“AI Governance: A Boardroom Challenge and Opportunity”
The adoption of artificial intelligence (AI) in various industries is rapidly gaining and with it comes significant oversight and governance issues. Companies employing AI are beginning to ponder, ‘How should the board of directors oversee AI?'
Notably, the SEC has pointed to an upward trend in annual reports filled by large companies mentioning AI. Disclosures on AI covered multiple sectors, showing up mainly in risk-factor sections, business segments, and management discussions. Interestingly, the current disclosure framework does not officially cover AI.
Concerning the ‘State of Play', about 15% of S&P 500 companies have given some sort of disclosure about board supervision of AI. This pertains to board or committee responsibility for AI, any directors with AI expertise, or an AI ethics board. The IT sector led this disclosure rate at 38%, followed by the healthcare sector at 18%.
An essential finding was that companies preferred expanding existing committees' responsibilities to manage AI rather than establishing new ones. Similarly, some companies are extending any audit committee's purview of tech risks to include AI, while others extend AI oversight to committees concentrating on environmental, social, or public policy matters.
Governments alongside industry associations have begun to provide resources to help companies navigate these murky waters. An example includes the AI Risk Management Framework by the National Institute of Standards and Technology (NIST), initiated in the footsteps of President Biden's executive order in October 2023.
In light of all these, decision-makers in both public and private organizations must undertake prudent measures that sync AI’s benefits with society's best interests.
What are your thoughts on how companies should manage AI governance?
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