4 Ways AI Is Changing the Corporate Governance Landscape - Boardroom News & Insights

4 Ways the Evolution of AI Is Changing the Corporate Governance Landscape

Artificial intelligence is an exciting arena. Although the technology has been around for a long time, many people are just discovering what it is capable of. Even so, it’s important for corporations to realize that no one — including AI developers — has even scratched the surface of what this technology is expected to eventually become.

There is much opportunity in the AI space, but there is also a lot of risk. Managing those risks will stretch the capabilities of existing corporate governance structures and require new ways of thinking in the boardroom. 

Directors who wish to steward this moment well must be willing to make four critical changes that will help them protect the company from the potential dangers of AI without abandoning their quest for greater profitability:

1. ESG & Profit Must Coexist as Corporate Priorities.

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AI is an emerging technology that will likely require a new form of governance. In traditional boardrooms, profit typically takes precedence. While there are other elements for board members to consider, keeping profit as a top priority ensures the longevity of the company and its ability to continue innovating to meet long-term goals.

This approach has seemingly worked for many years and has helped many large public companies overcome their challenges, but a different level of thinking is necessary to tackle the challenge of AI. Even though the technology is not new, many people around the globe are just starting to use it for the first time. 

The novelty is exciting, but it also comes with many questions about privacy, safety, and Big Tech’s future plans. It also comes with concerns about whether investors will continue to fund AI companies that focus their efforts on the greater social good. 

It’s still advisable for boards to maintain their focus on profits, but they must hold social goals in just as high of a regard. Though putting stakeholder well-being front and center may seem limiting to directors and shareholders, failing to do so may erode public trust and hinder profit goals in the long run.

2. An Independent Director Brings Specific Challenges.

Independent directors are supposed to be shielded from the influence of management so that they can act in the best interests of shareholders. However, there are never any guarantees in this regard.

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Independent directors enjoy tremendous freedom and have the power to wield it however they choose — including in their own best interests.

For this reason, boards that follow this traditional path must grapple with the idea that directors who don’t answer to executives or investors may not choose what others may consider to be the most socially moral path. What should a corporation do when this is the case? 

Unfortunately, traditional governance structures have very few strategies in place to address this conundrum, and that won’t cut it in a future where AI use is the norm. For some, the answer lies in providing incentives that push all board members toward social goals. 

Though the corporate world has yet to bring forth a model for it, it may be time for a new form of corporate governance that encourages decision-making with the wider society in mind and promotes accountability for board members who continually put profits over what is best for the people they serve.

3. Human-Level AI Is Inevitable, and Good Governance Means Having a Plan.

There is no doubt that AI has been touted as the long-awaited answer to everyone’s productivity and efficiency woes. Tools like ChatGPT can do everything from generating interview questions to writing a song. It can create pictures, deliver data, and solve complex problems. 

Yet AI is not without its issues, and some believe that the most pressing dangers associated with this technology have not even begun to emerge. AI giants have been very clear that society must pay close attention to AI development. 

It’s crucial for directors and investors alike to understand that while science fiction movies seem like they belong in a fantasy realm, the reality they depict may not be as far-fetched as it seems. Similarly, scientists cannot take for granted that a bent toward corporate profit won’t motivate boards to push AI developers in that same direction. 

Instead of making an attempt to battle the behemoth of monetary thirst, it may be a better idea to come up with creative ways to make social goals and AI safety profitable. If developers can’t overcome the opposing viewpoint, why not try to find a way to join them?

4. Directors Must Be Open to New Experts.

In every corporation, the board of directors is responsible for determining the direction of the company on every level. Consequently, customers, employees, and investors expect directors to have all of the answers. 

When it comes to emerging technologies like AI, it may be time to surrender to outside expertise and realize that directors may not know enough to properly steward AI safety in their organization.

Accomplishing this brings its own kind of challenges. When outside experts are not clearly aligned with the board, communication and understanding may be minimal. It can be difficult to get board members to break out of their traditional mindsets, learn new things, and adopt novel ideas. Still, in the age of AI, it is vital.

It’s also important for boards of AI companies and corporations that are moving heavily into this space to consider board composition in a more deliberate manner. Because of the risks AI poses to every corporation, having an AI expert on board should be a top priority. 

While it may not be easy to find someone with both corporate experience and in-depth AI knowledge, it’s worth investing in the development of these types of leaders, as they will be in demand as the future marches on.

The Benefits & Risks of AI Cannot Be Ignored

No corporate board can afford to bury its head in the sand and pretend that AI doesn’t hold the potential to disrupt industries across the business landscape. This disruption will likely cause major shifts in traditional governance structures. 

Directors will eventually have to shift their focus to social goals, and stakeholders must be protected along the way. However, that doesn’t mean that profit has to suffer.

The key is to figure out how to balance these seemingly competing priorities. With a change in focus and a willingness to learn from outside experts, board members can work toward a corporate world where profitability and safety coexist. 

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