A recent corporate governance meeting attended by hundreds of board members working at companies of all sizes and types, raised questions about whether AI is currently being used in all industries. About half of the room managers raised their hands. However, when asked if they had depth in AI to support governance responsibility, only 10% of their hands were raised.
Anecdotes, this board investigation shows both the limitations and possibilities for AI to support the board. The use of AI for information collection and analysis is not widely used across boards. However, there are indications that this trend is catching up as part of the overall intrusions that AI is adopting in organizations, from mail rooms to conference rooms.
There is great potential for AI to change the basic way an organization is implemented. Almost 80% of recent McKinsey survey companies report using AI in areas such as workflows, business processes, and data generation and analysis. Already, the board has paid more time and attention to discussing the use of AI within its organization, including more than 62% of directors who reported participating in a full board discussion about the company's AI policy.
The question now is how board members can use this technology efficiently and ethically. As a longtime board member and former chairman and CEO of a $12 billion healthcare company, I am optimistic about AI as a contributor to problem solving and decision-making. Such capabilities increase the likelihood that boards and management teams will adopt this technology as well. This is not a replacement for human judgment, but as a tool that allows for more informational decisions.
Enhance the board business
AI has the potential to make board members more knowledgeable and improve their ability to engage in discussions with management on challenges, opportunities, strategy and operational issues. The biggest contribution to the director is to supplement the “board package” the company offers throughout the year to summarise recent performance, new developments, competitive challenges and potential acquisitions. Board members are expected to read and digest this information before the next meeting, allowing them to engage in the discussion by asking management questions. However, this information is provided by the company to the board of directors. This involves some degree of filtering to determine the amount of details needed and the depth of discussion, if necessary.
Open, honest, transparent information – enough for meaningful discussion without infiltrating details into the supervision is the basis for maintaining a relationship of trust between the board and management. As a member of the board said when I first became CEO of Baxter International, “It won't surprise me, Harry. I don't want to drive my own car and hear the news about Baxter on a radio that I didn't know about.”
However, even with the best intentions, management cannot expect to educate board members on any economic, geopolitical or operational issues affecting the company. Furthermore, it may be appealing to focus more on the success of management rather than presenting some of the key issues facing the board. In an increasingly complex world, board members need to take more responsibility to educate themselves and to gain a better understanding of many aspects of the issue. Next-generation AI tools can be extremely useful in these pursuits.
Consider the example of companies weighing the impact of US tariffs on goods imported from China, and the possibility of shifting production to locations in Southeast Asia. As trade talks evolve rapidly, tariffs have been proposed, cancelled and quickly revised across the region. A quick and concise AI query will help board members aggregate information about the current state of tariffs and trade consultations. Using some keystrokes, board members can gain insight into how other industries are being affected and what production decisions they are making.
The human part is difficult
However, the tool is just as good as the user. As my colleague at Mohan Sawhney at Kellogg School of Management at Northwestern University once observed, the aspects of technology using AI are relatively simple. Rather, “It's the human part that you really need to pay attention to, because if you don't think about humans, machines won't think of you.”
There are many educational requirements to help board members use AI to become more comfortable. The average age of board members for S&P 500 companies is 63 years old, and many serve until the 70s. In other words, there are very few digital natives. Furthermore, as anyone who has used the generator AI knows, the quality of the answers received depends heavily on the quality of the questions raised. This will require an hour or more presentation by a consultant to the board. What you need is training that will help the director implement this tool. This is an ethical consideration for such as not disclosing confidential company information while submitting questions to AI.
As the business environment continues to evolve, companies and their boards need to respond to changes. Board members can perform their fiduciary duties by learning how to properly serve shareholders and use all the tools, including AI.
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