The development, ownership, and control of artificial intelligence (AI), especially generative AI, primarily lies in the hands of a small, influential set of private companies operating under U.S. laws and management structures. Consequently, the importance of U.S. corporate governance in regulating AI responsibly and for broadly benefitting humanity should not be underestimated. Safety measures are of paramount importance in this regard.
Lawmakers have the ample task of building on current U.S. corporate governance infrastructure while shifting the central focus away from shareholder profits. They can achieve this by adopting a stakeholder model akin to the Delaware public benefit corporation (PBC). This addition to federal regulatory guidelines would balance the interests of different parties involved.
The fundamental idea of current U.S. corporate governance is built on Nobel laureate economist Milton Friedman’s concept of shareholder primacy. This concept proposes that corporations primarily exist to generate wealth for their shareholders or owners. However, companies have also started to employ the emerging alternative theory of stakeholder capitalism, owing to Edward Freeman of the University of Virginia’s Darden School of Business. Stakeholder capitalism reconnoiters the complex interdependencies vital to an organismic company, economy, and society, asserting that every organization thrives on an intricate network of stakeholders.
Industry-leading executives and investors, such as Marc Benioff of Salesforce, Larry Fink of BlackRock, understand the significance of the stakeholder approach in managing operations and assets, as well as mitigating risks. Evidence of this trend is visible in the Salesforce Stakeholder Impact Report, which emphatically states: “when we focus on stakeholder value as well as shareholder value, our companies will be more successful, our communities will be more equal, our societies will be more just, and our planet will be healthier.”
Corporate purpose evolution has seen work from state lawmakers as well, with Delaware’s PBC being a noteworthy framework for how directors and executives can integrate stakeholder governance. Since its establishment in 2013, PBCs have proven to be popular, with investors investing billions of dollars. Currently, there are around two dozen public trading PBCs on U.S. stock exchanges, including popular names like Planet Labs, Allbirds, Warby Parker, Lemonade, and Laureate Education, among others.
One of the primary features of a PBC is the obligation faced by its directors and managers to consider the interests of stakeholders who are materially affected by the corporation’s actions. They then balance these interests with those of its shareholders and the wider public benefits identified in the company charter. PBC guidelines allow a certain degree of freedom to prioritize interest sets as long as the decisions are rational, informed, and impartial.
The PBC model provides a relatively simple process for realizing the theory of stakeholder capitalism, which includes obligations for directors and managers to identify, communicate with stakeholders, and manage issues outside the traditional scope of fiduciary duties. Given the popularity and success of PBCs, there is a suggestion that a suitable AI governance path could be modelled after PBC’s focus on transparency and trust.
Anthropic, a generative AI company, formed in 2021 as a PBC, provides a compelling example of stakeholder capitalism in the AI industry. Its public mission is to “build reliable, interpretable, and steerable AI systems”. The company’s value has surged, and it recently entered a $4 billion partnership with Amazon.com Inc. Anthropic is in talks for other billion-dollar deals.
No clear guidance exists yet on balancing these interests when they come into tension. Nevertheless, failure to perform this balancing process of consideration could make Anthropic vulnerable to shareholder litigation. Additionally, the company has established a separate Delaware purpose trust that holds special governance rights, ensuring the company’s adherence to its PBC obligations.
As we struggle with the tremendous changes triggered by novel AI technologies, we have an opportunity to reimagine corporate purpose. By building directly on the foundation of Delaware’s PBC model, new corporate governance rules for AI companies can incorporate the proven benefits of stakeholder capitalism. In turn, these benefits may unlock a competitive advantage for these organizations.