The first step for any journey is to know your starting position. Boards of directors, and Chairs in particular, have a responsibility to assess their level of comfort and understanding of the topics affected by AI and work quickly to close any gaps. Given the rapid rise and evolution of AI technology, it is safe to assume there are significant gaps on this topic inside nearly every corporate boardroom.
To develop a baseline level of understanding of both AI technology and the key areas it affects for their organization, we recommend the following starting steps for every board:
1. Embrace self-learning
Every board member (or at least technology committee members) should have a basic understanding of AI. Learning about this technology is vital to make informed decisions and staying relevant in today's rapidly changing business landscape.
Some free resources we have enjoyed ourselves include:
2. Stay informed by your organization
To keep the board up to date, establish regular presentations on important AI topics. The CTO, General Counsel, Customer Success leaders, and other experts should all be invited to share AI-related insights with the board.
3. Engage external experts
Tap into experts outside of your organization to understand how AI is impacting your specific industry and the areas of concern you face.
4. Foster a culture of accountability
Have open and regular conversations about AI within the board and hold each other accountable for staying informed and knowledgeable about AI matters. The chair must ensure that every board member takes these responsibilities seriously and is well-prepared to engage in meaningful debates.
As the board develops a common language and understanding of AI, it becomes possible to delve deeper into more complex issues, which include three primary areas: (1) Addressing Strategy, (2) Responsible AI, and (3) Risks and Regulations. We break down each of these areas in detail along with several key questions board members will want to ask.
As board members, many have seen waves of technology come and go, promoted one day as “the next big thing” and obsolete soon thereafter. Given the bold claims for AI, some might argue we should wait and see. Others will say we’re already too late given that AI could be a game-changer that disrupts and transforms entire industries. While we don’t have the absolute answer, it is the responsibility of boards to make a conscious decision, recognizing that doing nothing is also a choice – and a risky one.
Mitigating the risk of inaction requires board members to be proactive in understanding the potential benefits and challenges of AI adoption. They need to foster a culture of innovation and continuous learning within the organization, encouraging exploration and experimentation with AI applications.
As the pace of innovation increases, AI has the power to turbocharge everything. New players are entering the scene, and even old ones are using AI to get ahead. Being too risk-averse and simply sticking to the old ways of doing things may be a death sentence for a company. As it becomes increasingly integrated into business processes and decision-making, companies that refrain from leveraging its power may struggle to keep up with the pace of change and find themselves lagging behind more agile and tech-savvy competitors.
Implementing AI technologies thoughtfully and ethically can lead to significant gains in productivity, efficiency, and innovation. Ultimately, recognizing the urgency and embracing the potential of AI is no longer an option; it is a necessity for the long-term success and survival of businesses today.
Key Questions For board members to ask
This area addresses AI issues surrounding fairness, accountability, transparency, ethical considerations, and the well-being of both individuals and society. The goal is to mitigate the potential negative impacts and risks of AI technologies while maximizing their positive contributions. There are several key components of Responsible AI:
KEY QUESTIONS FOR BOARD MEMBERS TO ASK
One of the critical areas of AI that demands attention from the board is concern for liability. As generative AI models become more advanced and capable of producing innovative works, questions arise about intellectual property infringement and ownership of the work. Companies must address whether they have the right to claim ownership over outputs generated by their AI models and whether they can patent these new works. Additionally, understanding the complexities of data rights and ensuring compliance with data protection regulations is essential.
As new policies and regulations emerge from various authorities, including the European Union (EU) and U.S. Securities and Exchange Commission (SEC), companies must closely monitor these developments. Ignorance or negligence in keeping up with the ever-changing legal landscape could lead to inadvertent violations, which might result in severe financial penalties and damage to a company's reputation. In addition, compliance with stringent regulations, such as the General Data Protection regulation (GDPR) or the AI Act in Europe or the California Consumer Protection Act (CCPA) in the United States, is essential to safeguarding user data and maintaining trust with customers.
Unfortunately, specific regulation for AI is still emerging, leaving companies to institute their own level of governance for now. Developing a framework for AI operations will provide clarity and transparency throughout the organization and position your company to comply if and when regulations come. Clear testing procedures to evaluate and validate your AI systems are also needed to ensure functionality, reliability, accuracy, and performance meet the desired standards.
Navigating the uncharted waters of AI regulation requires companies to adopt a proactive and adaptable approach, collaborating with legal experts and stakeholders to develop comprehensive and compliant AI strategies that align with the evolving regulatory framework. By staying ahead of the regulatory storm, organizations can not only mitigate potential risks but also position themselves as leaders in the responsible development and deployment of AI technologies.
KEY QUESTIONS FOR BOARD MEMBERS TO ASK
The board’s oversight of AI will not be a one-and-done exercise. As a director, your efforts will evolve as your company’s comfort and use cases for technology do. Going forward, the board will need to keep the following considerations in mind as its journey progresses:
Normalize the topic of AI: As mentioned previously, AI needs to be a regular, expected topic for the Board. Risk committees must assess emerging regulations and areas of vulnerability. People committees must consider the impact of AI on the organization, and of course, any areas where AI can bring greater efficiency and effectiveness. Tech committees must assess and report on progress toward major AI initiatives. As Boards learn to treat AI as an asset and resource, it will become a topic as expected as financials or human capital.
Modify your board structure: If you don’t have a technology committee, now may be the time to start one. Not every board member brings the tech acumen or interest to dive deeply into these topics, so boards must provide the forum for those that do. Additionally, if you don’t have a technology expert on your board, you will want to bake in that capability when seeking your next board director.
Evaluate your company’s leadership: The need for AI strategy and skills is equally important within corporate leadership. Ensure your management teams are having similar discussions, and mapping where AI experts may be needed. The demand for AI talent is extremely high, so carefully assessing what capabilities are needed and developing a strategy for recruiting those specific experts is critical to maintaining a competitive advantage.
Budget time and resources for the long term: Too often boards and management teams spend aggressively upfront to try to leverage technology immediately. While being a first mover has advantages, ensure you have the resources to fund long-term investment in AI. Unrealistic timelines and budgets can lead to AI failures, where companies expect immediate results and end programs before they have time to reap the benefits.
Play offense and defense: Ensure your board agenda provides sufficient time to address both AI threats and opportunities. Staying abreast of AI regulations and competitors’ actions will be table stakes – how can you leverage AI to your advantage? Is there an opportunity to influence regulation to your benefit, apply AI learning models against your company’s proprietary data, or deploy AI technologies internally to gain significant efficiency?
Continuous learning: In the coming years, AI will likely evolve faster than any previous technology. Keeping current on emerging technologies and opportunities will be critical to evolving your company’s strategies with the changing landscape. Fighting complacency in this emerging battleground may ultimately separate the winners and the losers.
It’s impossible to predict the future, but all signs suggest that the emergence of AI marks a significant and transformational milestone along the arc of technology history. This new chapter presents both opportunities and risks by joining the AI revolution – but even greater ones by taking a wait-and-see approach. Regardless of the speed at which your organization adopts AI, one thing is for certain – AI should not be ignored. It will change our world in countless ways, and its full potential will unfold over time, reshaping our industries, economies, and societies. Board members who embrace and understand AI’s potential will become the architects of that transformation.