Despite risks, board oversight of AI still low: Analysis

Despite the increasing prominence of artificial intelligence (AI) technologies in the corporate sphere and the unique risks and challenges their deployments expose, only around 15% of companies in the S&P 500 provide board oversight of AI, a new report has found. However, AI expertise is growing within these senior ranks.

“The most common evidence of a board’s readiness to oversee AI-related risks and opportunities is found in the skills and experiences of its board members, especially in industries where AI may have a greater impact,” ISS-Corporate wrote in its latest report, AI and Board of Directors Oversight: AI Appears on Corporate Radar.

A company was viewed as having board oversight of AI if it disclosed the presence of:

• board or committee responsibility over AI;
• a director(s) with AI expertise;
• and/or an AI ethics board or similar governing body tasked with overseeing related topics.

The analysis found that 13% of companies had at least one director with AI-related expertise.

However, disclosure of board oversight appears concentrated in only a few sectors – notably, the information technology sector, which unsurprisingly declared the highest level of AI expertise. Around 38% of companies in the IT space disclosed some level of board oversight or expertise, with the health sector providing the second-most prevalent disclosure levels at 18% of listed companies.

The lowest-ranking sector, utilities, had just 3% of listed companies declaring board oversight or director expertise.

Explicit disclosure of full board or committee of AI oversight is still rare, ISS found, with just 1.6% of the S&P 500 providing specific disclosure of this type of structure. Only 0.8% of listed companies had an AI ethics board, which was most prominent in the IT and communications services space (averaging around 5% of companies).

“When oversight responsibility on AI is delegated to a committee, the analysis finds that an existing committee’s scope is typically expanded to oversee this new area of risks and opportunities as opposed to creating a new committee,” the ISS wrote in its analysis.

“There are also those companies that have a dedicated Technology Committee whose oversight responsibilities include a broad range of technology-related topics, including AI, and others that are approaching AI from environmental and social impacts and regulatory considerations, delegating the AI oversight responsibility to a committee tasked with public policy matters and/or environmental and social risk oversight.”

Marija Kramer, head of ISS-Corporate noted that AI “will play prominently over the course of the forthcoming US annual meeting season, both in terms of investor engagement with portfolio companies and through the shareholder proposal process”.

The analysis concluded: “AI has the potential for significant value creation but could also pose significant risks for companies as well. As AI becomes a material factor, investors may begin to expect that companies, at least those in industries more heavily impacted by AI, start disclosing relevant board skills and oversight responsibilities.”