US
SSPL (via Getty Images)
AI accelerates many things. You might think one of them is business strategy. Or, at a more established level, corporate governance.
In other words, the management strategies of large corporations, that is, corporations, will be greatly influenced by AI. And what will technology make these giants do?
We intuitively know that, all things being equal, AI tends to reinforce existing trends. Therefore, if the objective is to generate returns for shareholders, AI has the potential to carry out that objective and significantly increase returns to stock and dividend holders.
I was reading this and it was enlightening Article from Harvard Law School Forum on Corporate Governance Written by Pierluigi Matera. I wanted to break down some of this to consider how our economy might respond to more powerful AI.
Share and display values
Matera begins like this (please excuse the long quote):
“Artificial intelligence (AI) is rapidly transforming corporate governance. While much attention has been focused on AI’s impact on operations, compliance, and risk management, its impact on shareholder activism deserves equal scrutiny, especially as young, tech-savvy investors translate their generational values into corporate decision-making.” The evolution of “representatives” suggests the potential for the emergence of identity-driven activism, a form of shareholder engagement that reflects priorities beyond short-term profits, such as climate action, diversity, and long-term social contribution. Gen Z investors are leveraging AI-enabled tools to become increasingly capable of identifying causes they care about, crafting targeted recommendations, and coordinating collective actions with incredible accuracy and speed. ”
All of this sounds promising in the sense that younger small investors may have more progressive ideals. But Matera writes:
“Empirical data from the 2022-2024 proxy season suggests that the democratizing potential of AI remains structurally constrained, with the main benefits going to large and well-resourced actors.”
To say that AI democratization and shareholder activism remains “structurally constrained” does not sound very hopeful overall.
Matera then elaborates on four “signals” that support the idea of constrained change, starting with the suggestion that some of the more ideal shareholder proposals are “increasing in volume but are now facing increased resistance,” that millennial participation is lower than expected, and that activists are winning fewer board seats.
The last of the four relevant assertions is shown verbatim.
“Fourth, while AI is increasingly being incorporated into activist strategies such as predictive analytics, sentiment analysis, and voting simulation, these technologies remain concentrated in the hands of institutional investors and well-capitalized funds. Millennial-led and grassroots efforts have not yet been able to gain meaningful access to or significantly benefit from these technological advances.”
That’s obvious. The big fish keep winning.
Economy and cyber warfare
Let’s introduce this part of the essay line by line. First, Matera argues that:
“At the same time, companies are deploying AI to strengthen their defenses against activist interference.”
Part of the idea is to use AI for predictions.
“Companies are turning to predictive modeling and sentiment tracking to discover vulnerabilities, anticipate potential challenges, and strengthen incumbent board positions.”
For what purpose?
“From AI-generated revenue scripts to sophisticated risk assessment systems, these innovations are being used to strengthen business controls, making it more difficult for dissidents to succeed.”
And this observation is:
“In many cases, the same algorithmic tools that empower activists are being repurposed to disempower them.”
Matera concluded:
“This dual use of AI highlights a core paradox: the same technology that promises to decentralize influence can also entrench existing power structures.”
For those who think AI can change the world for the better, this sounds daunting.
the future is not written
There is a significant ambiguity at the end of Matera’s work, as the author notes: Title: The past is prologue:
“The transformative potential of AI may indeed be a new chapter in corporate governance, one that builds on the foundations of the past but looks toward a future full of possibilities.The data is not yet conclusive, but it is clear that this promise will become a reality. Ultimately, it may depend on directors anticipating rather than resisting generational change. With foresight and commitment, this next chapter can be one of innovation, inclusion, and lasting progress.”
So things could go either way.
Thoughts from an experienced business leader
I thought I’d include this as well. Recently, I sat down with Mark Lynch, former top brass at eBay and Microsoft, among others, to discuss how all of this works in the age of AI.
Lynch began with an anecdote about how his high school years shaped his thinking.
“When I was a freshman in high school, my older brother, who was a junior, came home from economics class one day and said, “Mark, we just learned that the purpose of economics is to make a profit for shareholders.” I thought, “Oh, really?” I thought the purpose was to create something that was needed. I thought it was to give us jobs. That’s it, I thought. He said, “No, no, that’s what I learned.” He is an authority figure. He was my older brother and the teacher was even more authoritative. And sure enough, throughout the ’70s and ’80s, the message was broadcast that the purpose of the economy is to make profits for shareholders. ”
The essence of Lynch’s story is that this is not an appropriate goal at the top level. But I digress.
The neoliberal era – and what comes next
Speaking further about economics, Lynch defined neoliberalism for us.
“Neoliberalism is the name we gave to the era that really started in the ’70s and ’80s,” he said. “It was based on the economics of the ’50s and ’60s at the time. It kind of created the era that we all know. We think of it as economics. Before that, there was Keynesianism that lasted for decades.”
Then he spoke into the future.
“What’s going to happen next,” Lynch continued, “and one of the questions is, are we in a moment of change? I think there are a lot of things that are happening that make us feel like we’re in a moment of change. A lot of people, probably the majority of Americans, don’t feel like the economy is working for them. We’ve degraded the natural environment. We’ve got AI looming over us. It’s going to cause big changes either way. So now is the moment for change.” ”
He returned to what he brought up earlier in the discussion: the need to make AI work in ways that are beneficial to humans.
“Every change brings opportunity,” he said. “I’m not a technology optimist. I’ve spent my career in technology. I think technology can solve human problems. I think the purpose of the economy is to solve human problems so that we can thrive. That’s what we want the economy to do, but that’s not always the case.”
He concluded:
“I think the right way to measure things is whether this innovation solves something that helps make our lives better.”
I agree.
stay tuned.
