Audit and governance committees' AI responsibilities

Every board needs to confront what artificial intelligence (AI) means for their company’s business model and their ability to create shareholder value. That urgency sets the tone for this episode, where host Skadden partner Ann Beth Stebbins moderates a discussion about how boards are overseeing their companies’ use of AI — and how they can use AI themselves in their oversight role.

For insights, Ann Beth sits down with Sumaiya Balbale, a director at Shake Shack, and Skadden colleague Don Vieira, who heads the firm’s tech policy practice and advises companies on AI governance.

Sumaiya says that directors should ask sophisticated, pointed questions about a company’s use of AI. She says that Shake Shack is employing AI in various aspects of its business, for example, to make better predictions about customer flows, inventories and orders, ultimately, to improve the customer experience. She encourages directors to use AI tools themselves as an effective path to building comfort with, and understanding of, AI.

Don also encourages directors to develop AI literacy, becoming fluent in where and how AI is being used in the company. But companies need to facilitate AI use by directors in ways that don’t compromise confidential information, such as introducing such information into a public chatbot.

Audit committees at some companies are taking the lead on understanding AI risks, he says. And nomination and governance committees are increasingly focused on whether the board itself and management have adequate AI literacy, or whether they need to find people to help assess AI, both as an opportunity and as a risk.

“Because the technology is changing so quickly, the board has to have some broad stroke principles rather than hard and fast rules,” Sumaiya says. “You don’t want to have a framework that’s obsolete two months later when the latest model comes out.”

Companies “need to enable an environment where people feel like AI fluency is important and critical,” and make “sure that people feel empowered to understand this technology, to use it to find creative applications, to identify the risk, but also to grow in their own talent and capabilities,” Sumaiya says.

Don suggests tempering optimism about AI’s capabilities with an appreciation of its risks. As one example: Some companies have been accused of “AI-washing,” claiming that AI is building efficiencies when it is not. “It’s critically important that the board vet that and make sure it’s part of its oversight process,” he observes.

Tune in for a practical, candid discussion about how boards can navigate AI as both a strategic opportunity and a governance responsibility.

💡 Meet Your Host 💡

Name: Ann Beth Stebbins

Title: Partner at Skadden

Connect: LinkedIn

Featured Guests

Name: Sumaiya Balbale

Title: Board member, Shake Shack

Connect: LinkedIn

Name: Don Vieira

Title: Partner, Tech Policy, Skadden

Connect: LinkedIn

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The Informed Board is a podcast by Skadden, Arps, Slate, Meagher & Flom LLP, and Affiliates. This podcast is provided for educational and informational purposes only and is not intended and should not be construed as legal advice. This podcast is considered advertising under applicable state laws.