AI presents extraordinary opportunities for today’s companies, as well as risks and challenges that company boards and management teams must be able to understand and address. What does responsible development and use of artificial intelligence (AI) look like? What are the implications for human capital? How can investors best engage with companies on this subject?

These are key questions that the opening plenary session of the International Corporate Governance Network (ICGN) 2024 Annual Conference will be asking. Led by investors responsible for assets under management of $77tn and with members from more than 40 countries, ICGN is well-placed to offer a global perspective on this fast-evolving field.

As we’re all aware, an increasing number of companies are using AI to transform existing business models or create new ones, generate greater efficiencies, and enhance strategic decision-making to maintain their competitiveness.

The rapid development and use of AI necessitates comprehensive AI governance and risk management processes. Board oversight, responsible practices, risk management and accountability to shareholders and stakeholders, and transparency and explainability: these are cornerstones for responsible AI.

Investors expect the board of directors to be accountable for overseeing a company’s responsible development and use of AI. As part of its fiduciary duty to preserve and enhance long-term value, the board should ensure that company management balances the competitive deployment of new technology against potential risks. We encourage boards to ensure that they are properly equipped to do this.

Gaining AI expertise

Knowledge on AI can come from different channels (including training, advisory bodies and engagement with external experts), but surveys suggest that many boards overestimate or lack AI knowledge. Without sufficient expertise or access to expert advice, board members may be ineffective in identifying opportunities, and assessing material risks related to AI.

Companies should implement AI governance and due diligence procedures proportionate to the potential impacts of their AI activities. Companies developing and training AI face distinct risks from those using third-party AI solutions, and bear responsibility for ensuring that their system programming promotes safe and ethical outcomes.

Companies should envisage articulating their approach to AI in an overarching statement or a set of principles, and should embed responsible AI in existing policies.

Strong risk management processes are needed to identify, assess and mitigate AI-related risks that are financially material, as well as potential adverse impacts on society and the environment. Furthermore, investors, regulators, and company stakeholders will increasingly expect transparency and explainability: How have the AI systems the company uses been designed and trained? Do they align with human values? Has this content been generated by AI?

Many governance professionals want to engage more with companies on AI, and the ICGN has published an Investor Viewpoint, ‘Artificial Intelligence: an engagement guide’, to support their efforts.

Expert assessment

The ICGN plenary session will reflect speakers’ practical experience of how AI is impacting businesses today. The panel brings together asset owner, asset manager and company management—respectively Judy Wade, head of strategy execution and relationship management, CPP Investments; Christine Chow, managing director/head of active ownership, UBS Asset Management; and Klaus Moosmayer, chief ethics, risk & compliance officer, Novartis—to share their perspectives on this crucial field, with the conversation moderated by Nicholas Beale, chair of the Lord Mayor’s Ethical AI Initiative.

The three-day conference, taking place in London from 15-17 July, will cover a wide range of topics facing businesses and investors internationally. This includes plenaries on:

• ‘Attracting IPOs and Unlocking Growth’, looking at what’s driving the reduced number of company listings. Moderated by John Plender, a senior editorial columnist at the Financial Times, the panel will consider what the real factors are that determine where a company chooses to list and how we can prevent a regulatory race-to-the-bottom to attract IPOs.

• Assurance of sustainability reporting, with updates from key global standard-setters—ISSB, IAASB and IESBA—and breakfast sessions to equip participants with knowledge to navigate the evolving landscape of ESG reporting and assurance.

• Executive remuneration continues to be in the spotlight: too high, not high enough… an international panel will discuss the appropriate remuneration package to attract the best executive talent and how to ensure that it is proportionate in terms of employee compensations and wider income inequality.

Take a look at the full conference programme.