Artificially Intelligent Boards and the Future of Delaware Corporate Law

20 Pages Posted: 24 Sep 2021 Last revised: 4 Mar 2022

Date Written: September 22, 2021

Abstract

The prospects for Artificial Intelligence (AI) to impact the development of Delaware corporate law are at once over- and under-stated. As a general matter, claims to the effect that AI systems might ultimately displace human directors not only exaggerate the foreseeable technological potential of these systems, but also tend to ignore doctrinal and institutional impediments intrinsic to Delaware's competitive model – notably, heavy reliance on nuanced and context-specific applications of the fiduciary duty of loyalty by a true court of equity. At the same time, however, there are specific applications of AI systems that might not merely be accommodated by Delaware corporate law, but perhaps eventually required. Such an outcome would appear most plausible in the oversight context, where fiduciary loyalty has been interpreted to require good faith effort to adopt a reasonable compliance monitoring system, an approach driven by an implicit cost-benefit analysis that could lean decisively in favor of AI-based approaches in the foreseeable future.
This article discusses the prospects for AI to impact Delaware corporate law in both general and specific respects and evaluates their significance. Section II describes the current state of the technology and argues that AI systems are unlikely to develop to the point that they could displace the full range of functions performed by human boards in the foreseeable future. Section III, then, argues that even if the technology were to achieve more impressive results in the near-term than I anticipate, acceptance of non-human directors would likely be blunted by doctrinal and institutional structures that place equity at the very heart of Delaware corporate law. Section IV, however, suggests that there are nevertheless discrete areas within Delaware corporate law where reliance by human directors upon AI systems for assistance in board decision-making might not merely be accommodated, but eventually required. This appears particularly plausible in the oversight context, where fiduciary loyalty has become intrinsically linked with adoption of compliance monitoring systems that are themselves increasingly likely to incorporate AI technologies. Section V briefly concludes.

Keywords: artificial intelligence, Delaware, corporate law, corporate governance, fiduciary duty, oversight, compliance

JEL Classification: K22

Suggested Citation

Bruner, Christopher M., Artificially Intelligent Boards and the Future of Delaware Corporate Law (September 22, 2021). University of Georgia School of Law Legal Studies Research Paper No. 2021-23, Available at SSRN: https://ssrn.com/abstract=3928237 or http://dx.doi.org/10.2139/ssrn.3928237

Christopher M. Bruner (Contact Author)

University of Georgia School of Law ( email )

225 Herty Drive
Athens, GA 30602
United States

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