AI not only benefits companies, but it also provides powerful tools and greater information to Board members, enabling them to be more proactive.
According to "The Artificially Intelligent Boardroom," an article by Stanford Graduate School of Business Professor David Larcker and colleagues, AI could change expectations, time commitments, and increase potential personal liability for Board members. It might also blur the lines between management and Board roles. The article raises important questions that are just starting to be considered.
Why it matters: AI can boost the volume, type, and quality of information available to Board members, reducing the “information asymmetry” between the Board and management. This can lead to better predictive analysis, scenario planning, risk identification, and investment prioritization.
The article also highlights HR-related benefits for Directors:
-
Compensation Committee Benefits: Access to analytical and benchmarking tools could allow Boards to request pay data with different metrics or targets in near real-time, predict investor reactions, and identify tax and legal implications.
-
Human Capital Management Benefits: AI tools could enable the compensation committee or Board to identify current and future skills gaps and perform accurate long-range workforce planning, leading to more probing questions on workforce and talent reviews.
Yes, but: There are also potential drawbacks of AI for company directors.
-
Increased Preparation Time: More information may require more preparation for each board meeting.
-
Greater Personal Liability?: Directors may be expected to ask for more company data and information, potentially increasing personal liability for not using AI tools effectively.
Benefits to Management: Management can use AI to evaluate their presentations and anticipate Board questions and requests.
The Bottom Line: AI in the Board context requires safeguards to protect confidential information and an understanding of the technology’s risks and limitations, just as it does in the corporate context. Much has yet to be developed and resolved, but in the governance context, AI has the potential to increase insight, accelerate decision-making, and enhance performance.
