Is AI Changing Board Structure?

The New Independent Board Oversight Committee

(Originally appeared in the September 19th, 2024 'Across the Board' digital publication, a Board Director, Board Advisor, C-Level, and Business Leader publication reaching 48,000+ exceptional business leaders in over 70 countries with articles focused on leadership, strategy, and governance topics - sign up here )

Board Committee structures, along with their important responsibilities, seem to always keep up with the times. In other words, company or industry needs commonly mimic the required expertise and experience requested "of" Boards and "on" Boards in the form of focused committees. Some Boards are ahead of the curve, some are on the curve, and others slightly on the backside of the curve. In an increasing number of global cases, however, many Boards are migrating to the "ahead of the curve" territory. And this is a good trend.

Boards are also seemingly becoming more proactive with trending and evolving oversight focus, which?could have a material effect on the organization, infused within Committees - in some cases, well in advance of?mandates or required disclosures. Whether due to increasingly brazen investors,?noisier stakeholders, or simply fear of being out of compliance (along with individual Director liabilities ), many Boards feel?increasing pressure to cover both negative and positive?risks as well as define known and unknown risks. Focused and dedicated Board Committees commonly make this an easier task.

Adding new Committees or expanding the responsibilities of core Committees to strengthen?their focus is nothing new on Boards, of course. It is an inherent component of proper?Board Architecture . We have seen this in recent years as it relates to talent, technology, risk, sustainability, cybersecurity, and many more. But now there is a new kid on the block, seemingly having moved in overnight. In all of my years, this is by far the quickest to gain a strategy and governance?foothold in the boardroom. This is Artificial Intelligence (AI).

A very recent event highlights the attention and spotlight shining on AI in the boardroom. On?September 16, 2024, OpenAI released "An update on our safety & security practices " outlining how their Safety and Security Committee?(SSC) "will become an independent Board oversight committee, chaired by Zico Kolter, to oversee critical safety and security measures related to model development and deployment." This is quite big development as it creates a combined?safety and governance scope?within a singular independent Board Committee - giving it significant clout across the entire Board. Yes, OpenAI's business model is focused on AI, but the argument can logically be made that most organizations have or will have varying levels or touchpoints leveraging AI, thus it is applicable to just about every organization.

OpenAI's?release goes on to state: We established the Safety and Security Committee to make recommendations on critical safety and security decisions as OpenAI models reach each new level of capability and continue solving hard problems for people around the world. As one of its initial mandates, the Safety and Security Committee conducted a 90-day review of safety and security-related processes and safeguards and made recommendations to the full Board. Following the full Board's review, we are now sharing the Safety and Security Committee’s recommendations across five key areas, which we are adopting. These include enhancements we have made to build on our governance, safety, and security practices.?

• Establishing independent governance for safety & security
• Enhancing security measures
• Being transparent about our work
• Collaborating with external organizations
• Unifying our safety frameworks for model development and monitoring

The Safety and Security Committee reviewed the safety and security criteria that OpenAI used to assess OpenAI o1’s fitness for launch as well as the results of safety evaluations of OpenAI o1. We’re committed to continuously improving our approach to releasing highly capable and safe models, and value the crucial role the Safety and Security Committee will play in shaping OpenAI's future.

Some may argue, as I have in the past, that AI will be challenging for Boards to govern within the historical parameters we define as today's modern governance. The complicated intertwining of ethics, morals, profits vs. investments, shareholder pressures, and many other considerations (some possibly not fathomable as of yet) will surely make evolving Board governance very interesting in the upcoming years. Make no mistake, AI will have an accelerating and significant influence on the direction of Board and organizational governance evolution in a short period of time. Directors need to be quickly preparing for this paradigm shift already set in motion (join our upcoming webinar, "AI in the Boardroom - A Strategic Framework for Governing Artificial Intelligence ").

The challenge for most organizations will be that Boards not only have to?adapt to changing AI oversight policies, but actually expand their purview to accommodate broadening AI oversight policies, whether self-policed or mandated - as seen with OpenAI's example. How this affects Board size along with Board Architecture will be interesting to witness in upcoming months and years.

Is your governance model?adapting?for AI considerations?

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About the Author: Mark A. Pfister is CEO & Chief Board Consultant of M. A. Pfister Strategy Group, an executive advisory firm that serves as a strategic advisory council for executives and Boards in the public, private, nonprofit, and private equity (PE) sectors. He is also the Founder & CEO of the International Board Director Competency Designation (IBDC.D) education and certification program, a Board Director certification course recognized globally. Mr. Pfister is a 'Board Macro-Influencer' and his success has been repeated across a wide range of business situations and environments. He prides himself on being a coach and mentor to senior executives and directors. In Board Director circles, Mr. Pfister has earned the nickname "The Board Architect."?Connect with Mark ?on LinkedIn.

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