Across the Board
OpenAI Insiders Warn of a ‘Reckless’ Race for Dominance
Whistleblowers say the organization prioritizes profits over safety in AI systems
“A group of OpenAI insiders is blowing the whistle on what they say is a culture of recklessness and secrecy at the San Francisco artificial intelligence company, which is racing to build the most powerful A.I. systems ever created. The group, which includes nine current and former OpenAI employees, has rallied in recent days around shared concerns that the company has not done enough to prevent its A.I. systems from becoming dangerous. The members say OpenAI, which started as a nonprofit research lab and burst into public view with the 2022 release of ChatGPT, is putting a priority on profits and growth as it tries to build artificial general intelligence, or A.G.I., the industry term for a computer program capable of doing anything a human can. They also claim that OpenAI has used hardball tactics to prevent workers from voicing their concerns about the technology, including restrictive nondisparagement agreements that departing employees were asked to sign.” THE NEW YORK TIMES
OpenAI Board Members Brush Off Warning From Ex-Directors and Defend Sam Altman as ‘Highly Forthcoming’
Two former OpenAI board members criticized the CEO amid safety concerns
“Current OpenAI board members Bret Taylor and Larry Summers issued a response to AI safety concerns on Thursday, stating that ‘the board is taking commensurate steps to ensure safety and security.’ The response comes a few days after The Economist published an op-ed by former OpenAI board members Helen Toner and Tasha McCauley, who criticized CEO Sam Altman and OpenAI’s safety practices while calling for a need to regulate AI. The title of the piece argued that ‘AI firms mustn’t govern themselves.’ Taylor and Summers…defended Altman and discussed OpenAI’s stance on safety, including the company’s formation of a new safety committee and a set of voluntary commitments OpenAI made to the White House to reinforce safety and security.” BUSINESS INSIDER
U.S. Clears Way for Antitrust Inquiries of Nvidia, Microsoft and OpenAI
The DOJ and FTC will proceed with separate investigations into major players in the AI industry
“Federal regulators have reached a deal that allows them to proceed with antitrust investigations into the dominant roles that Microsoft, OpenAI and Nvidia play in the artificial intelligence industry, in the strongest sign of how regulatory scrutiny into the powerful technology has escalated. The Justice Department and the Federal Trade Commission struck the deal over the past week, and it is expected to be completed in the coming days, according to two people with knowledge of the matter, who were not authorized to speak publicly about the confidential discussions. Under the arrangement, the Justice Department will take the lead in investigating whether the behavior of Nvidia, the biggest maker of A.I. chips, has violated antitrust laws, the people said. The F.T.C. will play the lead role in examining the conduct of OpenAI, which makes the ChatGPT chatbot, and Microsoft, which has invested $13 billion in OpenAI and made deals with other A.I. companies, the people said.” THE NEW YORK TIMES
Meet the Tesla Board Fighting for Elon Musk's $46 Billion Payday
Shareholders are set to vote on the package on June 13
“Tesla is embroiled in another major controversy and its board of directors are at its center. This latest kerfuffle goes all the way back to the distant year of 2018, when Tesla’s board put together a surprising compensation package for CEO Elon Musk. The plan, which was approved by 73% of shareholders, gave Musk the right to purchase up to 304 million Tesla shares priced at $23.34 per unit, as long as he met a series of increasingly difficult milestones. Despite the difficulty of achieving the goals, Tesla met enough of them by the end of 2022 for Musk to receive the full package ….Now, meet the seven members of Tesla’s board who are overseeing Tesla’s future. Excluding, of course, the ‘Technoking’ of Tesla, Elon Musk.” QUARTZ
Tesla Shareholders Advised by Proxy Adviser to Reject Musk’s Pay Package
$56 billion award considered ‘outsized’ from start, ISS says
“Tesla Inc. shareholders are being urged by proxy adviser Institutional Shareholder Services to reject Chief Executive Officer Elon Musk’s $56 billion compensation plan, setting up another hurdle for the electric carmaker’s board. ISS said the pay package, initially approved by shareholders in 2018, was ‘outsized from the start’ and has failed to meet some of the board’s stated objectives. The opposition comes days after another prominent proxy adviser, Glass Lewis & Co., recommended investors vote down the Musk remuneration plan.” BLOOMBERG
Tesla Director Gebbia Says He Discussed Selling House to Musk
Joe Gebbia’s exit from a special committee formed to decide key aspects of Tesla’s future makes for a committee of one
“Joe Gebbia, the Tesla director who exited a board committee that made key decisions about the car maker’s future, told Reuters that CEO Elon Musk had discussed purchasing a house from his start-up and that he was concerned their friendship could be seized on to attack the committee’s independence. Gebbia, whose start-up Samara makes tiny prefabricated houses, was one of two directors that Tesla’s eight-member board deemed independent enough to serve on a ‘special committee’ that deliberated on the company reincorporating from Delaware to Texas. The board formed the special committee after Musk called in January for Tesla to move its corporate domicile out of Delaware, where a court shot down his $56 billion pay package …. Gebbia stepped down from the committee in March after its mandate was expanded from deciding on the re-domestication to also considering what to do about Musk’s pay package, the filing states. His exit left behind a special committee of one, an unusual corporate governance setup that has been criticized by some of Tesla’s shareholders.” REUTERS
