TheCorporateCounsel.net

Stanford’s Rock Center for Corporate Governance recently issued a report about how the adoption of AI tools will influence how boards of directors do their jobs and what is expected of them.  The report says that AI will have a transformative effect on corporate boardrooms:

First, artificial intelligence offers to increase the volume, type, and quality of information available to management and boards. By making this information readily available, it reduces the information asymmetry between management and directors. Board members are much less likely to be “in the dark” about the operating and governance realities of their companies as technology makes it easier for them to search and synthesize public and private information made available to them through AI board tools.

Second, AI increases the burden on both parties to review, synthesize, and analyze information prior to board meetings. Managers and directors can expect to spend substantially more time on meeting preparation, because the quantity of available knowledge is substantially greater. Elementary information that was previously reviewed during meetings will be expected to be analyzed and digested prior to the meeting.

Third, artificial intelligence will allow for the supplementation—and in some cases, replacement—of information provided by third-party advisors and consultants. Furthermore, AI will increase the breadth of analysis available to the board, coupling the retrospective review of mostly historical data (prevalent today) with more powerful tools for predictive and trend analysis. These tools will allow boards to be more proactive and less reactive.

The report cautions that as a result of the dramatic improvements in the information provided to directors through AI, “expectations for a director’s diligence in reviewing and preparing this information will be exponentially higher, and the quality of questions, challenges, and insights will also be expected to be correspondingly higher.”

We’ll always cover SEC compliance and board governance issues associated with AI developments here, but if you’re looking for guidance on risk management and compliance issues associated with AI and other emerging technologies, be sure to check out and subscribe to our free AI Counsel Blog.

– John Jenkins