The Emergence of Generative AI
The emergence of Generative AI presents corporate boards of directors with a present-day challenge. Will Generative AI disrupt companies and entire industries? Some estimates have indicated that Generative AI will automate over 40 percent of business tasks and create business value worth more than $400 billion. The public version of Chat GPT, an application of Generative AI, created over 100 million users in a few weeks of its release. The potential impact extends to job displacement. What if a large majority of white-collar tasks can be performed more effectively with AI?
I recently attended the Wall Street Journal Tech Live event, and wrote about Artificial General Intelligence (AGI) And The Coming Wave. At the WSJ event, venture investor Vinod Khosla forecast that, “AI will be able to replace 80% of 80% of all jobs within 10-20 years”. Author and AI pioneer Mustafa Suleyman noted, “Within the next few years, AI will become as ubiquitous as the Internet”, and asked, “Will AI unlock secrets of the universe or create systems beyond our control?”
The Responsibility of Corporate Boards
What is the responsibility of corporate boards when it comes to Generative AI? Are corporate board members sufficiently equipped to consider the opportunities as well as risks, and guide corporations through their shareholder and stakeholder responsibilities? While Generative AI has the potential to revolutionize the way we do business, there is equal potential for good or harm, at scale. These are the risk and reward factors that corporate board members must consider.
Generative AI and the responsibilities of corporate boards of directors was the topic of discussion at a meeting on November 1 of the New York chapter of the National Center of Corporate Directors (NACD). The discussion was hosted and moderated by Ash Gupta, the former and longtime Global President of Risk and Information Management for American Express. I was a guest panelist along with Heidi Lanford, the former Global Chief Data Officer for Fitch Group, which is comprised of Fitch Ratings and Fitch Ventures, and is wholly owned by the Hearst Corporation. The NACD discussion focused on the steps and actions that corporate boards must undertake to safely embrace Generative AI.
Implications and Role of Boards
Potential risk for any company will depend upon the nature of the business problem that Generative AI is being used to solve. Examples include creating operating efficiencies, enhancing customer cross-sell, improving risk management, or driving product and servicing innovation. The recommended course of action will be dependent upon factors including industry regulation, skill sets of the organization, and whether safeguards have been put in place to mitigate potential risks. Heidi Lanford notes, “Monitoring and governance is needed. However, for use cases on the “offense” side of AI, I prefer to set up guardrails as opposed to heavy handed governance”.
Preparing Corporate Boards for Generative AI
Author Tom Davenport raises a warning flag about the preparedness of corporate board members for Generative AI. Davenport notes that 67% of board members interviewed for a recent industry survey characterized their knowledge of Generative AI as “expert” (28%) or “advanced” (39%). Davenport expresses his skepticism, noting that this level of expertise seems rather unlikely. One solution may be to recruit new corporate board members who possess skills in this area.
Ash Gupta suggests a series of steps that companies can undertake to prepare corporate boards for a Generative AI future. These steps include creating critical training for the board and corporate leadership, creating a test and learn culture, extending knowledge through external collaborations, and regularly discussing progress and updates. Gupta emphasizes the importance of a deep understanding of Generative AI, its possibilities, limitations, and the need for ongoing learning and governance.
Boards must remain vigilant when it comes to Generative AI. They should encourage broad participation and a culture of experimentation and failure. While regulation of Generative AI is important, board members should not abdicate their authority and should delegate to technical experts while maintaining oversight. The successful implementation of Generative AI requires both technical and leadership understanding, and a commitment to creating a test-and-learn culture.