There’s a new template for board engagement with artificial intelligence.
Whether the board of directors has a role in the company’s use of artificial intelligence has been a distinct “hot button” for controversy as the technology has evolved.
On the one hand are the proponents, who point to concerns with the risks, the reliability, the costs, the regulation, conflicts of interest, and the strategic challenges as to why a company’s application of AI benefits from board monitoring.
On the other hand are the opponents, who point to concerns with the board’s technical knowledge, the often lengthy board review process, the chill on innovation from an extra level of internal review, the lack of scientific vision they see as engulfing the boardroom, and the perception that in this instance, management oversight is more effective.
It’s been an often heated debate which has left many boards uncertain about the role governance may/should perform with respect to their company’s use of complex technology. It’s an uncertainty compounded by the absence of any established AI regulatory framework. Without resolution, it could compromise the company’s ability to effectively monitor its use of AI.
That’s why the new report from the National Association of Corporate Directors (NACD), “Technology Leadership in the Boardroom,” is so significant. Released on October 7, the new Report is a byproduct of a notably diverse “Blue Ribbon Commission”, consisting of leaders from technology, finance, management, military, consulting, higher education, insurance/risk and law.
The Report’s overarching conclusion is that in the current environment, effective corporate governance “has a significant impact on whether and how new technologies will drive value creation and will be-or won’t be-accepted by organizations, economies, and societies”.
The premise of the Report is that companies are being called to respond to a “blistering pace of compounding, technology-driven changes that are re-writing the rules of the game”. As articulated by the Report, these changes and trends include: (i) rising stakes due to a confluence of technology trends and developments; (ii) the speed of change, which is compressing corporate strategy timelines; (iii) shifting corporate competitive advantages; (iv) technology that threatens to overwhelm boardmember experience; (v) increasing focus on the trustworthiness of technology; and (vi) the potential that technology innovation may be stifled by the current “patchwork” pattern of government technology regulation.
These changes are, in turn, placing extraordinary challenges on companies to reinvent themselves technologically in order to stay competitive-while at the same time confronting “raised expectations” about the responsible use of technology.
Thus one of the great contributions of the NACD report is its articulation of ten specific recommendations for technology leadership in the boardroom, organized according to three separate “core technology governance imperatives”:
Imperative One: Strengthening Oversight
₋ Ensure trustworthy technology use by aligning it with the organization’s purpose and values;
₋ Upgrade board structures for technology governance;
₋ Clearly define the board’s role in data oversight; and
₋ Define decision-making authorities for technology at board and management levels.
Imperative Two: Deepening Insight
₋ Establish and maintain necessary technology proficiency among the board;
₋ Evaluate director and board technology proficiency; and
₋ Ensure appropriate and clear metrics for technology oversight.
Imperative: Three
₋ Recognize technology as a core element of long-term strategy;
₋ Enable exploratory board and management technology discussions; and
₋ Design board calendars and agendas to ensure appropriate focus on forward-looking discussions.
The Report’s overarching conclusion is that in the current environment, effective corporate governance “has a significant impact on whether and how new technologies will drive value creation and will be-or won’t be-accepted by organizations, economies, and societies”.
The ultimate value of the Report is that it is the first formal recognition from a prominent board development organization to address the role of corporate governance in the use of technology. Boards are thus encouraged to review the Report’s recommendations and consider their best application.
The NACD report does not, of course, immediately rise to the level of “best practices”, nor is it likely to end the debate on where the role of management ends and that of governance begins as to oversight of corporate technology use. It is, however, an important starting point from which an intelligent and thoughtful discussion on this critical question can proceed.
