Search results for: AI Governance

As we have detailed in numerous posts on this site, Artificial Intelligence (AI) is an important area of emerging corporate risk. AI also represents an important corporate governance challenge for companies and their boards. In the following guest post, Patrick Meson takes a detailed look at the nature of AI-related corporate risks and considers the corporate governance implications. Patrick is a Corporate Counsel at a New York Investment Bank. Our thanks to Patrick for allowing us to publish his article on this site. Here is Patrick’s article.

Continue Reading Guest Post: AI Governance Is a Fiduciary Duty
Burkhard Fassbach

The increasing prevalence of artificial intelligence (AI) tools and processes present companies with a host of opportunities and risks. These opportunities and risks in turn create challenges for corporate boards as they try to navigate the changing environment. In the following guest post, Burkhard Fassbach, considers the corporate governance implications AI presents for companies and their boards. Burkhard is a D&O lawyer in private practice in Germany. I would like to thank Burkhard for allowing me to publish his article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is Burkhard’s article.

Continue Reading Guest Post: Navigating AI Governance

As the 2026 proxy season recedes into the rearview mirror, several clear themes have emerged. Perhaps the most notable is that, despite years of intense focus on environmental and social issues, shareholder attention has increasingly returned to traditional governance concerns. Governance proposals not only proved more resilient than other proposal categories, but they also received some of the strongest levels of investor support.

The level of backing these proposals received indicates that investors continue to place a premium on board oversight, accountability, and governance frameworks as the first line of defense against emerging risks. At the same time, investors are demonstrating a growing interest in how boards oversee artificial intelligence, reflecting the reality that AI has become both a business opportunity a potential source of operational, regulatory, and litigation risk.

These developments are unfolding against a rapidly changing regulatory backdrop. During the 2026 proxy season, the SEC significantly reduced its traditional involvement in the Rule 14a-8 no-action process, leaving issuers with greater responsibility for shareholder proposal exclusion decisions. Meanwhile, the agency has reportedly begun considering rescission of Rule 14a-8 altogether, a move that could shift primary responsibility for shareholder proposal matters back to state law.

As discussed in more detail below, these governance trends and changes in the shareholder proposal landscape suggest that board oversight and accountability, particularly with respect to AI, may become increasingly important indicators of D&O risk.

2026 Proxy Season

Several recently published reviews of the 2026 proxy season reveal a consistent pattern regarding investor priorities.

According to ISS-Corporate, overall shareholder proposal volume fell to a five-year low, but governance proposals proved remarkably resilient. Governance proposals increased in relative prominence, received the highest average shareholder support (31.4%), and were the only proposal category to consistently receive majority approval. D.F. King’s proxy season review reached a similar conclusion, noting that governance proposals accounted for an increasing number of shareholder proposal activity and most majority-supported proposals.

That governance focus is especially evident in the area of artificial intelligence. An ISS STOXX study of more than 3,000 Russell 3000 and S&P 500 companies found that only 8% disclosed board-level AI oversight, 9% disclosed formal AI governance policies, and 16% reported having at least one director with AI expertise, indicating that AI adoption is significantly outpacing AI governance. At the same time, EY reported growing investor demand for transparency around AI oversight and board expertise, noting that 37% of S&P 500 companies now disclose AI-related experience for at least one director, up from 11% in 2022.

Discussion

One of the more important takeaways from the 2026 proxy season is how investors increasingly view governance as the mechanism through which boards should oversee emerging risks. The growing focus on AI oversight reflects an expectation that boards establish governance structures around technology that present significant strategic, regulatory, and litigation risks.

That development is particularly noteworthy considering the significant rise in AI-related D&O claims. 24 AI-related federal securities class action lawsuits have been filed through September 28, 2026, compared to 16 during all of 2025, making AI-related litigation one of the most significant D&O claims trends of the year. The allegations have expanded well beyond traditional “AI-washing” claims and now include issues involving disclosure controls, infrastructure investments, competitive positioning, business disruption, and board oversight.

For D&O underwriters, the proxy season results may provide an early indication of where future scrutiny and litigation risk may emerge. While traditional governance indicators remain important, the increased investor focus on AI oversight suggests that governance surrounding emerging technologies may become an increasingly relevant indicator of D&O risk.

