Toward artificial governance? The role of artificial intelligence in shaping the future of corporate governance
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Toward artificial governance? The role of artificial intelligence in shaping the future of corporate governance Michael Hilb1
© The Author(s) 2020
Abstract The article explores the impact of the ongoing progress and adaptation of artificial intelligence on the practice of the corporate governance. It applies three lenses to artificial governance—the business, technology and society lenses—to assess the desirability, feasibility and responsibility of automating board-level decision-making to ensure effective corporate governance. Based on an assessment of the potential and limitations of human and machine learning for effective board-level decisionmaking, the article proposes five scenarios of artificial governance, i.e. assisted, augmented, amplified, autonomous and autopoietic intelligence, that are likely to shape the governance of organizations today, tomorrow and beyond. It discusses the implications of both the governance of and the governance with artificial intelligence in the three horizons and concludes with an appeal to board members to take an active role in understanding, imagining and shaping the future of artificial governance. Keywords Artificial governance · Corporate governance · Artificial intelligence · Machine learning · Decision making
1 Introduction Although artificial intelligence (AI) is now at the top of the agenda for many business leaders (Davenport and Ronanki 2018), it is not a new term—it was originally coined in the 19050s (Russell and Norvig 2016). Its importance for corporate management and governance, however, has long been ignored, as Peter Drucker’s article “The Manager and the Moron” stipulates (Drucker 1967, p. 49): “The computer does not make decisions, it only executes commands. It’s a total moron.” How times have changed. AI is now widely considered a “general purpose technology” (Mantas 2019, p. 42), by many even seen as a “general solution technology,” i.e. the solution to any managerial, commercial, or even societal problem. * Michael Hilb [email protected] 1
University of Fribourg, Fribourg, Switzerland
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M. Hilb
What is still receiving less attention in the current state of euphoria is the impact of AI on the concept of the corporation and its governance itself (Libert et al. 2017). This article aims to close this gap by proposing a scenario framework to assess the impact of AI on corporate governance practice. For the purpose of this article, we define corporate governance as “the system by which companies are directed and controlled” (Cadbuy 1992, p. 15). The system can be defined as the composite of “ownership, boards, incentives, company law, and other mechanisms” (Thomsen 2008, p. 15). We define artificial intelligence (AI) as the “activity devoted to making machines intelligent, and intelligence is that quality that enables an entity to function appropriately and with foresight in its environment” (Nilsson 2010, p. 13). Hence, we shall focus in this article on the impact of intelligent machines on the activity of decision-making
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