On Monday, the National Association of Corporate Directors released a Blue Ribbon Commission Report providing substantive guidance for corporate directors on board oversight of artificial intelligence. In the following guest post, Michael W. Peregrine, a partner at the McDermott Will & Emery law firm, reviews the Blue Ribbon Commission report and summarizes its recommendations. A version of this article previously was published as client alert a from Michael W. Peregrine. I would like to thank Michael for allowing me to publish his article on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is Michael’s article.

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In an important corporate governance development, the National Association of Corporate Directors (“NACD”) has on October 7 released its latest Blue Ribbon Commission Report, “Technology Leadership in the Boardroom: Driving Trust and Value.”

In the ongoing national discussion on the use of artificial intelligence (“AI”), the board of directors’ proper oversight role has not been fully considered. This has created a significant void in the development of “best practices”. The new NACD Report fills that void with substantive guidance: that strong, focused board oversight is essential to the proper corporate application of technology.

The basic message of the Report is a call for “boards to govern technologies with more definition, a more strategic focus, and more proactive engagement”. The Report describes as “vital” the need for boards to “strengthen their oversight, deepen their insight and develop greater foresight” with respect to technology. (Keep in mind that the important management level activity generally referred to as “AI Governance” is separate and distinct from “corporate governance oversight of AI”.)

From an overall perspective, the Report identifies six interrelated trends that collectively serve to drive a new focus on technology governance:

(i) A confluence of technology trends and developments raises the stakes; (ii) Corporate strategy timelines are compressed by the speed of change; (iii) Corporate competitive advantages are shifting; (iv) Innovations are outpacing board member experience with technology innovation; (v) The focus on trusted technology and data use is growing; and (vi) The current “patchwork” government regulation of technology creates a threat of inertia or even paralysis with respect to technology innovation.

Specific board-related recommendations include: (i) Ensure trustworthy technology use by aligning it with the organization’s purpose and values; (ii) Upgrade board structures for technology governance; (iii) Clearly define the board’s role in data oversight; (iv) Define decision-making authorities for technology at board and management levels; and (v) Evaluate director and board technology proficiency.

Additional recommendations are (vi) Establish and maintain necessary technology proficiency among the board; (vii) Ensure appropriate and clear metrics for technology oversight; (viii) Recognize technology as a core element of long-term strategy; (ix) Enable exploratory board and management technology discussions; and (x) Design board calendars and agendas to ensure appropriate focus on forward-looking discussions.

The Report’s overarching conclusion is that in the current environment, effective corporate governance “has a significant impact on whether and how new technologies will drive value creation and will be-or won’t be-accepted by organizations, economies, and societies”.

The ultimate value of the Report is that it is the first formal recognition from a prominent board development organization to address the role of corporate governance in the use of technology. Working with its CLO and CTO, the board is encouraged to review the Report’s recommendations and consider their best application.

Collaboration between the board’s Governance and Technology committees might be the most effective way to evaluate the NACD recommendations, and present a suggested course of action to the full board.

As the board proceeds to evaluate the NACD recommendations, it should anticipate push-back from certain well-meaning internal constituencies who may feel that any material board involvement will needlessly frustrate innovation and the competitive advantage. These may include technology leaders, researchers, scientists, and developers, and their voices should be heard as boards move to implement a formal oversight structure.

As part of this process, it will also be important for the board to understand the role and function of what is commonly referred to as “AI Governance;” i.e., an internal operational framework that works to design to create policies, procedures, and standards for the proper development, use, and management of AI and machine learning algorithms. It is an important management tool, and should be compatible with (and should not be seen as a substitute for), actual governance by the organization’s board of directors.

The NACD report is an important first formal step from which boards and their various internal constituencies may move towards an organizationally acceptable role for the board in the oversight of technology.

The author is a partner of McDermott Will & Emery in its Chicago office. He is a Fellow of the American College of Governance Counsel.