The stakes associated with organizational use of AI are too great for the board not to be involved.
While much of Corporate America has rushed to develop artificial intelligence strategies, the role of the board of directors in that process has remained questionable.
Technology officers? Of course. Innovators and business strategists? You bet. Senior executives? Goes without saying. But the board of directors? Not quite sure what they’d bring to the table, other than getting in the way. It’s just so technical that it’s best that the board sit this one out.
And confusion about the board having any role has been confounded by the absence (until recently) of any guidance or release of related principles from the leading corporate governance public policy organizations. Boards have essentially been on their own when it comes to formulating a basic approach to the deployment of AI within their own organizations.
But those, and other legitimate questions about board participation in AI development have been washed away by the tidal wave that is the Biden Administration’s new Executive Order on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence (“EO”).
As described in an accompanying Fact Sheet, the EO “establishes new standards for AI safety and security” designed to insulate the public from potential harm. The new standards also focus on enhancing AI’s fundamental promise and supporting AI research in order to promote American competitiveness.
Although it does not say so in exact words, this massive, fifty-page document describes the public policy for AI regulation in such imperative tones as to render obvious the related interest of corporate boards. The federal government’s profound focus in responsible AI development, deployment and use should prompt boards to consider how best they can identify and manage similar risks and benefits of AI use in their own organizations.
The EO is the most comprehensive of several AI related initiatives from the Biden Administration, including the “Blueprint for an AI Bill of Rights” published by the White House Office of Science and Technology Policy in October 2022, and the Administration’s receipt of voluntary commitments from 15 leading companies received to drive safe, secure, and trustworthy development of AI.
A series of regulatory directives within the EO offer useful suggestions to corporate boards on issues that might be worthy of governance oversight.
These directives speak to such critical topics as (i) the role of AI in corporate “mission critical activities;” (ii) the development of standards, tools, and tests to help ensure that AI systems are safe, secure, and trustworthy; (iii) protecting consumers from AI-enabled fraud and deception; (iv) preventing AI algorithms from being used to exacerbate discrimination; and (v) principles and best practices to mitigate the harms and maximize the benefits of AI for workers.
The EO also intimates a role for the board in assuring the presence of AI-related organizational functions such as risk management, corporate compliance, cybersecurity and privacy-and the responsibilities of corporate officers who lead those functions. In addition, the EO is likely to prompt board consideration of the most effective internal information reporting systems by which the board may be informed on AI related risks and opportunities.
Also relevant is the recent recommendation from the National Association of Corporate Directors (“NACD”) on the creation of a board-level science, technology and innovation-styled committee. The goal of such a committee could be to coordinate oversight for a company’s various technology-oriented operational programs, investments, and risks. This committee might also be an efficient means through which the board could monitor AI and other emerging technology matters, likely in coordination with as Audit & Compliance and Strategic Planning committees.
The Biden Administration’s new Executive Order on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence is, first and foremost, a significant advancement of the federal government’s effort to regulate this new technology.
But it’s also valuable to the extent that it indirectly promotes the need for material board engagement in a company’s development, acquisition and implementation of AI. Any technology that attracts the level of government attention as AI has within the EO suggests a similar level of attention by corporate governance.
Michael thanks his partner, Alya Sulaiman, for her contributions to this post.