Underwriters may therefore want to evaluate whether boards have clearly assigned responsibility for AI oversight, adopted formal governance policies, developed relevant expertise, and implemented disclosure controls around AI-related statements and projections. Notably, these are the same issues attracting attention from both investors and plaintiffs’ lawyers. As a number of guest authors on The D&O Diary have recently observed, effective AI governance requires clear oversight, board engagement, relevant expertise, and disciplined disclosure practices. The proxy season data suggests investors have reached the same conclusion.

Companies that aggressively promote AI opportunities while providing limited evidence of board-level oversight may present a different risk profile than companies with more mature governance frameworks. That distinction may become increasingly relevant as AI-related litigation and regulatory scrutiny continue to evolve, particularly given the ISS STOXX finding that relatively few companies currently disclose formal AI oversight structures or governance policies.

At the same time investors are demanding stronger board oversight of emerging risks such as AI, the regulatory framework governing how shareholders express those concerns through the proxy process is also evolving.

The significance of the SEC’s evolving Rule 14a-8 approach extends beyond shareholder proposal mechanics. For decades, Rule 14a-8 has served as the primary mechanism through which shareholders raise governance concerns and seek board accountability through the proxy process. As SEC staff involvement in no-action determinations declines, proposal volume and ballot outcomes may become less reliable indicators of investor priorities. Accordingly, the decline in shareholder proposals during the 2026 proxy season should not necessarily be interpreted as diminished investor concern. Rather, investors may increasingly pursue governance objectives through engagement, director elections, activist campaigns, or litigation. This distinction is important because the season’s strong support for governance proposals suggests that governance remains central to investor expectations, even as the mechanisms for expressing those expectations evolve.

For D&O underwriters, the key implication is that governance concerns may become more important than proposal statistics themselves. Indeed, the 2026 proxy season suggests investors remain highly focused on board accountability, risk oversight, and governance structures, particularly with respect to AI. Even if proposal activity declines as a result of regulatory changes, investor concerns are unlikely to disappear and may instead manifest through engagement, voting pressure, activism, or litigation.

As a result, underwriters may increasingly benefit from evaluating the substance of a company’s governance framework rather than relying solely on traditional proxy season metrics. For emerging risks such as AI, governance quality may become a useful proxy for future D&O risk.

Artificial intelligence (AI) is an increasingly important part of business strategy for many companies. As AI has become increasingly important in the corporate world, some commentators suggest that corporate boards not only need AI fluency but in fact need a specialized AI expert.  These suggestions about board expertise may present challenges for many boards, as boards seek to balance a host of competing objectives and interests. An April 15, 2026, memo from the Debevoise & Plimpton law firm (here) takes a pragmantic approach, proposing that the appropriate AI governance framework “will differ for each company and should align with the company’s strategic needs and relationship to technology.”

Continue Reading AI and Corporate Governance: Do Boards Need an AI Expert?
Sarah Abrams

The current private credit market turmoil has involved a number of high-profile company failures and ensuing D&O claims. In the following guest post, Sarah Abrams takes a closer look at one recent example of these developments — the bankruptcy of Tricolor Holdings and the ensuing criminal indictment — and considers the broader potential D&O liability and insurance implications. My thanks to Sarah for allowing me to publish her article on this site. Here is Sarah’s article.

Continue Reading Guest Post: The Collision of Asset-Based Lending and Governance Failures

spainIn an interesting June 11, 2014 Financial Times article entitled “Spain’s Renewal Must Include Governance Improvements” (here), financial journalist and commentator Tony Barber identifies corporate governance issues that he believes Spanish companies have been slow to address. According to Barber, while there may be historical explanations for many of the long-standing corporate governance practices in Spain, Spanish companies’ increasingly international shareholder base will require the companies to meet higher governance standards.

 

Barber acknowledges that corporate governance practices at Spanish companies have improved since the CNMV, the national financial market regulator, published a non-binding code of good governance in 2006. But progress has been slow and “some of the biggest, most internationally active Spanish companies can certainly do better.” According to Barber, the current government has plans to update the 2006 code. It has also sent a bill to parliament that will increase shareholders’ control over executive pay, strengthen the voice of minority shareholders and address potential conflicts of interest.

 

Barber identifies four additional governance issues that, in his view, many Spanish companies need to address. First, he says that “too many combine the roles of chairman and chief executive in one person.” Second, the boards are often “too old and universally old.” Third, many boards are too large. And finally, “some boards contain too few credible independent directors.” Among other things, these practices allow the concentration of power in one person’s hands.

