Checking in With Your Board of Directors on AI Usage
In this episode of “Waking Up With AI,” Katherine Forrest and Anna Gressel revisit how companies should brief their boards of directors about AI in 2025, offering insights into AI usage, risks and strategic considerations for senior management.
- Guests & Resources
- Transcript
Katherine Forrest: All right. Good morning, folks, and welcome to today's edition of “Waking Up With AI,” a Paul, Weiss podcast. I'm Katherine Forrest.
Anna Gressel: And I'm Anna Gressel.
Katherine Forrest: Actually, Anna, even though you don't have your fancy microphone, you sound pretty good.
Anna Gressel: I have my fancy mic. I don't have my headphones but look at this thing. Because we're at the office, I've got this like enormous mic today.
Katherine Forrest: Oh, okay. All right. I couldn't see it. I couldn't see it through the Zoom. So we're actually just down the hall from each other, although we're recording this in two different spaces down the hall. But we were thinking, folks, this may come as a shock, that we were going to leave sort of the high-tech environment for a moment. It’s still going to be AI-related, but we're to go back to our roots as lawyers for a little bit and spend time today in our podcast talking about what kinds of issues in-house lawyers and those lawyers who are advising boards of directors should be or may want to consider discussing with their boards of directors in 2025.
Anna Gressel: Yeah, I love this topic. It's so important. It's also really timely, notwithstanding the fact that many episodes ago, almost a year ago really, we did an episode on educating the boards on AI. This is one of those things that is an actual perennial topic for us in the AI space, like how do you brief the board? And now it's time to check in about briefing boards and check in with boards of directors on what they need to know about AI in their company and in the industry and in society writ large.
Katherine Forrest: Right, it's exactly those areas. You want to make sure that the board is aware about some of the ways in which, or the extent to which AI is being used at his or her company. They don't have to know every single detail, and we'll talk a little bit about that, but they want to have some understanding of how AI is being used. So it's the “how” at the company, but then also how AI is being used or talked about more widely in the industry, what the competitive set is doing and how what they're doing may compare to the competitive set. And then of course, there's also the “what is on the horizon, what's coming up” because that can impact a lot of things including investments and future planning.
Anna Gressel: Yeah, I'm really excited about this topic. And I want to also mark this as a little bit different than the way we've discussed this in the past, and there's a reason for that because we're in a different moment now with AI. I mean, every few years feels like a really different moment, and it's important to acknowledge that. But for the purpose of boards of directors, there's also a different dynamic that we're seeing within senior management and within boards, which is that boards are, for the first time, proactively really asking their companies to brief them on AI. And why is that? It's because we actually see board members sitting across many different companies. Often people have multiple board roles and they hear about AI, they get briefed on AI in one company. And now they're beginning to go to their other companies and say, “hey, how come you haven't briefed me on this?” So when we used to talk about this with companies, we'd say, you know, pick your moment and be thoughtful about it and prepare for that. And right now I think that preparation runway is a lot narrower. And really, senior management needs to be prepared themselves to get that question and have to respond pretty quickly to it.
Katherine Forrest: So if you're in senior leadership and responsible for AI or are responsible for briefing the board, at least, you want to be prepared for that call. And there's one other thing, Anna, that's been coming up, which is disclosures. There are now disclosures that some companies are finding it advisable to do, and whether or not it's advisable is really very specific to a particular company. But there are disclosures now on AI use, AI risk and things of that nature. So that's another reason to have the directors be prepared for things that may be upcoming.
