The Use of Artificial Intelligence in Corporate Decision-Making at Board Level: A Preliminary Legal Analysis

Abstract

Praised popular applications of artificial intelligence (AI) such as ChatGPT are merely a demonstration of AI’s potential in the business world. AI is on the verge of assuming a common role in the management of companies, since its steady emergence as a support tool for the administrative and judgement work of directors and managers. While only a handful of companies worldwide have attempted to appoint a robo-director, the general use of AI in corporate governance has proven to rationalize board decision-making, challenge groupthink and strengthen the independence of directors. Contrastingly, company law frameworks around the world remain rooted in exclusively human decision-making and deny the role of technology in corporate decision-making, resulting in inefficient regulatory strategies with regard to AI systems bestowed with governance powers. As a result, uncertainty exists about the legal permissibility and legal consequences of the implementation of AI in the corporate realm, which could discourage corporations from adopting AI, in spite of the technology being likely to enhance the business judgement of directors.

Therefore, this paper attempts to highlight the growing importance of AI in corporate governance by classifying its gradual levels of autonomy vis-à-vis the board of directors. Then, this paper proceeds to make a preliminary legal analysis of the potential roles of AI in the management of memberless entities, leaderless entities and traditional corporations. The strongest focus of this paper lies on fundamental questions of corporate law pertaining to the delegation of decision rights to AI, the full replacement of human directors by AI, the required human supervision of AI and the attribution of liability for algorithmic failure.

Keywords: Artificial Intelligence, Corporate Law, Company Law, Board of Directors, Corporate Governance, Decentralized Autonomous Organisation, Algorithmic Entity, Decision-Making, Delegation, Robo-Director, Liability for Algorithmic Failure

JEL Classification: K22, K13