Home > AI and catastrophising board governance 

AI and catastrophising board governance 

May 2023


Neon style with a background of computer hardware components and a glowing brain icon central

Artificial Intelligence (AI) is here to steal your jobs, or at the very least to run amok and unchecked through the corporate governance of your business. 

Yes, there is a new technology in town and that means lurid headlines over job losses, the takeover by robots and the digitalisation of yet more elements of our lives are already shouting their opinion. 

To coincide with Mental Health Awareness Week, Bridgehouse has taken a look at the potential impact on the workplace and, more particularly, corporate governance. 

The first thing to say is that it is not unusual to anticipate massive, negative impacts on jobs and the workforce when new and largely unknown technology is introduced, especially when it has direct work applications and functions. 

And while optimisation of processes, forecasting and the rapid collation and analysis of data and information have emerged as the most promising initial uses, inevitably many working across almost every aspect of business have wondered whether AI will not enhance their role, but replace it. 

In March, Goldman Sachs published a report showing that AI could replace the equivalent of 300 million full-time jobs. Last year, PwC’s annual global workforce survey showed that almost a third of respondents said they were worried about the prospect of their role being replaced by technology in three years. 

American management guru Scott Galloway calls this the “catastrophisation of the news” which, he points out, is a phenomenon that has been repeated with each new wave of technology over recent decades. 

In fact, history shows that technology tends to change jobs rather than remove them, he says. Just think of the huge swathe of people who work in coding for example. 

But make no mistake, AI is seriously exciting businesses. 

Boards and the impact on corporate governance are no different and AI is already transforming how companies operate by facilitating organisation, process, decision-making, and risk management. 

Executives, board members, and directors can use AI tools to enhance corporate governance and effective leadership strategies by incorporating AI tools into board meetings, business strategy, decision-making and operations, they can ensure that all the components of their organisation are optimised. 

AI technology can predict trends within the market. With the input of historical market patterns and statistics, programmers have already designed tools that monitor patterns and trends to create predictive models and optimise decision-making for a company. 

Those responsible for corporate governance can then use these predictions to direct the business and to improve performance, while directing investment analysis and business plan development. 

Using risk modelling and data science, AI tools can act as risk-management assistance to enhance corporate governance practices. Companies can use risk-management AI technology to mitigate crises and decrease liability risks within their business strategies, so the leadership team is able to address any issues as soon as possible. 

AI is already transforming companies’ approaches to corporate governance but, of course, this comes with a multitude of caveats. 

Generative AI has perhaps been perceived as different from, for example, the ill-fated metaverse because it’s emergence has been preceded by years of machine learning, much of which is already incorporated into many business protocols. 

But that needs to be balanced with what is undoubtedly a steep learning curve for board oversight of corporate AI applications. While directors may be able to leave the details of implementation to corporate management, they remain responsible for monitoring that implementation. 

This enhanced engagement requires an ongoing awareness of how generative AI may be applied by the company, and the social, legal, ethical and governance issues these then throw up. 

These include the trust-related concerns from both consumers and employees; the inevitable impact on board composition, including the possible need for new expertise; government regulation; and the need to fully understand both the opportunities and the risks and to manage employee concerns. 

Of the latter, in November 2022 research by sociology professor Eric Dahlin at Brigham Young University, Utah, US, showed that about 14% of workers said they had seen their job replaced by a robot. However, both workers who had and had not experienced job displacement because of technology tended to overstate the pace and volume of the trend. 

Understanding these concerns will be key. 

In order for the board to monitor the organisational use of AI, it must possess some basic awareness of the technological framework of AI and its intended organisational use. It must also comprehend the potential that the technology may offer — the board will need to make a commitment to technical education and training, as well as to dedicated management and consultant support. 

It is also worth remembering that AI is not infallible. 

For example, while technology is generally much more reliable than the human brain for mathematical processing, when professors at Wharton put ChatGPT through its paces in taking their MBA exam, they noted that its basic maths was poor. 

They also noted that its ability to work through process was exemplary, but interpretation was far less reliable. 

Of course, when technology advances, it becomes more efficient, consistent and valuable. And as time goes on, AI will become even more integrated into everyday living and governing boards should prepare themselves now, reskilling and – more importantly – bringing new skills to the boardroom table.