 

The current board practices of many large Spanish companies “have deep roots in Spanish business culture.” This culture is a lingering vestige of practices during the Franco era, when Spain “remained in most respects a self-enclosed world, dominated by a handful of mighty financiers and industrialists.”

 

These old habits die hard, even though in a wide variety of industries Spanish companies “stride the globe” and even though foreign investors hold roughly 40 percent of the equity of the companies in Madrid’s blue-chip Ibex-35 index. Even companies like Banco Santander that have started to make changes still have boards that are almost exclusively Spanish. Even after adding former U.S. banking regulator Sheila Bair to its board in January, the bank’s 16-person board consists of 14 Spaniards, a Chilean and Bair. Three board members belong to one all-powerful family.

 

Barber contends that “national as well as gender-diversity is something that Spanish companies need to get to grips with.” Even when Spanish companies select foreign directors, they tend to turn first to Spanish-speaking countries. Barber comments that “it stretches credulity to suggest that such appointments reflect a meticulously conducted search for the best candidate. “

 

To underscore the importance of these issues for Spanish companies, Barber cites as an example the recent decision of Pemex, the Mexican national oil company, to sell most of its 9.2 percent investment in Repsol, the Spanish energy group. Among other things, Pemex cited Repsol’s governance practices as a reason for the sale. While not meaning to suggest that Pemex’s views on governance represent some sort of a standard, Barber said that “there is no doubt that international investors would welcome higher standards at some of Spain’s best known companies.”

 

Barber closes his article with a reference to the recent abdication of King Juan Carlos, noting that “modern Spain is embarking on a project of national renewal that calls for brave decisions in difficult times.”  Improving corporate governance “will form part of the contribution of Spanish business to this task.”

 

The practices and the resistance to reform in Spain may be best understood by reference to the country’s particular history, but many of the concerns are not unique. Other countries have their own versions of many of these issues. Just the same, it is interesting to consider this country-level perspective on corporate governance practices

A growing chorus of voices is calling for public companies to make the separation of the Chairman and CEO functions the default governance structure. This movement, which may have the support of the new SEC Chair, appears likely to lead to some type of "adapt or explain" approach. Increasing evidence that the companies where the CEOs also act as board Chair are likelier to have "certain troubling governance characteristics" will likely encourage shareholder interest in the initiative as well.

 

The idea of separating the two roles is hardly new, but it has gained significant support from a wide variety of sources recently. First, on March 30, 2009, the Chairmen’s Forum of the Millstein Center for Corporate Governance at Yale School of Management issued a report entitled "Chairing the Board: The Case for Independent Leadership in Corporate North American" (here) calling on all North American companies to "voluntarily adopt independent chairmanship as the default model of board leadership," and if they chose to take a different course "to explain to their corporate shareholders why doing so represents a superior approach to optimizing long-term shareholder value."

 

(The Chairman’s Forum is a group of more than 50 current and former board chairs, directors and CEOs convened at the Millstein Center.)

 

The Millstein Center’s March 30, 2009 press release (here) reports that while in the U.k. only 5% of the FTSE 350 companies combine the chairman and CEO roles, over 60% of the S&P 500 companies have boards that are chaired by their CEOs. The press release quotes one commentator as saying that the independent chair model "has been adopted successfully by many companies in many regions of the globe as a means to further ensure and empower board independence."

 

The press release also quote the former chairman of Northwest Airlines as saying that combining both roles puts both functions in one person who "is obviously conflicted in the essential duty of providing oversight and monitoring the CEO and management team."

 

A March 30, 2009 Wall Street Journal article discussing the Chairmen’s Forum’s report can be found here.

 

Recent remarks from, Mary Schapiro, the SEC’s new Chair, in her April 6, 2009 speech to the Council of Institutional Investors (here), seem to suggest the possibility of an SEC move to a disclosure based approach toward separating the two roles. Among other things, she said that "we’ll also be considering whether boards should disclose to shareholders their reasons for choosing their particular leadership structure—whether that structure includes an independent chair, a non-independent, or a combined CEO/Chair."

 

As Professor Jay Brown has suggested on his Race to the Bottom blog (here), Schapiro’s remarks may suggest a SEC attempt to influence corporate governance through disclosure. Professor Brown has been a vocal advocate in favor of separating the two roles (as shown here).

