Across the Board
Adobe Investor Sues Board Over AI Training Decisions
Investor suit alleges board oversight failures tied to use of copyrighted data
“Adobe Inc. officers and directors unlawfully had the software company use copyrighted material to train its artificial intelligence model, a shareholder lawsuit said. Instead of using clean data, Adobe leadership followed an ‘ask forgiveness not approval’ approach in using a dataset with pirated literary works to develop its AI services, according to the stockholder derivative complaint filed by a pension fund April 24. By adopting an unlawful strategy to train its SlimLM model, executives and board members exposed Adobe to potentially massive liability in copyright infringement lawsuits, the SEIU Pension Plans Master Trust told the US District Court….” BLOOMBERG LAW
When AI Claims Go Too Far
Boards face growing fiduciary and legal exposure as regulators crack down on inflated AI claims
“As artificial intelligence becomes increasingly embedded in corporate strategy, operations, and investor communications, organizations face accelerating risk from ‘AI washing’—the overstating or misrepresentation of AI capabilities. This risk now represents a material board‑level governance, fiduciary, and enterprise‑value issue. Regulatory agencies, including the SEC, DOJ, and FTC, and the sharp increase in private securities litigation, demonstrate that AI misstatements can expose directors and officers to personal liability…. Artificial intelligence (AI) ‘washing,’ false or exaggerated claims about AI capabilities, has emerged as a critical threat to corporate credibility, shareholder value, and director liability. The SEC, DOJ, and FTC have all launched enforcement actions targeting companies that overstate AI sophistication.” JD SUPRA
Starboard Targets Dynatrace, Presses for Turnaround
After lagging peers, the AI software firm faces activist pressure to unlock growth
“Activist investor Starboard Value has taken a significant stake in AI-software maker Dynatrace and is pushing for changes that could help boost the stock…. Starboard is now a top-five shareholder in the company and has been privately engaging with Dynatrace management in recent months, the draft letter to the company says. The letter is written by Starboard managing member Peter Feld and was expected to be delivered on Tuesday. The activist believes Dynatrace should be a big winner from more companies integrating artificial intelligence into their operations…. Starboard believes Dynatrace shares have dropped as revenue growth has stagnated and investors are skeptical the business can improve in the near term…. Starboard says in its letter that Dynatrace’s board should be open to all paths to maximize shareholder value.” WALL STREET JOURNAL
Activist Makes $3B Play for Driven Brands
ADW Capital bids for Meineke owner, citing mismanagement and pushing for a turnaround
"Adam Wyden’s activist hedge fund is offering to buy Meineke owner Driven Brands for nearly $3 billion…. The move is part of ADW’s effort to overhaul the automotive services provider and to remove private-equity firm Roark Capital, which is Driven’s majority owner. Driven owns brands including Meineke and Auto Glass Now. The hedge fund, which has a roughly 3.7% stake in Driven, had last month called on the company to launch a strategic review process and to explore a sale or break up…. In February, Driven disclosed “material errors” in its financial statements and “material weaknesses” in internal controls over financial reporting. Last month, ADW estimated that selling the whole company to a competitor or another private-equity firm would result in value north of $30 a share for Driven shareholders. Wyden said he is offering $18 a share and would then have to improve the business, which could involve cost cuts or selling parts.” WALL STREET JOURNAL
Do Boards Need AI Experts?
Boards weigh the benefits of deep AI knowledge against conflicts and practical constraints
"As the use of artificial intelligence (AI) across industries increases rapidly, many boards of directors are considering whether they have the expertise necessary to maintain effective oversight of AI-related opportunities and risks. As the SEC has made clear regarding cybersecurity, boards must find a way to exercise their supervisory obligations, even in technical areas, if those areas present enterprise risks. A frequent question in this context is whether boards should have a director who is an ‘AI expert.’…. While appointing a director with AI expertise may be appealing, it can present practical and governance challenges. First, the pool of individuals with both deep AI expertise and the qualifications to serve effectively as a public company director is limited. Second, the percentage of companies for which AI is so fundamental to their business that it requires an AI expert on the board is very small. The appointment of a director with AI expertise could raise questions about a lack of specific board expertise covering other areas of potential enterprise risk (e.g., such as cybersecurity, political or environmental risks).” HARVARD LAW SCHOOL FORUM ON CORPORATE GOVERNANCE
From Systems of Record to Systems of Trust
As boards invite AI into decision making, they must update governance models built for human judgment
“The mismatch between agentic AI and human judgement is the real risk, not in system behaviour, but in how boards define the boundary of delegation. This means that to govern systems of trust, boards must abandon the illusion of total control, with the new mandate being the architecture of constraint. For decades, boards have governed technology the same way: buy the system, hire the team, set policy, audit outcomes. But the recent shift is different. The modern boardroom is not adopting a faster class of software. It is reallocating decision rights to autonomous systems such as AI agents, while retaining governance models built for human judgement. This mismatch between autonomous systems and human judgement is the real risk, not in system behaviour, but in how boards define the boundary of delegation. Boards that govern these agents, not just buy them, will quietly compound an advantage their competitors won’t even know how to measure…. As agents move from conversational novelties to core operational engines, the latency between a strategic directive and a catastrophic execution shrinks to zero. In practice, this means boards are now voting, often blindly, on where human judgement ends and machine authority begins. Where governance fails in practice is not where boards are looking. Boards assume the risk is a technical glitch, an agent hallucinating or crashing. But the true failure mode of an autonomous agent is rarely a breakdown. It is hyper-competence applied to a flawed metric.” WORLD ECONOMIC FORUM
United Walks Away from American Deal
Strategic ambitions stall as American rejects combination
“United Airlines’ chief executive said a merger with American Airlines could have been transformational—but isn’t happening, since American wouldn’t engage. On Monday, United CEO Scott Kirby outlined his airline’s case for buying American, an ambitious deal that would have brought together two of the top carriers in the U.S. He also acknowledged high hurdles in moving forward, especially with American unwilling to engage, and said that ‘pursuit of talks with American have ended.’ In a statement Monday, Kirby said that given American’s public aversion, a merger, which would bring together two of the world’s largest airlines, is ‘off the table for the foreseeable future.’ Still, he defended United’s attempt, arguing that a combination would have allowed it to expand its service internationally and to smaller communities, increase value for customers by adding economy seats to the market and better compete with foreign airlines.” WALL STREET JOURNAL
The Most Sought-After Director Skills Today
A Glass Lewis memo highlights the significant investor interest in board composition
“The primary responsibilities of the board include oversight of management and risk, in addition to providing guidance on business strategy. As such, it’s unsurprising that senior executive experience continues to be the most sought-after director criteria, as directors with this background are often equipped with pertinent expertise relating to companies’ operations, strategies, and the needs of management. In addition, human capital management, core industry, and financial/audit and risk are also prevalent director skills. They are essential to fulfilling fundamental director responsibilities and ensuring effective board oversight of key areas including operations, financial reporting, and risk, among others. Comparably, while fewer directors have legal/public policy, environmental/social, and cybersecurity/IT skills, directors with these backgrounds provide for well-rounded boards and bolster board oversight and navigation of material risks in these areas. Companies often seek out directors to strengthen areas where their businesses are exposed to the most risk. As such, some boards may have a higher concentration of directors with these backgrounds and skillsets than others, depending on their sectors and risk profiles.” HARVARD LAW SCHOOL FORUM ON CORPORATE GOVERNANCE
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