Anna Gressel: Definitely. So let's talk a little bit about how senior management and senior legal leadership can get ahead of this dynamic, think ahead about what they should be doing with briefing the board. And we can talk about how legal advisors should be informing a board in terms of how AI is being used at the company. And that can mean a lot of different things. So let’s, we'll break it down in a second. But in terms of cadence, we usually recommend some sort of periodic basis for briefing on AI. And that doesn't have to be every month. It can be twice a year, certainly once a year. And in advance of that, legal advisors and whoever is kind of responsible for the board briefing may want to gather information from various teams within the company responsible for AI usage. And some of the things that they'll want to find out are, what is the AI actually being used within the company? And where on the spectrum of utility does it fall? Is it very helpful to not helpful at all? What is the company thought about that? Is there an ROI that can be associated with the AI? And we can talk a little bit about that later. Are there risks the company needs to be aware of with respect to the AI uses that are identified? And have there been any incidents in which those kinds of risks have actually manifested into real issues for the company that are useful for the board to be aware of? And finally, how does that usage that you've learned about already within your company compare to that of your competitors? There's usually a benchmarking piece and sometimes Katherine and I actually come in and brief when we do the board briefings. We fill that role because we have some view of the competitive landscape.
Katherine Forrest: Right. And one thing I should say as we're talking about this, it just strikes me that we want to mention that we're talking about, today, really companies that are not AI developers and not developing AI tools. Obviously if you're in those areas, the cadence of your report to the board and the nature of the communications with the board are going to be entirely different. We're talking about really all kinds of companies across a variety of industry segments who are users and deployers of AI tools. But all of the questions, Anna, that you've just sort of highlighted are so important. And before we move on to the industry report for a board, let's talk a little bit more about this checklist. When we say what AI is being used within a firm, we're talking about relevant products and use cases. What are the AI use cases that individuals or areas within a firm have been deploying, have been talking about deploying, have been piloting? And this could be anything from your most basic co-pilot only to more sophisticated marketing tools, to analytical tools, to research tools for specialized areas for all kinds of medical device tools, etc, etc.
Anna Gressel: Yeah, and there can be a few uses within a firm, or there could be a really large number. And I want to stress that the board doesn't really need to know about every particular use case. They're not becoming part of that AI governance committee you might have formed that's reviewing spreadsheets and spreadsheets of use cases. But rather, the point is the board needs to understand that there is AI being deployed generally within the firm. And to get a sense of how important or critical the function is of that AI to the overall company is either work or risk profile.
Katherine Forrest: Right, and then let's talk about why that's important. Why does the board even need to know that? It's important because right now there's so much discussion about the transformative potential of AI that a board's going to want to be sure that there really is a responsible group on top of that issue within the firm and that the particular uses that the firm may find to be very important or are very important within the industry are on people's radar screens and are on their radar screens at high level. Again, we're not talking about making your board into any kind of AI experts. This is the kind of high-level discussion you have with the board about really critical infrastructure within a firm and infrastructure that may be coming down the road to the firm, and AI is really a potential part of that. So, you want to get the people who are best positioned to answer these questions about utility, about usage, about risks, to be able to speak to those issues.
Anna Gressel: Yeah, definitely. And I think one thing we mentioned earlier is that as part of this discussion, you want to really be able to talk about the utility of the AI being used and also whether the firm has some sort of ROI associated with that, a return on investment associated with that. And how you measure ROI is actually, I think, in the AI area, often a matter of debate. Sometimes the ROI is efficiency and number of hours that this might save someone. There can be other kinds of ROI that is associated with the use of a kind of tool. But there should basically be a value proposition here for how the company is using AI and being able to clearly articulate what the vision and the value proposition is of internalizing these tools can be really important to having a healthy discussion about it.
Katherine Forrest: Right, and if there is no value proposition, that's an important discussion also to be having at the board level depending upon the level of investment because a board is going to want to understand whether you've got a dramatic cost savings that you are actually seeing, or whether there was a predicted cost savings that is not actually eventuating as expected, whether there's an impact on other investments or whether or not there are use cases that you'd expected to mature in a particular way that are or are not maturing in that way. And ultimately you want to be able to understand, or the board wants to be able to understand, is our business going to be experiencing any dramatic changes in the near-term, mid-term and long-term horizon.
Anna Gressel: Yeah, and then turning after that to the risks, it is important that if there are big risks associated with AI usage, that the board hear about them at a high level. And this is the same point we've made. This is a board level discussion not, you know, it doesn't have to be too granular, too in the weeds of minor risks. And you don't really have to take this time to make your board into a set of legal experts on these kinds of issues. But if there are risks associated with those uses — particularly if those risks are material or could impact safety-critical areas, business-critical areas — it's important for those to be flagged to the board.
