Exclusive: Scrutiny mounts on Microsoft's surveillance technology

Microsoft is facing new pressure from investors over its development and sale of surveillance technologies to law enforcement and its efforts to shape the policies regulating their deployment.

Three separate shareholder proposals filed this week reviewed by The Hill are demanding Microsoft evaluate whether its business model aligns with the tech giant’s stated commitments to racial justice and human rights.

The first, filed by the social-issues-focused firm Harrington Investments, calls on Microsoft leadership to “generally prohibit” the sale of facial recognition technology to all government entities and disclose any exceptions made to that rule.

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Microsoft announced last summer that it would not sell the technology that scans faces for the purpose of identifying them to police departments until there is a federal law regulating its use amid renewed scrutiny during protests against police brutality.

That pledge did not make clear whether Microsoft would still sell the tech to other government agencies, like Immigration and Customs Enforcement (ICE). For example, the company repeatedly tried to sell the Drug Enforcement Administration on its tech during 2017 and 2018.

Activists and privacy advocates have raised alarm about deployment of facial recognition by law enforcement both over inaccuracies and the surveillance power it can provide.

The National Institute of Standards and Technology released a study of more than 100 vendors, including Microsoft, in 2019 that found the majority of facial recognition systems have "demographic differentials" that can worsen their accuracy based on a person's age, gender or race.

The proposal counts the American Civil Liberties Union of Washington among its supporters. Jennifer Lee, the group's technology and liberty project manager, said in a statement to The Hill that "if Microsoft is truly committed to protecting our democratic freedoms and standing for racial justice, it must permanently divest from selling facial recognition technology to all government entities, including law enforcement."

The second shareholder proposal was filed by the sisters of the Religious of the Sacred Heart of Mary and calls for a holistic report on how effectively Microsoft implements its own human rights commitments.

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The proposal highlights contracts with the New York Police Department (NYPD), ICE and the military that it says may conflict with those stated ideals.

Microsoft partners with NYPD on its Domain Awareness Systems (DAS), which uses cameras, automatic license plate readers and radiological sensors to surveil New Yorkers in real time without a warrant.

Critics say the system erodes privacy and have raised concerns about the power it gives a police department with a history of racist discrimination and over-policing.

“For years, Microsoft has partnered with the NYPD to sell the [DAS], which is likely the single most invasive surveillance system in the country,” Albert Fox Cahn, executive director of the Surveillance Technology Oversight Project, said in a statement to The Hill. “Microsoft can’t claim to take the moral high ground on surveillance when it is selling the software that is used to track millions and undermine civil rights.”

ICE has tapped into DAS to fill its database of license plates that it uses to target immigrants for deportation. The proposal also highlights contracts between Microsoft’s Azure and the immigration agency for cloud computing services, which could reportedly be expanded this year.

Microsoft has faced internal pressure over its work with both police and ICE.

The final proposal, led by the Congregation of the Sisters of St. Joseph of Peace, asks Microsoft to commission a report on how its lobbying aligns with its stated principles.

The company spent nearly $10 million on federal lobbying in 2020 on a wide variety of issues such as privacy, border security and defense.

The proposal highlights support of state-level privacy bills that the investors say don’t align with Microsoft’s stated policy agenda, including the need for affirmative opt-in consent. It also points to lobbying done in opposition to legislation that would limit or ban government use of facial recognition, including one bill in Washington that would pump the brakes on the technology until demographic differentials are resolved.

Taken together, the three shareholder proposals mark a significant escalation of investor scrutiny on Microsoft’s business practices.

A spokesperson for the tech giant declined to comment on the proposals, but pointed The Hill to a video of Microsoft President Brad Smith explaining the decision to suspend facial recognition sales to police.

Microsoft could theoretically appeal to the Securities and Exchange Commission to have the proposals omitted, but if not they will come up for a vote at the company’s next shareholder meeting in December.

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Activist investors have increasingly been using shareholder proposals to put pressure on companies.

Harrington Investments, for instance, has introduced a similar proposal about facial recognition at Amazon for the last three years.

And earlier this month investors at Thomson Reuters voted on a proposal to evaluate its contracts with ICE.

While these types of proposals have relatively low success rates  and are often nonbinding — their proponents say they offer an effective avenue to show companies the business risks of controversial contracts.

Mary Beth Gallagher, the executive director at Investor Advocates for Social Justice who helped the two religious organizations file their proposals, said that the strategy is moving companies in the right direction.

“Investors and other stakeholders don't want companies making empty promises, statements [and] commitments,” she told The Hill. “These proposals and all the work civil society actors are doing I think are pushing toward more corporate accountability.”