Despite the different approaches of the four tested LLMs, Kekst CNC was still able to analyze the sources most commonly cited by these models and share some generally applicable communications takeaways for public companies. For example, these LLMs didn’t assign the same weight to arguments and resources that have historically been highly influential.

[T]wo traditionally core arguments have only relatively moderate influence for AI, each seeing around 25% frequency in promanagement votes:

– Lack of credibility or experience attributed to the activist fund itself (separate from its nominees). It is particularly worth highlighting that in very few cases did AI cite procedural or tactical accusations against activists – such as suspicious timing of actions taken, trading activity/disclosures, or track record of unconstructive engagement with the board.

– Expertise and track record of the board’s nominees. The vast majority of the time, AI did not attempt to compare the two sides’ nominees. In cases where director nominee quality was a factor, the rationale was either rounding out skills central to the company’s strategy, or a desire to avoid disruption of the board’s oversight of ongoing progress.

In addition, certain arguments frequently relied upon by issuers to question the motives of activists hold minimal weight among the LLMs. The short-term nature of an activist’s position, or the activist not representing the true interests of shareholders, was mentioned in just 5% of pro-management votes.

And, it’s not just what you say, it’s how you say it – and possibly even how many times.

The single most important channel to articulate arguments that affect AI recommendations is the press release [. . .] Releases represented nearly one-third of all citations informing AI responses – whether through direct links to the newswires through which they were issued, or through full reprints on automated websites. Notably, the analysis did not uncover obvious volume “fatigue” among engines, i.e., consuming a maximum number of press releases to inform its recommendations. The breadth of attribution was typically a function of the depth of the engine’s analysis – Gemini’s analyses are more detailed, for example, while Perplexity’s are shallower. Sourcing can also change meaningfully when running the same search multiple times or by different users.

A valuable subject for further study and testing is whether companies and activists should consider increasing their rate of press release issuance in contested situations to “flood the zone” with content deemed most credible by AI engines.

Less impactful on AI decision making are the “fight deck” and major business publications, which seemed to be drowned out by the “flood of digital content [that] exists in the public domain that both dwarfs volume of ‘sophisticated’ media, and continues to hold meaningful credibility by LLMs.”

This a16z Substack points out that proxy advisor influence may be waning (and the vote outcome goes the way of the activist only 14% of the time). That said, the Kekst CNC report says not to write off proxy advisors just yet:

The approach of treating AI as proxy advisors should not downplay the critical role of the traditional proxy advisors, which remain broadly used among institutions. The LLMs themselves certainly do not underestimate the value of ISS and Glass Lewis: well more than half of all chatbot responses noted their outcomes as a dispositive factor. All sides in a contest should prioritize highlighting favorable recommendations and supporting language from the proxy advisors, through press releases and any other channels that could be influential in LLM analysis.

This report is focused on proxy fights, but AI use is impacting uncontested elections and other proposals. Yesterday on CompensationStandards.com, Liz blogged about how say-on-pay outcomes are impacted by investors’ use of AI.

We usually cover “big A” activism on DealLawyers.com, so head there for more info on activism. For more on the latest and greatest proxy voting and engagement trends, see our “Proxy Season” Practice Area here on TheCorporateCounsel.net.

– Meredith Ervine