As AI continues to advance at an exponential rate, companies are finding that traditional governance methods struggle to keep up with the complexity of the modern digital economy.
The rise of chief AI officers to the C-suite underscores this shift and highlights the growing importance of AI in corporate leadership. But this raises serious questions. Shouldn’t this forward-looking approach also apply to boards? Recent research points to the urgent need for AI governance, and if boards simply adapt to incorporating AI into their corporate strategies, It is clear that there is a need for active monitoring.
AI in the boardroom
AI has the potential to enhance strategic decision-making, but discussions about its use and governance in boards are still in the early stages.
Ryan McCarthy, Audit Partner and Board Leadership Center Lead at KPMG Ireland, spoke on the role of AI in the boardroom, saying that conversations around AI often revolve around perceived threats rather than opportunities, and that AI emphasized the need for a more nuanced understanding of the value of In his words, “I haven't yet seen AI discussed in a meaningful way at the board table. When it is discussed, it's not about the potential for new game-changers.” We're just scratching the surface at the same level of depth.”
AI offers many opportunities for boards. A 2021 study examining the importance of laws and regulations in the adoption of AI on corporate boards found that AI can help companies achieve ESG goals while reducing the risks associated with subjective decision-making, such as short-term impacts. thinking and opportunistic behavior that can help you make better decisions focused on.
For example, if a company's board of directors needs to decide whether to invest in a new project, without AI they may have to rely on limited data and subjective interpretations of such data. there is. Meanwhile, AI can also be used to analyze market data and financial statements to provide a more comprehensive picture of the risks and impacts of a proposed project. This will enable the board to make informed decisions that are more aligned with the company's ESG objectives.
AI also holds promise for optimizing board meetings and deliberations by automating routine tasks such as scheduling meetings, providing pre-read summaries, and taking notes. This allows board members to focus on deeper discussions.
AI governance beyond the C-suite
The Chief AI Officer role is entry-level to the C-suite. Several companies have already established this position, including Accenture Federation Services, Boeing, eBay, Dell Technologies, and Mayo Clinic. The Chief AI Officer will be responsible for overseeing governance, driving innovation, and driving productivity through AI. Their duties include developing AI strategy, developing AI talent, advocating for ethical and responsible AI practices, and ensuring effective communication with senior management and other stakeholders, among other things.
Given the critical importance of this role today, important questions arise. Shouldn’t there be a corresponding role for the board of directors to support and oversee the activities of the chief AI officer?
This question highlights the urgency for boards to prioritize AI governance, given the research conducted by boards in 2023, and shows that AI is widespread without corresponding oversight measures in place. This is extremely important as it has been shown that it is used in The report found that 80% of boards lack formal procedures to evaluate their company's use of AI, and 86% of companies adopt AI tools without the board's knowledge. As a result, the report highlighted the need to incorporate AI into boardroom agendas and treat it as a key corporate governance issue.
One practical way to address this issue is to appoint directors with AI/technology expertise to the board, in addition to selecting a chief AI officer. Companies are recognizing the value of this approach, as evidenced by board recruiters observing a marked increase in first-year director appointments chosen for their AI or ESG expertise. It's starting.
Emergence of directors with AI/technology expertise
A March 2024 study by ISS-Corporate analyzed proxy statements from September 2022 to September 2023 and found that approximately 15% of S&P 500 companies disclosed details about their boards' oversight of AI. It turned out that there was. This includes responsibilities assigned to a board or committee, a board member's expertise in AI, or the establishment of an AI ethics committee. According to the study, around 13% of companies have board members with AI expertise.
What is the role of the AI/Technology Director? The AI/Technology Director works with the Chief AI Officer and relevant board committees to strategically deploy AI within the company and ensure that the company's use of AI is compliant with regulations. Responsible for developing policies to ensure compliance with the framework and assessing and mitigating risks related to AI. AI technology. You can also advocate for the use of AI technology. Doing so increases efficiency and facilitates continued education and training of board members on AI trends, capabilities, challenges, and more.
Now that we have established the valuable role that an AI/technology director can play, what qualifications should such a director have? He points out that he is still trying to clarify what it should be. Scott Coleman, senior client partner at Korn Ferry, said: “Boards often talk about the need for AI expertise, but because it's so complex, it's difficult to understand the skill sets and competencies needed for the business. “I'm having a hard time doing that,” he explains.
However, the qualifications for an AI/Technology Director are likely to be similar to those required for a Chief AI Officer. The ideal candidate will have technical expertise in AI and machine learning, as well as industry-specific experience. This includes a proven track record in senior leadership roles successfully implementing data and AI strategies within corporate environments. It would also be beneficial to have more young directors on boards, given that younger generations are more sensitive to AI developments.
Key skills include a deep understanding of ethical considerations in AI and a commitment to promoting responsible AI practices, strong communication and collaboration skills, knowledge of corporate governance and regulatory frameworks, and promoting diversity and inclusion. Includes efforts to
Overall, as we move further into the digital age, integrating AI into the boardroom agenda is not just an option, but a necessity for forward-thinking companies. To take full advantage of the capabilities of AI, boards must embrace technological advancements while fostering an environment that prioritizes ethical considerations. This requires including skilled talent, both in the C-suite and on the board, who can guide the company toward using AI as a tool for sustainable and responsible growth.