TheCorporateCounsel.net

As we emerge from “AI summer” – and take stock of the heightened interest of the SEC and the plaintiffs’ bar in corporate AI disclosures – it’s a good time to revisit the Board’s role in overseeing the unique risks that companies may face in this brave new world of artificial intelligence (and the regulations that will apply to its use).

This Skadden memo provides a good starting point for that exercise. It summarizes key risks (based on the NIST framework), how they may vary across different industries, and the current regulatory landscape in the U.S. and Europe (which many U.S.-based companies will have to contend with). The memo offers these “guiding principles” for AI corporate governance:

1. Understand the company’s AI risk profile. Boards should have a solid understanding of how AI is developed and deployed in their companies. Taking stock of a company’s risk profile can help boards identify the unique safety risks that AI tools may pose.

2. Be informed about the company’s risk assessment approach. Boards should ask management whether an AI tool has been tested for safety, accuracy and fairness before deployment, and what role human oversight and human decision-making play in its use. Where the level of risk is high, boards should ask whether an AI system is the best approach, notwithstanding the benefits it may offer.

3. Ensure the company has an AI governance framework. The board should ensure that the company has such a framework to manage AI risk, and then reviews it periodically to make sure it is being properly implemented and monitored, and to determine the role the board should have in this process.

4. Conduct regular reviews. Given the rapid pace of technological and regulatory developments in the AI space, and the ongoing discovery of new risks from deploying AI, the board should consider implementing regular reviews of the company’s approach to AI, including whether new risks have been identified and how they are being addressed.

5. Stay informed about sector-specific risks and regulations. Given how quickly the technology and its uses are evolving, boards should stay informed about sector-specific risks and regulations in their industry.

You can find details on all of the latest AI developments in our “Artificial Intelligence” Practice Area. AI developments will also be on the agenda for our “2024 Proxy Disclosure & 21st Annual Executive Compensation Conferences.” For example, we have a panel titled “In-House Insights: Governing and Disclosing AI,” which will feature Kate Kelly of Meta, Erick Rivero of Intuit and Derek Windham of Tesla to discuss how AI is being utilized in the in-house legal functions at public companies. If you can’t make it to the Conferences in person, we also offer a virtual option. Register today by visiting our online store or by calling us at 800-737-1271.

– Liz Dunshee