Bloomberg L.P., announced a new chief executive and president on Monday, a possible indication of who will take over for him when he steps away from the company. Mr. Bloomberg, 81, also announced plans to appoint a new board to steer the business, a purveyor of data terminals that generates more than $12 billion in revenue annually. Vlad Kliatchko, 54, Bloomberg’s chief product officer, was appointed chief executive of the company, Mr. Bloomberg said in a memo to employees Monday. Jean-Paul Zammitt, 55, formerly Bloomberg’s chief commercial officer, was named president. Mr. Bloomberg said in his memo that he had no plans to step away any time soon, noting that he was not taking on any new title.” THE NEW YORK TIMES

 

Freshpet Appoints Activist Investor Nominee to Board 

Appointment of director Timothy McLevish effectively ends Jana Partners’ feud with Freshpet

 

“Pet food company Freshpet Inc said on Monday it has reached an agreement with Jana Partners and appointed Timothy McLevish, one of the activist investor's director nominees, to its board. The agreement draws to a close a proxy fight with Jana Partners after it disclosed a nearly 10% stake in Freshpet in September and urged the company to consider selling itself.” REUTERS

    Seat at the Table

    • Fifth Third Bancorp appoints to its board Laurent Desmangles, former Senior Partner and Managing Director at Boston Consulting; and Kathleen Rogers, former Chief Finance Administration Officer of U.S. Bancorp 

    • Flowers Foods welcomes to its board Brigitte King, Global Chief Digital Officer at Colgate-Palmolive; and Joanne Smith, EVP and Chief People Officer at Delta Air Lines

    • Biomarker detection company Quanterix elects to its board William Donnelly, former EVP and Chief Financial Officer at life science tool firm Mettler-Toledo International

    • Semiconductor manufacturer SkyWater Technology adds to its board Edward Daly, retired U.S. Army 4-Star General

    • Financial services firm WisdomTree appoints to its board Rilla Delorier, Chief Strategy and Digital Transformation Officer at Umpqua Bank

    • Energy infrastructure firm Sempra welcomes to its board Richard Mark, former Chairman and President of electrical services company Ameren Illinois

    • Lulu’s Fashion Lounge Holdings elects to its board Kelly McCarthy, former SVP and Director of Global Brands Communications at Moët Hennessy Louis Vuitton

    • TD Bank Group announces to its board John MacIntyre, Co-Founder of Birch Hill Equity Partners Management; and Keith Martell, former President and CEO of First Nations Bank of Canada

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