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Jun 25, 2024

AI ethics proposal attracts support among Netflix shareholders

Resolution seeks information about board oversight

More than four in 10 votes at Netflix’s AGM backed a shareholder proposal seeking information about the company’s use of AI. Multiple companies have faced investor interest in the technology this proxy season.

The proposal, filed by AFL-CIO Equity Index Funds via Segal Marco Advisors, garnered 43.3 percent of votes cast, according to an SEC filing. Although not a majority such a level of support is widely seen as significant by governance experts. Segal Marco Advisors filed similar proposals at Apple and The Walt Disney company this year. The resolution at Apple was backed by 37.5 percent of the votes cast at the company’s AGM.

Specifically, the resolution asks Netflix to issue a report that ‘explains the company’s use of [AI] in its business operations and the board’s role in overseeing AI usage and sets forth any ethical guidelines that the company has adopted regarding its use of AI.’

The proponent writes in a supporting statement: ‘The use of AI by large corporations raises significant social policy concerns. These concerns include potential discrimination or bias in employment decisions, mass layoffs due to job automation, facility closures, the misuse and disclosure of private data and the creation of ‘deep fake’ media content that may result [in dissemination of] false information. These concerns pose a risk to the public and the company’s reputation and financial position.

‘Transparency regarding [Netflix’s] use of AI, and any ethical guidelines governing that use, will strengthen the company. Transparency would address the public’s growing concerns and distrust about the indiscriminate use of AI, strengthening the company’s position and reputation as a responsible, trustworthy and sustainable leader in its industry. With a transparency report, the company could establish that it uses AI in a safe, responsible and ethical manner that complements the work of its employees and values the public.’

The supporting statement argues that, if Netflix does not already have ethical guidelines for the use of AI, adopting such guidelines may improve the company’s performance by avoiding labor disruptions and lawsuits. It notes that last year’s entertainment industry writer and performer strikes were the result in part of concerns about AI.

‘In our view, AI systems should not be trained on copyrighted works, or the voices, likenesses and performances of professional performers without transparency, consent and compensation to creators and rights holders,’ the proponent writes. ‘AI should also not be used to create literary material, to replace or supplant the creative work of professional writers.’

Board urged a ‘no’ vote
Netflix’s board had urged shareholders to vote against the resolution. It wrote in the company’s proxy statement: ‘[T]he proposal does not define the scope of AI or areas of our business operations the report should cover. The board has considered the proposal and concluded that its adoption is unnecessary and would not be in the best interests of Netflix or our stockholders.’

The board argued that the company is committed to the responsible use of AI. ‘We believe it is important to be thoughtful about whether, how and when we use emerging technologies, including AI technologies, in our business operations,’ it wrote. ‘As with other technological advancements, we view our current explorations and use-cases of AI solutions as a potentially valuable tool for many internal employee and creator use-cases to unlock creativity, innovation and efficiency and serve to assist them, rather than replace their work.’

The board stated that Netflix has guidelines on the use of certain AI tools and that its chief technology officer and management give the board regular updates on AI, the regulatory and competitive landscape and associated strategies, risks and opportunities.

‘The proposal is vague and broadly requests that the company disclose on our website a transparency report that explains the use of AI in business operations without defining the scope of AI or areas of our business operations the report should cover… The lack of definition and clarity… makes the proposal fundamentally unclear and therefore difficult to implement. In addition, a report of this scope may require disclosure of strategic initiatives, confidential research and development activities, and other information that may harm our competitive position,’ the board added.

A request for comment from the company was not returned immediately.

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