Katherine Forrest: Right. I mean, one of the things that is sort of a piece, a good piece of general advice is if you've got a potential high-risk set of actions that you're undertaking — and that's very specific to a company and to how a company is operating in a particular industry — and there's an investigation or a high-profile announcement of some sort, you don't want your board to be completely caught off guard. And so what we're talking about is doing some of that groundwork that prevents your board from being caught completely off guard from a usage here in the AI area that might have some public repercussions that they need to be aware of.
Anna Gressel: Yeah, and along with flagging potential risks of AI, if there are some examples of risks that have actually materialized within the business, that can really be important to brief your board on. It's flagging risks that have actually resulted in some issue for the company can be important if there are potential significant financial or reputational risks associated with it, or if the board needs to actually understand how those were remediated and why that mitigates having the same kind of risk occur in the future. That can be an important discussion.
Katherine Forrest: Right. And another piece of all of this is looking at your competitive set. Now, we're talking about doing this in a way that is based only on public information, but what you want to do is understand as a board member whether or not your company is lagging behind a competitive set or is way ahead of a competitive set for a variety of reasons. So if the board of a company that is ahead of the curve from its competitive set, but the use cases within the company are high-risk use cases, that's just an issue for the board to be aware of and to consider as they're looking at their overall risk profile. If, on the other hand, the board hears that many competitors are using AI, but their company is not, and they've not set aside the funds for investing in the resources that would make that possible, they may want to understand more about why they're not deploying AI. Is the ROI really not there, but there's hype in a particular use case, but there's not really an ROI? Or is there something else? Is there a risk profile of the organization that needs to be recalibrated?
Anna Gressel: Yeah, and sometimes just hearing about what other competitors are doing can raise a lot of important questions for companies, like whether those competitors have experienced really known benefits of AI that should be taken into consideration. Or if they've run into issues with their AI usage, that can actually help inform your company's strategy and how you want to move forward.
Katherine Forrest: Right. And again, I'll put my antitrust lawyer hat on and say we're talking about only engaging in analysis of what is publicly available about what your competitive set is doing. Of course, you want to always comply with all antitrust laws. We're not giving any legal advice in this podcast ever, but that is just a good best practice in general. Now let's go on to what is one of my favorite pieces to talk to individuals at companies at all levels about, both legal advisors and board members, which is the horizon. We get a lot of questions, Anna, I think it's fair to say, on what's coming. What should I be getting ready for?
Anna Gressel: Totally. I mean, I think our listeners should know this, right? We love talking about this. And some of the things that companies may want to hear about, particularly the boards may want to hear about, are what kinds of shifts we're seeing in the technology space, particularly if they're like big paradigm shifts or major new technologies even within the AI kind of bucket, and the implications those might have for the company's own tech stack, their market for their products or their customers.
Katherine Forrest: Right, and then developments that might be relevant both to the company in terms of deployment scenarios and so the company executives, as well as the board, are scenarios where you can see that there might be some big changes that will have to be invested in, in one way or another. Infrastructure investments for instance, or potentially redeployment of human resources, retooling, if you will, and retraining of human resources, potentially even downsizing. If you see on the horizon that there are scenarios that are coming the company's way, if you will, that will require these kinds of changes, then the board's going to want to be on top of that. Not necessarily making any big adjustments today but starting to have those basic conversations that will allow them then to be planning for the company's future.
Anna Gressel: Yeah, and I mean, in some ways, Katherine, you can think about this also in terms of ROI. Like if your ROI actually has the impact you think it has, that may have some actual impact in terms of your planning, your strategic planning for the company. So it's natural to marry these conversations. It's natural for the board to weigh in on the balancing of the ROI and the downstream consequences. That is kind of paradigmatically a nice board level conversation to have. So that's kind of what we're driving at here.
Katherine Forrest: All right, and with that, Anna, we've had our legal hats on today. I'm Katherine Forrest.
Anna Gressel: I'm Anna Gressel. Like and subscribe if you're enjoying the podcast.
