Generative AI (i.e., AI creating original content using machine learning and neural networks) has captivated people everywhere, producing a range of responses from doomsday warnings of machines rendering humans extinct to rosy dreams where machines possess magical properties. In corporate boardrooms, however, a more sober conversation is occurring. It seeks a practical understanding of how boards might evaluate this powerful, but error-prone new tool, and comes with both cautions about its downsides and considerations for potential upsides.

Companies are racing to harness the benefits of generative AI while trying to develop policies to protect against reputational and regulatory risks—all of which creates a clear role for boards of directors.  The generative AI industry continues to debate and refine its offerings as well, which have become more effective with each subsequent iteration of generative AI. Policymakers are weighing in with a flurry of regulatory initiatives and recommendations in the face of concern about the ethical implications and other risks of widespread adoption of this new tool.

In this alert, we offer corporate boards insight about generative AI along with practical cautions, noting both its perils and promise. We begin with current regulatory initiatives and legal issues for directors. We provide considerations on the relevance of generative AI to standing board committees such as audit, compensation, and nominating/governance committees, including suggesting ways that generative AI can help boards address thorny challenges, from setting their own pay to planning for their own succession. We also provide illustrations for how the full board or designated risk or strategy committees might at some point be able to use generative AI to add value to strategic planning and enterprise risk management.

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