Apr 23, 2024 - Technology

AI shakes up corporate boards

Illustration of a board room table with 8 chairs, one of them a different color, surrounded by abstract shapes.

Illustration: Gabriella Turrisi/Axios

AI is forcing corporate boards to change how they operate, with the most aggressive companies appointing AI bots as observers to their boards and putting tech at the center of their board strategy work.

Why it matters: The world's largest companies are increasingly obsessed with AI — mentioning it repeatedly in 2024 earnings calls — but most boards lack the expertise to effectively guide AI strategies.

  • New uses of AI could support boards to make more informed decisions.

The big picture: The pace of AI innovation is pushing executives to develop AI strategies quicker than they have for previous new technologies, and boards are now part of that wave of change.

Case in point: One of the UAE's most valuable public companies, International Holding Company, has appointed Aiden Insight to its board as an "AI observer."

  • Aiden Insight is the persona of a tool called BoardNavigator, created by G42 — the Gulf region AI company that recently obtained a $1.5 billion investment from Microsoft.
  • BoardNavigator was built with Microsoft's Azure OpenAI service, in cooperation with Microsoft, G42 said in a statement.

How it works: G42 promises that Aiden Insight will provide "real-time insights to inform discussions and guide decisions" during business meetings, which it says is possible because of continuous data analysis and ethical and compliance monitoring.

  • The tool combines a company's own data with external market trend data to offer advice, and G42 says it works best for energy, health, finance and technology companies.

Context: Non-AI software has been changing board governance for years — most noticeably through "board portals" offered by companies such as Nasdaq, which create a secure environment for boards to deliberate and take action.

Driving the news: The National Association of Corporate Directors created a 24-member commission April 16 to develop AI principles to guide its 23,000 or so members who sit on boards.

  • The commission will be co-chaired by David Kenny, incoming chair of Best Buy and executive chair at Nielsen, and Nora Denzel, the lead independent director at AMD.

By the numbers: Only 13% of S&P 500 companies have at least one director with AI-related expertise, according to an analysis of SEC filings by ISS-Corporate, a governance consultancy.

  • Just eight companies in the S&P 500 have formal AI board oversight systems, per ISS, and only around 1 in 7 Fortune 500 boards have a broader science or technology committee.

What they're saying: "The use of AI in the boardroom is a game changer," Kiril Evtimov, group chief technology officer for G42, said in a statement.

  • "CEOs sometimes don't understand the issue well enough to organize the different interests inside the organization" around AI, and boards need AI competence to spot that, Friso van der Oord, senior vice president at NACD, told Axios.
  • "It's crazy for a board to [still] get updates every 90 days with PDFs when predictive AI can spot a revenue issue two weeks into a quarter," Steve Singh, managing director of Madrona Venture Group, told Axios.
  • Singh, who is also a board member at Clari, a revenue management platform used by executives and boards, said: "Soon with generative AI, agents will be working on the board's behalf, prodding a company's revenue leaders. The board will add a permanent layer of analytical value to the organization."

Between the lines: Experts suggest that, thanks to AI and other tech-driven trends, executives need to hear from their boards more frequently, rather than once a month or every three months.

Yes, but: All this acceleration of board work could blur the lines between a company's operational management and board oversight.

  • Seating an AI bot on a board also raises novel questions about liability for the AI's actions. Alissa Kole, managing director of advisory firm Govern Center, argues that responsibility lies with the AI's developers, "effectively upending the entire concept of board liability insurance."

Flashback: 45% of respondents to a 2015 World Economic Forum technology survey predicted the first AI board directors would appear by 2025.

The bottom line: Executives and their boards will need to work in tandem to spot and seize AI opportunities — and some of those conversations will be with AI agents.

Go deeper