As AI continues to advance at an exponential rate, businesses are realizing that traditional governance methods are struggling to keep up with the complexities of the modern digital economy.
The rise of the Chief AI Officer in the C-suite underscores this shift, buttressing the growing importance of AI in corporate leadership. However, this raises a critical question: Shouldn’t this forward-looking approach also apply to the board of directors? With recent studies pointing out the urgent need for AI governance, it is clear that boards must not only adapt to but also proactively monitor the incorporation of AI into corporate strategy.
AI in the Boardroom
Although AI has the potential to enhance strategic decision making, discussions about its use and governance in the boardroom are still in the early stages.
Ryan McCarthy, Audit Partner and Board Leadership Centre Lead, KPMG Ireland, speaking on the role of AI in the boardroom, observed that conversations around AI often revolve around perceived threats rather than opportunities, highlighting the need for a more nuanced understanding of AI’s value. In his words, “we’re not seeing AI discussed around board tables in a meaningful way yet. When it does get discussed, it’s with the level of depth of discussing any new potential game changer – at the start you’re only scratching the surface.”
AI offers a number of opportunities for the board. A 2021 study examining the importance of law and regulation in the adoption of AI in corporate boardrooms, explains that AI could help companies make better decisions focusing on ESG goals while reducing the risks associated with subjective decision-making such as being influenced by short-term thinking and opportunistic behaviour.
For example, if a company’s board needs to make a decision about whether or not to invest in a new project, without AI, they may have to rely on limited data and subjective interpretations of such data. Whereas AI could be used to analyze market data and financial statements, providing a more comprehensive picture of the risks and impacts of the proposed project. Thus helping the board to make informed decisions that better align with the company’s ESG goals.
AI also holds promise in optimizing board meetings and deliberations by automating routine tasks like scheduling meetings, providing summaries of pre-reads and taking notes. This allows board members to focus more on having in-depth discussions.
AI Governance Beyond the C-Suite
The role of Chief AI Officer is the new kid on the block in the C-suite. Several companies, including Accenture Federal Services, Boeing, eBay, Dell Technologies, and the Mayo Clinic, have already established this position. The Chief AI Officer is responsible for overseeing governance, driving innovation, and enhancing productivity through AI. Their duties include crafting AI strategies, nurturing AI talent, and advocating for ethical and responsible AI practices while ensuring effective communication with senior management and other stakeholders, among other things.
Given the critical importance of this role today, an important question arises: shouldn’t there also be a corresponding role on the board of directors to support and oversee the Chief AI Officer’s activities?
This question is crucial in light of a 2023 study conducted by the Institute of Directors which underscores the urgency for boards to prioritize AI governance, revealing widespread use of AI without corresponding oversight measures. According to the report, 80% of boards lack formal procedures to assess their company’s use of AI and 86% of businesses employ AI tools without the board’s awareness. The report consequently emphasized that AI needs to be included on board agendas and treated as a key corporate governance issue.
One practical way to address this issue, is to appoint a director with AI/tech expertise to the board, in addition to selecting a Chief AI Officer. Companies are beginning to see the value in this approach as evidenced by board recruiters who have observed a notable increase in the appointment of first-time board directors chosen for their expertise in AI or ESG.
Enter, Directors with AI/Tech Expertise
A March 2024 study by ISS-Corporate, analyzing proxy statements from September 2022 to September 2023 found that approximately 15% of S&P 500 companies disclosed details about board oversight of AI. This included responsibilities assigned to boards or committees, director expertise in AI, or the establishment of AI ethics boards. According to this study, around 13% of companies have directors with AI expertise.
What is the role of an AI/tech director? Working in concert with the Chief AI Officer and relevant board committees, an AI/tech director would be responsible for deploying AI strategically within the company, developing policies to ensure that the company’s use of AI complies with regulatory frameworks, evaluating and mitigating risks associated with AI technologies. They could also advocate for the use of AI technologies where doing so will improve efficiency, facilitate ongoing education and training for board members on AI trends, capabilities and challenges, etc.
Having established the valuable role an AI/tech director could play, what qualifications should such a director have? Board recruiters point out that boards are still trying to clarify what these qualifications should be. Scott Coleman, a Senior Client Partner at Korn Ferry explains, “boards are talking a lot about the need for AI expertise, but because it is so complicated, they are having trouble figuring out the skill sets and competencies their businesses need.”
The qualifications of an AI/tech director could however be similar to those required of a Chief AI Officer. Ideal candidates would possess technical expertise in AI and machine learning coupled with industry-specific experience. This includes a proven track record in senior leadership roles where they’ve successfully implemented data and AI strategies within corporate settings. Also, given that younger generations are more attuned to AI developments, it would be beneficial to have more young directors on boards.
Key skills include a deep understanding of ethical considerations in AI and commitment to promoting responsible AI practices, strong communication and collaboration skills, knowledge of corporate governance and regulatory frameworks, and commitment to fostering diversity and inclusion.
In all, as we venture further into the digital era, incorporating AI into the board agenda is not just an option but a necessity for forward-thinking companies. To make the most of AI’s capabilities, boards should embrace technological advancements while fostering an environment that prioritizes ethical considerations. Doing so requires the inclusion of skilled individuals both in the C-suite and on the board who can steer the company towards using AI as a tool for sustainable and responsible growth.
