Evolving Corporate Governance
Governance by definition is not static. While the underlying principles remain constant, in practice effective corporate governance will evolve to reflect the challenges and opportunities of business, and the changing concerns and priorities of shareholders and stakeholders.
As such the UK regulator, the Financial Reporting Council, has recently concluded a consultation period on the refreshment of the UK Corporate Governance Code. The consultation asked companies, shareholders and practitioners to respond to a range of governance questions. This included a proposed shift from more tick box and compliance based external Board assessments to Board performance reviews which are forward looking and have a greater focus on outcomes and effectiveness. Fidelio has already commented on the significance of this reprioritisation in a previous Overture.
The Open Question
Fidelio was pleased to provide our feedback on all 26 questions that were posed by the FRC as part of the consultation. And we would argue that one question stood out and has probably attracted much less attention than it merits.
“Q.26 Are there any areas of the Code which you consider require amendment or additional guidance, in support of the Government’s White Paper on artificial intelligence?”
This very open question draws attention to a critical aspect of governance that has rapidly risen up the Board agenda. As with climate change competence in the Boardroom, Fidelio sees directors of all types of companies and organisations asking what are the implications of AI for the oversight and leadership that they are required to provide.
Fidelio has indeed previously written on the role that business needs to play in providing frameworks and oversight of AI. While regulation clearly sits in the hands of government and regulators, there is a growing argument that business and Boards must take responsibility. Indeed, the screenwriters’ strike in the US is potentially creating a template as to how employees can also have a say.
Guardrails and Boards
The need for governance and regulation to evolve quickly and effectively to provide guardrails for AI is a theme that Fidelio is developing and expanding with our clients and more broadly. Earlier this year we co-hosted a webinar with Lord Clement-Jones which provided a deep dive into the AI regulatory frameworks that are evolving in particular in Europe but also other jurisdictions. A key message was that there remains much more to be done and that Boards have a vital role to play in understanding how their organisations are both using and challenged by AI and in ensuring an ethical response.
Equally Fidelio’s co-founder recently moderated a panel in Cambridge of academics and business practitioners all working closely with AI. There was pushback against the simplistic blanket term of AI and also excitement about the potential in a number of areas of both academic and day to day life. But deficits were identified in the understanding that is needed to provide meaningful regulation, as well as the need for all of us to upskill, regardless of our academic and professional background. For business leaders there is a particular imperative. AI is far too important to be left to the technologists and corporate governance needs to reflect this.
Fidelio’s purpose is building high performance Boards through evaluation, development and search. To learn more about how Fidelio can support your Board in increasing its effectiveness, including with regard to AI, please get in touch.
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