Governance Insights 2025 A Preview of 2025: 10 Legal Updates GCs, Boards and Investors Need to Know
Increased focus on the business risks presented by AI systems has also drawn commentary from proxy advisory firms. Glass Lewis updated its voting guidelines for 2025 to recommend that issuers that use or develop AI technologies adopt “strong internal frameworks that include ethical considerations and ensure they have provided a sufficient level of oversight of AI.” Glass Lewis also recommends that issuers address skill gaps on the board through director education and the appointment of directors with AI expertise. Disclosure concerning the role of the board in overseeing AI-related issues, including how issuers are “ensuring that directors are fully versed on this rapidly evolving and dynamic issue” is also recommended. Exactly how Glass Lewis may tie its voting recommendations to AI matters remains to be seen, although the firm did caution that it will closely evaluate issuers’ disclosure and the way boards respond to and manage these issues. Glass Lewis may recommend voting against directors if it finds the board’s oversight, response or disclosure insufficient. Closer board scrutiny by Glass Lewis will be invited in instances where “there is evidence that insufficient oversight and/or management of AI technologies has resulted in material harm to shareholders.” For a more in-depth discussion of these issues, refer to our Governance Insights article, Get Smart on Artificial Intelligence (AI) and Corporate Governance: Key Considerations for Boards of Director s.
DISCLOSURE OF USE AND RISKS OF AI SYSTEMS
Following its latest continuous disclosure review, in November 2024 the CSA released Staff Notice 51- 365 ( Continuous Disclosure Review Program Activities for the Fiscal Years Ended March 31, 2024 and March 31, 2023 ). During its review, the CSA observed that investor interest in AI has led some issuers to make inaccurate, unbalanced or embellished claims about their businesses in order to promote interest in their securities. The CSA noted a current practice among issuers of AI washing, in which an issuer makes false, misleading or exaggerated claims about the use of AI systems in its products or services to capitalize on growing interest in the field. The CSA reminds issuers to avoid such overly promotional language by ensuring that disclosure is factual and balanced, and eschews broad statements in favour of specific and factually supported claims. While issuers must refrain from AI washing, the CSA reminds issuers that disclosure of the use of AI systems or the development of products or services that rely on AI systems, as well as the risks arising therefrom, should be included in their continuous disclosure where that use, development or risk is material: “Fulsome disclosure can assist an investor or client to understand the breadth and scope of a market participant’s AI system use. It also allows investors or clients to better understand the material risks that are associated with that use.” Disclosure should be tailored to the issuer and facilitate investors’ understanding of the issuer’s use of AI systems and their risks, including operational, third- party, ethical, regulatory, competitive and cybersecurity risks.
FORWARD-LOOKING INFORMATION
In both staff notices, the CSA cautions that future-oriented disclosure, such as an issuer’s prospective or future use or development of AI systems, may constitute “forward-looking information” (FLI) within the
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