Does your current board composition include members with the appropriate level of artificial intelligence expertise? Does your board have members who can accurately assess the growing impact of AI on society, its risks and the opportunities for operational efficiency and revenue growth that can catapult your company to become leaders in its industry? Heather Redman, a director at PPL Corporation and venture capitalist who specializes in deals involving AI startups, recently sat down with Corporate Board Member columnist Matthew Scott to discuss why companies need to add AI expertise to their boards and how they can go about doing that. The following is an edited transcript of their conversation.
Why is artificial intelligence becoming such a critical expertise that corporate boards need to add to their boards in the months and years ahead?
If you recall, boards began adding directors with cyber security expertise several years ago because of the need for it functionally and because the SEC’s cyber security rule was hanging over our heads. That made cyber very important from a defensive perspective, and boards had to adapt. Now, boards need to add AI expertise because the technology has defensive aspects (How are we going to manage the risks of AI?), but more importantly, AI also has incredible potential to create new business opportunities, new revenue growing opportunities, new avenues and lines of business that can be opened, and huge gains in operational efficiency. Adopting AI can lead to real business transformation.
It’s similar (but bigger) to how businesses adapted to the Internet. At first, businesses asked, “How does this Internet thing work and how is that going to impact us?” Then businesses learned to use emails, online advertising and e-commerce which allowed them to gain some efficiencies, but your whole operation didn’t change. The Internet touched a lot of businesses very profoundly. It was an existential threat to some businesses, but it was also a fabulous opportunity for other businesses for transformation. The Internet drove a lot of efficiencies and new opportunities in many businesses, but it didn’t change your whole operation.
Artificial intelligence is going to be an industry and economy transforming technology. It’s going to have a much bigger impact than the Internet. We’re still waiting for the huge impact, but somewhere between two and ten years, it will affect every industry in our economy, from top to bottom. So whatever industry you’re in, you need to have the offense and defense capability that AI offers, and you need to have that ability to look at AI from the perspective of, “How does it make our organization more efficient?”, “How could it potentially be either an existential threat to our standing in our industry”, or “How could it produce an opportunity to move into completely new lines of business like what hasn’t happened since the Industrial Revolution?” It’s important for your board to be ahead of this coming monumental shift.
Every business needs to develop a strategy for how they’re going to manage the changing environment that AI is going to create in the next decade.
So, with that said, what type of AI experience would make a potential director candidate a valuable addition to any corporate board?
Boards today love to add newly retired CEOs because they have a lot of time and a lot of great experience. They can provide great value when it comes to thinking through business transformation, how you get the best teams to work together constructively, how to do cost cutting and how to build growth over different business cycles. But because AI technology is changing so rapidly, boards really need to concentrate on finding candidates who are very current on technology as it exists today, and as it is continuing to evolve. That’s because as I stated earlier, over the next two to ten years, boards will need someone who can help them understand what’s happening as AI technology takes new twists and turns.
Boards should look for people who are at some of the companies on the frontier of AI, like Anthropic or Open AI. Those people are hard to get because their industry is very busy, their companies pay very well and their jobs are very demanding. But if you can get a candidate from one of those companies to devote time to your board while continuing at their company, they would be suitable for board service.
Another group of people I think would be good candidates are investors who get to evaluate a lot of technologies as part of what they do. They tend to have a view that’s very broad and very current because they see multiple deals that require them to learn many new technologies and stay current on what’s competitive. These potential candidates may also be more accessible because they are generally more interested in which technologies are working at the enterprise level, and which technologies are transforming industries. This keeps them in the flow of the technology today, unlike an executive who might have served on an AI-related company two or five years ago.
Should boards focus only on C-Suite level executives or could a non-executive with demonstrated AI expertise also be considered for a board seat?
It’s always a struggle to find people who have deep AI expertise but also have board experience. We usually look for that in the C-Suite. Boards should not compromise on selecting people who are board-ready—those who have the breadth of experience and demonstrated ability to operate in a boardroom in the way that we want to see people show up. Maintaining a positively functioning board is the most important thing, so if you can broaden your search to find a chief technology officer or chief product officer who already has board experience, or an investor who is actively vetting AI startups, you might be well served.
What are some ways companies can approach the actual process of adding directors with meaningful AI experience to their boards?
Spend more time studying companies that have shown they’ve made breakthroughs in AI, including some of the frontier model companies. This can provide directors with good opportunities to get more educated about what’s going on in AI technology. Spend more time with the investor community. Oftentimes, companies will have relationships with one or more venture capital firms or service providers who can put companies in touch with other venture capital firms that are investing in this area. I’ve talked to service providers like the big accounting firms to find potential candidates. They are very much involved with AI networks because they themselves are starting to use AI and are providing a lot of services to their clients by implementing the technology.
There are also a lot of industry conferences directors can attend that can help boards delve into learning more about AI technology. And I heartily recommend companies try AI—use it, so they can judge the expertise level of board candidates more accurately. Board members will also find that expanding their professional and social circles so that they can get to know people that might ultimately be considered as board candidates in the future will be very valuable.
What can current board members do to improve their personal understanding and experience with AI in ways that could benefit the company?
It is important that everybody on the board be current on what AI is all about and be using it in their daily lives. I encourage directors to experiment with AI. Find out what people aged 15 to 21 are doing with AI because it is very native to them. They’ve grown up with it and can give you clues as to what a professional might be using AI for, and how they’re using it. Hire one off the street if you have to, but learn from them.
There are a lot of good seminars out there for board members and executives that are held regularly. There are books being published on AI that are helpful. But there’s no substitute for using the technology and experimenting with it. Integrating AI into your life in meaningful ways can help you understand how it can make sense and be useful for your company. Then when your company is either proposing to use AI or fighting against transforming the business using AI, you will be better able to understand what makes the most sense and why, as well as the pros and cons of each situation. That’s how current board members can add value to their board.
What will happen to companies that fail to add relevant AI experience to their boards?
There are a few things that can happen. The one that I’m most concerned about is that the board will become risk averse, which is the natural thing to do when you don’t understand something, right? I have seen some of that behavior—holding the company back from doing some of the easy things that can produce marginal improvements that can at least allow it to stay in the middle of the pack. That would be a disaster.
Another thing that could happen is that the board allows management to do what makes sense to management without oversight because the board doesn’t really know anything about AI. If you don’t have the ability to ask the right questions, you could fail to spot obvious AI risks, endangering the company.
Lastly, say your company is competitive within your industry, but maybe there’s an opportunity to use AI to leapfrog the competition. If you had a great board that was very informed, AI could be a transformational game changer that becomes a catalyst for management that can catapult your company forward to the top of your industry. But if you don’t have the right expertise on your board, you risk missing that opportunity. AI presents us with a once in a century kind of opportunity. You don’t want to miss out on that.
