Despite widespread integration of artificial intelligence in daily business operations, corporate boards of directors are significantly behind in adopting the technology for their own governance responsibilities. A recent informal survey at a corporate governance meeting revealed that while about half of board members use AI personally, only 10% leverage it for in-depth analysis related to their oversight duties.
This gap highlights a critical challenge and opportunity in modern corporate leadership. As companies increasingly rely on AI, experts argue that boards must also utilize these tools to maintain effective oversight and make fully informed decisions, moving beyond traditional, management-filtered information channels.
Key Takeaways
- Only 10% of board members at a recent gathering reported using AI for substantive governance work, despite 50% using it in some capacity.
- This contrasts sharply with a McKinsey survey showing nearly 80% of companies use AI in their core business processes.
- Experts suggest AI can serve as a vital tool for directors to access unfiltered information and supplement management-provided reports.
- Major barriers to board adoption include a lack of training, the advanced age of many directors, and the need for ethical usage guidelines.
The Governance Gap in AI Implementation
The use of artificial intelligence is becoming standard across various industries. A recent McKinsey survey found that nearly 80% of companies have integrated AI into areas like workflow management, business process optimization, and data analysis. This rapid operational adoption, however, has not fully translated to the highest levels of corporate oversight.
According to Harry M. Jansen Kraemer Jr., former CEO of Baxter International, the disparity is clear. At a meeting of several hundred directors, an informal poll showed a significant lag. While approximately half of the attendees raised their hands when asked if they use AI, that number dropped to just 10% when the question specified using it for governance responsibilities.
This indicates that while directors may be familiar with AI tools on a personal level, they are not yet integrating them into their professional duties of steering and overseeing corporations. This creates a potential knowledge and capability gap between the board and the management teams they are meant to supervise.
Board Discussions on AI are Increasing
While personal use for governance remains low, boards are beginning to address the topic more formally. Data indicates that over 62% of directors have participated in full-board discussions regarding the establishment of AI policies for their companies, signaling a growing awareness of its importance.
AI as a Tool for Independent Oversight
One of the most significant potential benefits of AI for board members is its ability to provide access to unfiltered, comprehensive information. Directors traditionally rely on a "board package" prepared by the company's management team to stay informed about performance, challenges, and strategic developments.
However, this information is inherently filtered. As Kraemer notes, even with the best intentions, management decides the level of detail and framing. There can be a natural tendency to emphasize positive developments over significant challenges. This can leave directors without a complete picture of the issues facing the company.
"Never surprise me," a board member once told Kraemer when he became CEO. "I don’t want to be driving my car and hear news about [the company] on the radio that I wasn’t aware of."
AI tools can help directors fulfill their duty to remain independently informed. For instance, if a company is considering shifting production from China due to tariffs, a director could use AI to quickly aggregate current data on trade policies, analyze the impact on other industries, and understand the geopolitical landscape without relying solely on management's summary.
Addressing the Human Factor in Adoption
The primary obstacles to AI adoption in the boardroom are not technological but human. The successful use of AI as an analytical tool requires training, new skills, and a shift in mindset, which can be challenging for any group to adopt.
Demographics Play a Role
The average age of a board member for an S&P 500 company is 63 years old, with many serving into their 70s. This demographic is less likely to be composed of "digital natives," potentially making them less comfortable with adopting new technologies without dedicated training.
Mohan Sawhney, a colleague of Kraemer's at Northwestern University’s Kellogg School of Management, observed that the technology aspect of AI is often the easy part. He stated, "it’s the human part that you really need to pay attention to, because if you don’t think about humans, machines won’t think about you."
The Importance of Effective Training
For boards to use AI effectively, they require more than a simple one-hour presentation. Meaningful training is necessary to help directors learn how to formulate effective queries, as the quality of an AI's output is directly dependent on the quality of the input. Directors need to practice using these tools to gain confidence and proficiency.
Furthermore, this training must include robust ethical guidelines. Board members handle highly sensitive, confidential information. They must be taught how to use public AI models without inadvertently disclosing non-public data, which could have severe legal and competitive consequences.
The Path Forward for Modern Boards
For corporate boards to effectively carry out their fiduciary duties in an increasingly complex and fast-paced business environment, embracing new technologies is no longer optional. AI presents an opportunity to enhance decision-making, improve risk assessment, and provide a more comprehensive level of oversight.
The key is to view AI not as a replacement for human experience and judgment, but as a powerful assistant. It is a tool that can augment a director's knowledge, allowing for deeper engagement with management on strategy, challenges, and opportunities.
As the business world continues its rapid technological evolution, boards that fail to keep pace risk falling behind. By investing in the necessary training and developing clear ethical protocols, directors can leverage AI to better serve shareholders and ensure the long-term health of the organizations they lead.