Law & Lane: Generative AI, DEI, and the Executive Legal Seat
In college, I had taken a course on Cost Accounting, where the professor laid down strict consequences for cheating, making it clear that ethical standards were non-negotiable for future Accountants. This resonated with me, though I found the consequences a bit extreme. Let’s be honest. University life often consisted of various classes that made it incredibly difficult to keep up with on one’s own. The pressure can be unbearable. The professor's revelation: Accountants join the ethical elite, rubbing shoulders with Doctors and, for our discussion today, Lawyers.
This past February, I had the privilege of attending the GSAB conference hosted by Deloitte in Morristown, New Jersey. I wanted to learn more about the legal implications of ESG (Environmental, Social, Governance) within the corporate council. With personal experience working in corporate America, I value absorbing as much information as possible. The universe is interconnected and much like Chaos Theory’s “Butterfly Effect” (or if you prefer film to Science, “The Butterfly Effect” - same principle, varying execution), there is much to be said about the way one action can impact other actions on a small or grand scale. Similar to whisper down the lane, in the corporate realm, much of what is discussed in the legal field finds itself trickling down to a company’s financials - whether through litigation, fees, or initial costs.
The conference panel delved into three major realms: Generative AI, DEI, and the Executive Legal Seat - highlighting the special guest appearance of March 6th’s SEC Climate-Disclosure Ruling. While I'll touch on all three pillars, DEI will steal the spotlight in this discussion. The journey blends personal experiences with a broader exploration of the corporate landscape, making it a tale that resonates with my professional journey.
Generative AI
In the realm of AI, some fear a dystopian future where robots dominate, Terminator-style, while others focus on the value-added aspects of this rapidly expanding tech space. Siemens, a German Technology and Manufacturing company, is actively working to infuse AI with compassion. The goal is to teach AI avatars to “actively listen, understand, and show compassion” fostering human-machine collaboration. With the assistance of AI, companies and individuals can create a more efficient future. Best described by Rebecca Johnson, Head of Research Group at Siemens Technology, “Cloud and VR technology creates the negotiating environment. The latest AI advancements enable completely natural and engaging conversations. Empathic computing allows avatars to mimic human-like behavior and conduct real-time sentiment analysis.”
Consider Apple’s Vision Pro as a prime example. During the past weekend, I had the luxury of testing this cutting-edge technology. Employing spatial technology, these goggles utilize AI algorithms to automatically enhance the clarity, color accuracy, and overall visual appeal of images and videos. Truthfully, the tech surprised me as someone who has been fascinated with the integration of realistic tech-wear since watching Gamer in 2009. The Metaverse has always been of particular interest to me. Previous VR tech often disappointed in practicality, such as the PS VR causing motion sickness due to their heavy head-piece. Apple’s AI seamlessly blends digital content into the user’s daily world. By utilizing a dial on the right-hand side of the headpiece, users can adjust their environment, opening up endless possibilities for mixed-reality applications. This tech could potentially be a game-changer for industries like interior decorating or e-commerce.
However, as AI is becoming integrated into today’s society, it is it's crucial to recognize that it is still evolving. Generative AI holds a promising role when it comes to the legal world, particularly in streamlining tedious tasks such as eDiscovery and enhancing efficiency in billing processes, as discussed by the panelists. That being said, AI is not without its shortcomings. In June 2023, a New York federal judge imposed sanctions on legal practitioners who submitted a legal brief authored by the artificial intelligence tool ChatGPT. The document included citations to non-existent court cases, prompting the need for corrective measures in a professional context. Through a discussion with a colleague of mine, it was explained that legal briefs go through several checks, involving the main lawyer, senior colleagues, a legal research team, and others within the firm's structure. Despite these checks, errors can (and did) slip through, indicating a potential gap in the review process. In other words, exception noted¹.
Exception noted - Discovery of an irregularity or deviation from standard practices, akin to catching something that may have fallen through the cracks and requires additional scrutiny.
Diversity
Navigating diversity can be complex. Conversations with individuals have unveiled the struggles of feeling confined by labels, perceived limitations, and the struggle for opportunities solely based on diverse factors. On the flip side, some proudly embrace their uniqueness. Moreover, in discussions with Business Leaders, while they express a commitment to a more diverse workforce, there's a noticeable tendency to prefer individuals they already know. Unfortunately, this inclination contributes to a visible decline in diversity representation at the upper echelons of the corporate hierarchy. The Supreme Court's reversal of Affirmative Action further stirred the pot, opening the gates for lawyers opposing DEI to build cases around adversely affected outside the marketed minority groups. While I find this topic highly rebuttable, yet utterly complex - my standing stays persistently the same. Let me give you a little history to explain why:
During my education in an all-minority institution in Camden, New Jersey from pre-school to high school, the roots of societal disparities became apparent. When I was in 9th grade, an English teacher exposed our class to a film on racial segregation. The film focused on housing segregation which after a century, still happens to affect the soil of the lands of America. Due to racial segregation and disparity between the American people within their political systems, African Americans and other ethnicities were placed into areas filled with poverty. This can also be addressed as the Wealth Gap. Even after the integration of colored folks and Caucasians, prejudice was still heavily founded in the societies America had built itself on. Therefore, income segregation was heavily correlated to race due to an unmatched hierarchy of potential based on the color of one’s skin and colloquialisms.
