The New Director Dilemma: Use AI, or Not

Recently, when a board director asked her company’s internal AI to analyze five years of financial data, it flagged a pattern that management’s quarterly reports hadn’t highlighted: a steady sales decline in three business units that strong top-line growth had masked.

At first, the director was thrilled with the insights her query had revealed, but then she paused. Was she overstepping by going beyond what management presented in its curated pre-reads for the meeting? Or did she have a fiduciary duty to use every tool available to her?

Being a director of a big company has entered a new era: Call it the age of the AI-director dilemma. As AI tools spread throughout boardrooms—a Korn Ferry survey found 40% of leaders are actively using AI in their work—board members are discovering a new ability to do what they’ve always wanted. AI is enabling them to quickly get up to speed on the latest competitive landscape findings, dig deep into quarterly financial data, and get summaries of hundreds of pages of materials in a matter of seconds. “Directors can get value from generative AI,” says Bryan Ackermann, Korn Ferry’s head of AI strategy and transformation.

But as AI firepower helps directors become more efficient, it’s also brought complications to the surface. 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. “Today’s directors need to start wrapping their heads around this shift,” notes Anthony Goodman, leader of Korn Ferry’s North American Board Effectiveness practice, who discusses the issue in a new LinkedIn article. Adds Jamen Graves, Korn Ferry's global leader of CEO and enterprise leadership development: “More than anything, board directors need support and education on how to leverage AI to be more effective in their roles.” 

For decades, the business judgment rule, a legal principle, has protected board members who rely on information supplied by management to make decisions. But what happens when AI gives them 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?” Goodman asks.

To be sure, most directors are still in the early stages of using AI for work. For now, most are deploying it 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.

What’s more, most directors don’t have access to the secure enterprise-AI systems developed for the companies on whose boards they sit, Goodman notes. In this sense, the AI tools offered via board portals are like “working within a walled garden,” he says.

But a reality where boardrooms use AI more broadly may not be far off. If directors were granted access to confidential corporate IP and data, they’d have to be extremely cautious about inadvertently exposing it to AI training models, Ackermann says. Such access could also increase tension between management teams that already think directors get stuck in the weeds and boards that want to dig even deeper.

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. “The key is to strike a balance between moving forward the agenda set by management and the board’s interest in ensuring a broader external perspective,” Graves says. 

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