Board Effectiveness: A Survey of the C-suite
Execs prefer directors with knowledge in emerging technologies, 92% advocate for refreshment
“Against a backdrop of increasing fragmentation and complexity, companies are seeking to develop and execute coherent strategies, and corporate governance needs to keep pace, with directors addressing more topics and fielding input from more stakeholders. Through it all, business leaders are looking for their boards to move beyond traditional roles and expertise and offer greater guidance, leadership and knowledge in emerging areas such as digital, GenAI and environmental/sustainability ….While C-suite executives acknowledge their board’s proficiency in core oversight areas, they signal a need for upskilling in other areas of board oversight. The survey results suggest an underlying issue: a perceived gap in the board’s ability to pivot and adapt amid the whirlwind of rapidly evolving strategic challenges and business risks. What’s more, only a modest 30% of executives rate their board’s overall performance as excellent or good.” HARVARD LAW SCHOOL FORUM ON CORPORATE GOVERNANCE
How Board Oversight of Capital Allocation Can Drive Strategy
Capital allocation oversight is one of the board’s most important and fundamental roles
“The board’s role in capital allocation has become more challenging and more scrutinized. Current economic conditions – including lower growth prospects, increased geopolitical risks, sticky inflation and ‘higher-for-longer’ interest rates – mean capital allocation decisions are now essential to achieving strategic goals. Despite current headwinds, for many companies those strategic goals include business transformation. An EY survey of 1,200 CEOs globally in December 2023 found that 95% are planning to maintain or accelerate their transformational change in 2024, with those looking to accelerate plans (58%) nearly tripling from July 2023. Achieving such transformational goals in today’s market reality demands a more disciplined and efficient use of capital, as well as robust governance of investment decisions and related performance. Capital expenditures are strategic decisions that should maximize efficiency, profitability, and long-term value, all while mitigating as much risk as possible.” EY
Activist Investors Are Suffering Proxy Fight Defeats
But still drive change when they pick the right battles
“Recently, we evaluated how many self-styled activist investors are distinct from the original activists who helped catalyze needed governance reforms two decades back. We argued that the credibility and value proposition of activist investors are increasingly imperiled, amidst mounting proxy battle losses in high-profile fights and the flailing financial performance of activist firms. At the same time, we celebrate the instances where activist investors can help catalyze needed governance reforms, following in the footsteps of revered genuine, original activist investors, including Ralph Whitworth of Relational Investors, John Biggs of TIAA, John Bogle of Vanguard, Ira Millstein of Weil Gotshal, as well as Institutional Shareholder Services’ co-founders Nell Minow and Bob Monks, who were at the forefront of a virtuous and necessary movement in corporate governance, bringing accountability, transparency, and shareholder value to the forefront while exposing and ending corporate misconduct, cronyism, and excess.” FORTUNE
An Unprecedented Amount of Political Upheaval for Directors
Four steps boards could take to navigate the challenging environment
“Nearly 60 years ago, as the country was being roiled by political upheaval, some directors in corporate America continued to live in a rarefied world, insulated from the turmoil on college campuses and city streets. Consider how one director in the late 1960s responded to a question about serving on a company board where the top executive regarded the directors “as an unnecessary legal appendage and board meetings as bothersome interruptions ….Those days are gone. Today, directors, as the human beings legally in charge of a company, are on the front lines of one of the most challenging political environments in nearly 100 years as the nation heads toward the November presidential election, experts say. Indeed, about two-thirds of company respondents to a 2024 survey by The Conference Board described today's political environment as challenging or extremely challenging. Even compared with the last presidential election in 2020, companies find today's legal and regulatory environment, as well as the overall political environment, more difficult.” DIRECTORS & BOARDS
Estée Lauder’s Board Plans to Keep Its Longtime CEO
Board of beauty giant signals support for Fabrizio Freda as it focuses on succession planning
“Estée Lauder is expected to keep longtime Chief Executive Officer Fabrizio Freda in the top job at the beauty giant despite its sagging performance and division in the founding family over the direction of the company ….Estée Lauder’s lead independent director Charlene Barshefsky and Executive Chairman William P. Lauder said in a statement that the board fully supports Freda and his plan to boost growth, profitability and speed to market. ‘The Board has a long-established process for succession planning which includes assessing potential leaders, internally and externally,’ according to the statement. They added that Freda will continue to work with the board on that process.” THE WALL STREET JOURNAL
Microsoft CEO Leaves Starbucks Board After 7 years
Nadella expresses support for CEO, gives no reason for exit
“Microsoft CEO Satya Nadella stepped down from the Starbucks board this week, according to a regulatory filing Friday by the Seattle-based coffee giant ….Nadella joined the Starbucks board in 2017, just as one of his former Microsoft colleagues, Kevin Johnson, was preparing to take over as Starbucks CEO.” GEEKWIRE
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