Hence, my educational journey opened my eyes to systemic issues that I have witnessed during my time on this planet, so it's heartening to see post-ruling efforts that acknowledge the complexity of diversity. A friend in higher education mentioned that universities, post-ruling, are looking into ways to continue supporting students with scholarships, now taking into account factors like income brackets and zip codes. While I can't confirm whether these criteria are the best for assessing scholarship needs, their inclusion is still crucial.
Transitioning to the legal landscape, a leader within the legal team at a prominent telecommunications firm has identified a significant challenge in advancing diversity, equity, and inclusion (DEI) initiatives. Internally, conversations have shifted as concerns about potential legal ramifications take center stage. Despite the focus on the potential costs linked to litigation, the company remains resolute in its commitment to cultivating a more diverse workforce. In support of the attack on DEI and to honor the commitment to a more diverse workforce, a major financial services corporation has emphasized the importance of actively contributing to the community. This includes establishing buildings in urban areas and supporting local school systems through tax contributions. Additionally, the company actively engages with minority institutions, such as nearby high schools, to inspire students by offering insights into diverse career paths and opportunities.
Panelists further emphasized the influential role of in-house councils in shaping a better tomorrow. Empowered to make decisions that mold their workforce, they collaborate with diverse external councils and lawyers at non-traditional firms. In-house councils further contribute to DEI by granting partnering firms and lawyers origination credit. A notable discussion point revolved around the sincerity of companies claiming to value diversity only on the surface. Executives easily discern the facade, as revealed by a panelist who could infer when someone was presented merely to "check a box." This seems to be a common occurrence, with boardrooms struggling to list more than two HBCUs during crucial moments.
Sitting in the Executive Legal Seat
The appearance of working from home through the 2020 coronavirus pandemic changed the future of various careers. significantly impacted the trajectory of various professions. As companies embraced the work-from-home (WFH) trend, they swiftly adapted to create conducive home environments for employees. Some even provided financial assistance for setting up home offices, offering stipends for essential materials like desks, printers, and display screens. While WFH facilitated easier communication for introverted individuals, it posed challenges for lawyers, particularly minority lawyers, who struggled with visibility before the pandemic. A panelist acknowledged that the integration of working from home made it easier for individuals who found themselves to be more introverted to schedule a 10-15 minute Microsoft Teams invite to connect with management. Meanwhile, another panelist argued that the WFH environment put lawyers, especially minority lawyers who may have already struggled with receiving the proper face time before the pandemic, at a higher disadvantage as stated: “We grow in community, not in isolation”. Less face time equated to less visibility, which could prove to be detrimental for minority lawyers.
Panel discussions also emphasized the consensus that in-office time should be utilized efficiently. The corporate landscape has transformed, allowing for the downsizing of office spaces as remote work proved its viability. Employees demonstrated comparable productivity from home, emphasizing the importance of in-office time for building meaningful connections. Despite the efficiency of virtual work, the irreplaceable human connection with clients, peers, and management is a key aspect missing in the virtual landscape.
Employees should have the flexibility to enter the workplace and focus on the essential aspects of being in an office environment, particularly the cultivation of connections. The virtual realm during the pandemic could not connect employees face-to-face with clients, peers, and management. By prioritizing human connection while in the office and granting employees the flexibility to exercise work-life balance, productivity has proven to increase, and within executive roles, these interpersonal connections are highly valued. Consistently focusing only on tasks without engaging with others at work is like digging a tunnel without checking where it leads. While it may seem like progress, not having meaningful connections is like wandering in the dark without the valuable guidance and insights that interactions bring. Being heads down at a desk can help you reach a deadline, but facilitating bonds with peers grows a foundation for future success. After all, employees have learned to reach deadlines rather finely in the comfort of their own homes.
In more modern news, passed March 6th, the SEC released a final climate-related disclosure rule. This will require SEC-listed companies to report on Greenhouse Gas emissions and climate goals, as well as climate-related risks and efforts to manage those risks. There is an adoption period dictated by filing status, as early as 2025. Under the new SEC rules, companies would need to disclose:
Climate-related risks impacting business, results, and finances.
Actual and potential impacts of these risks on strategy and outlook.
Details on efforts to tackle climate risks, including costs and effects.
Information on emission levels and related assurance reports for larger companies.
Costs and losses from severe weather events and natural conditions.
Costs and losses related to carbon offsets and renewable energy if part of climate plans.
How financial estimates are affected by climate risks and goals.
It’s important to note that regardless of whether GHG proves to be material or not, every corporation filing under the SEC is required to test materiality in support of providing the conclusion on whether the disclosure is deemed to be necessary, or not.
In terms of navigating the legal world, one can expect litigation to follow due to the controversy of the above disclosures. Transparency is valued on both a corporate and investor level, but it can be argued that the start-up costs of calculating GHG emissions and their initial investment can cause quite a stir in a company’s financials. This might offer an opportunity for those dissatisfied with the enactment of these regulations to consider legal action in response. While it may involve an investment, such changes can be gradual yet crucial in paving the way for a better future. In an echo of my favorite sentiment of the evening,
“If you’re not getting sued, you’re not doing right.”
