The term artificial intelligence came into being in 1956 when philosophers attempted to make sense of human thinking as it pertains to a system. Oxford University physicist David Deutsch stated that he believes philosophy holds the key to achieving artificial general intelligence. Generally speaking, artificial intelligence is the level of machine intelligence compared to the brain’s intelligence. This definition seems a bit ironic considering the complexity of the brain and that we don’t even know what the brain is even capable of.
Modern governance forces us to re-evaluate board policies, protocols and practices according to what’s expected in today’s corporate world. The definition of modern governance is the practice of empowering state, province and local government leaders with technology, insights and processes to fuel good governance to thrive in today’s fast-paced digital age.
Digital processes are a major part of our everyday world in business and in our personal lives. In the interest of performance and efficiency, board directors have a duty to use digital solutions to maximize their potential. The advancements in technology, particularly in the area of machine learning, artificial intelligence and the impact of boards, are starting to call into question how much of the board directors’ jobs could be – or should be – taken over by digital processes. As technologies evolve, they will create many more questions about how these new tools will affect the role of board directors and what changes in the role will benefit corporations and stakeholders the most.
Breaking Down the Duties of the Non-Executive Board Director
Board portals and other digital solutions that support good governance have proven to be beneficial in the corporate world. As technological advancements continue to develop for business, it calls into question how much more those tools can do for businesses and in exactly what ways they can be helpful. The role and the capacity of artificial intelligence within the future business world and how it will impact boards are yet to be determined.
There are three things to factor in when considering the impact of artificial intelligence on board duties. Artificial intelligence can replace some board director duties and it can enhance others. There are also some board duties for which technology will never be able to replace human thought processes and actions.
Board directors are charged with safeguarding the best interests of the company, the shareholders and the stakeholders. Board directors also must ensure that the company is in continuous compliance and follows all regulations and disclosure requirements. Board directors have the responsibility for driving corporate performance, guiding management, and allocating resources appropriately and adequately in order for management to fulfill its duties and responsibilities.
Which Duties Could Be Taken Over by Technology?
With continued advances in artificial intelligence, robotics, blockchain technology, machine learning and distributed ledger technology, boards will soon have access to accurate data in real time. Since board directors would be viewing data and analytics as they happen, board directors can review company accounts, financial reports and audits in real time. This would alleviate the need for board directors to cram before board meetings to make sure they feel prepared for discussions.
Essentially, anything that’s repetitive, rules-based or routinely done can also be done via artificial intelligence. It makes sense that tasks such as verifying financial statements and satisfying reporting requirements could be replaced by distributed ledger technology and smart contracts. In addition, when we can automate internal audits, external audits, board dashboards and reporting requirements, it would reduce the chance that management could put their own interests before the company’s because of incentives or other matters. Also, since company accounts could be verified electronically anywhere in the world in an instant, it would make some of the board’s duties duplicative and irrelevant.
Programs could be developed for artificial intelligence that could ensure that the company conforms to regulations and reporting requirements. Advanced technologies would also give shareholders access to financial reports. Along with the capacity for electronic voting, technology might someday make it unnecessary to hold annual shareholder meetings. In fact, electronic voting could be used by customers and employees to signify their preferences using real-time voting platforms.
A venture capital fund in Hong Kong called DKV has an algorithm called Vital. In a landmark move, the company gave the algorithm the sixth seat on the board of directors. The algorithm is responsible for guiding investment decisions. It’s entirely possible that boards will have at least one member that is an algorithm in the future that can keep pace with board debates, put data in perspective, and provide real-time insights and recommendations.
That doesn’t mean that corporations will be able to replace human beings with technology on the board. Humans will always be able to provide crucial thought processes and creativity in situations where there is no precedent and no rules to govern situations. Humans will always be needed to provide individual judgment and advice on issues of strategy, future vision, corporate culture, employee performance and standards of conduct. Even so, artificial intelligence will give board directors the benefit of better insights as they make decisions about the things that technology will never be able to do on its own. According to a Harvard Business Review article, about 48% of board director activities could be augmented by technology and 25% of board activities could be replaced by technology in the near future.
As technology takes over more of the board director functions, it will free up much of board directors’ time. It remains to be seen how boards will evolve and how board directors will use their time. These changes could turn the board director role into more of an advisory or consultancy role with the CEO and managers. There’s also a possibility that board directors would have the time to serve on more boards, which would also redefine the term overboarding. Either way, moving forward, board directors will still need to learn new tech skills to keep up with the possibilities of how technology can provide the most valuable information.