 

The logic of targeting this particular issue as an important corporate governance objective was reinforced by the research recently released by The Corporate Library. As described in their March 25, 2009 press release (here), companies whose CEOs also serve as board Chair are "more likely to have certain troubling corporate governance characteristics than companies where the roles are separated."

 

The troubling characteristics, which are "associated with board entrenchment or lessened oversight of management," include relatively long CEO tenures; fewer board meetings per year; classified board structure; and "the presence of executive committees, which are typically given the power to act on behalf of the entire board, potentially allowing for a concentration of power."

 

The Corporate Library’s findings raise the possibility that having a single person as the Chair and CEO could be a risk factor for D&O insurance underwriters to assess. Along those lines, it is worth considering, as noted by the Chairmen’s Forum report, that "the overwhelming majority of financial institutions had combined roles before the current crisis erupted" – including, among others, Bear Stearns, Lehman Brothers, Citigroup, Washington Mutual and Wachovia.

 

On the other hand, there may be limits to how much can be expected or discerned from this single governance trait. As the Chairmen’s Forum’s report also notes, "splitting the role of chairman and CEO does not guarantee the application of independent oversight," adding that "it is no secret that certain companies, featured in some of the most famous corporate debacles, had separate CEOs and chairmen." Splitting the roles must be accompanied by other steps "in order for the independent chairman to fulfill the important leadership role."

 

In other words, while the continued combination of the two roles in a single person may (particularly in the current climate) represent something of a risk factor, the separation of the two functions alone is no guarantee of the absence of risk.

 

In any event, it seems likely that pressure for change will continue for all companies, and that companies that do not change will find themselves increasingly called upon to explain.

 

Michael W. Peregrine and Nathan Barnett

In the following guest post, Michael W. Peregrine and Nathan Barnett examine a recent Delaware Chancery Court decision dismissing oversight claims against Boeing directors arising from the January 2024 mid-air door-plug incident. As they explain, the decision provides important guidance on the continuing application of the Delaware courts’ Caremark doctrine, reaffirming that bad faith remains the essential prerequisite for oversight liability, clarifying the distinction between compliance risks and business risks, and offering additional insight into what constitutes a true “red flag” for board oversight purposes. The authors also discuss the practical governance lessons boards can draw from the decision and the importance of maintaining a robust compliance framework. Michael Peregrine is a retired lawyer and a fellow of the American College of Governance Counsel, and Nathan Barnett is a partner with McDermott, Will &Schulte LLP. Our thanks to Michael and Nathan for allowing us to publish their article on our site.

Continue Reading Guest Post: New Caremark Decision Provides Good News About Bad Faith
Stephen Hourigan

In the following guest post, Stephen Hourigan argues that a key driver of D&O claim severity is not necessarily board ignorance or misconduct, but the delay between when warning signs are known somewhere within the organization and when they are effectively communicated to the board. Steve suggests that there are questions underwriters can ask to determine the effectiveness of information communication to corporate boards. Steve is the Founder and CEO of Heardsafe, LLC. Our thanks to Steve for allowing us to publish his article as a guest post on our site.

Continue Reading Guest Post: Governance Signal Decay as a D&O Severity Problem

In Episode 6 of the D&O Diary Podcast Series, we sit down with Dan Holloway, Head of Global Management Liability & Professional Indemnity at Allianz Commercial, to discuss the results of a recent global survey examining industry perspectives on AI and its impact on D&O liability and insurance.

The survey, conducted jointly by The D&O Diary and Allianz Commercial, gathered responses from 250 insurance professionals across the United States, Germany, the United Kingdom, Canada, and 21 additional countries. Participants included insurers, brokers, and representatives of insured companies, providing a broad cross-section of views on the opportunities and risks presented by AI.

During our conversation, we discuss the survey’s key findings and what they reveal about market sentiment toward AI, including the growing consensus that AI presents both significant opportunities and meaningful governance challenges. We also examine how insurers are evaluating AI governance as part of the underwriting process, whether existing D&O insurance policy forms are adequate to address AI-related risks, and what AI may mean for the future direction of the D&O insurance marketplace.

While AI technology may be new, many of the risks associated with AI are fundamentally governance risks, making effective oversight, accountability, and risk management more important than ever.

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