AI Has Entered the Director’s Tool Kit. Now what?

It seemed like a slick step for a board to take: The directors used an AI tool to record and transcribe the minutes of their meeting. But what seemed like a step toward efficiency created some unexpected wrinkles. One of the directors had the idea of using the tech to evaluate the board’s social dynamics: Did every member get a chance to talk, or did certain directors hog the airways? Were there issues with anyone’s tone of voice? And would using a tool to do such an evaluation satisfy—or violate—the board’s duty of care?

If the complications coming up for call-center and frontline workers are any indication, using AI in the boardroom is creating a whole new level of complexity. While 40% of leaders actively use AI in their work, according to a Korn Ferry survey, experts say it’s still very early days for directors' professional use.  “What we found is a lot of discussion, but not much real application so far,” says David Larcker, director of the Corporate Governance Research Initiative at Stanford Graduate School of Business, who’s researching AI use in the boardroom.

To be sure, AI is already helping directors in a fair number of cases. From quickly getting up to speed on the competitive landscape to digging deep into quarterly financial data, “directors can get value from generative AI,” says Bryan Ackermann, Korn Ferry’s head of AI Strategy and Transformation. But thorny fiduciary issues are cropping up. For decades, the business judgement rule, a legal principle, has protected board members who rely on information supplied by management to make decisions. What happens, however, when AI gives directors the ability—and potentially the obligation—to look beyond this information? “Should they use it? What will be the legal jeopardy if they do? Or don't?” asks Anthony Goodman, leader of Korn Ferry’s North American Board Effectiveness practice. 

Some experts say that directors who go beyond the company’s curated materials may undermine the relationship between boards and management. Others say directors have a fiduciary duty to use every analytical tool at their disposal, especially when it comes to identifying risk. Regardless of the position directors take in that debate, they can’t overlook the fact that AI will fundamentally change board dynamics—particularly if there are “dueling sets of information,” Larcker says. Adds Shivaram Rajgopal, an accounting and auditing professor at Columbia Business School: “Anything that needs a solid audit trail should be treated with caution.” 

For now, most directors are using AI the way many professionals do—as a sounding board to critique strategies, generate insightful questions, and draft emails, says Dominic Schofield, chair of Korn Ferry’s UK Board and CEO Services practice. “Instead of spending hours calling people and reading a white paper, they’re able to get up to speed on a topic very quickly,” he says.

Directors are also using the technology to challenge assumptions. For example, if the board is considering changes to compensation packages, it could deploy AI to review proxy statements to determine the number of companies whose incentive plans include a clawback or a unique KPI. “It’s best to approach AI with a sense of adventure and possibility,” Rajgopal says. 

Of course, the paradox is that a tool that could help directors be more effective may fundamentally alter what board effectiveness means. Directors who use AI to dig deeper may catch risks earlier—or they may erode the trust and information flow that makes boards work in the first place, experts say. And directors who don't use it may technically fulfill their traditional oversight role, but fail to meet evolving standards of fiduciary duty in an AI-enabled world. 

Perhaps most confounding of all: AI may further blur the lines between management and directors. If directors can access most of a company’s data, along with the information they need to contextualize it, are they functioning less like a board and more like management? “It definitely won’t be business as usual,” Larcker says.

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