Disney Shareholders to Vote on Demand for AI Transparency

Disney will have to allow its shareholders to vote on whether the company must reveal how it uses artificial intelligence, thanks to a regulatory ruling issued this week.

The Securities and Exchange Commission decided to allow a vote on a shareholder proposal put forth by the AFL-CIO Equity Index Funds that would require Disney to explain how it’s using AI.

Specifically, if passed, the proposal would require Disney to prepare a transparency report that explains the company’s use of artificial intelligence in its business operations. The report must also describe the board’s role in overseeing AI usage, and share any ethical guidelines that the company adopts regarding use of the emerging technology.

Disney asked the SEC to exclude the proposal, which will come up in the same materials as the ongoing proxy battle between the House of Mouse and activist investor Nelson Peltz. The company argued that how it uses a particular technology is a matter of ordinary business operations, which are not subject to shareholder vote, but the SEC found otherwise.

The decision was first reported by The Hollywood Reporter.

The AFL-CIO — which includes the WGA East, Actor’s Equity, Communications Workers of America, and the American Federation of Musicians among its affiliated unions — announced its proposal in October, arguing that “the AI dehumanization of the American workforce threatens the very framework of the nation’s economy and endangers the existence of the already dwindling middle class,” according to The Hollywood Reporter.

The SEC also ruled that a similar proposal regarding the use of AI put forth by the union pension fund must also be put up for a vote by Apple’s shareholders.

The Disney vote, likely to take place in early April, is positioned to get more attention than it would under typical circumstances.

About 90% of institutional investors like hedge funds, mutual fund companies and pension funds participate in shareholder voting at most annual meetings, according to the Financial Industry Regulatory Authority, or FINRA. But usually, only between a quarter and a third of retail investors, or ordinary people who hold stock, cast votes on the proposals put forth by the company and other investors at these meetings.

With the vote on demanding a report from Disney over its use of AI coming amid the proxy battle with Peltz, more investors are likely to cast a ballot on the measure.

The AI proposal also raises a new issue for an annual meeting vote. Shareholder proposals in recent years have frequently touched on climate disclosure matters, racial equity and civil rights, corporate and political spending, executive compensation and other governance issues, a Harvard study that examined voting trends from 2018 to 2022 found. The use of a specific form of technology is a new area for shareholder activism.

The proposals follow hard-fought strikes by the Writers Guild of America and SAG-AFTRA last year that focused in part on the use of AI.

The post Disney Shareholders to Vote on Demand for AI Transparency appeared first on TheWrap.