Diligent Institute—with partners Deloitte, Vinson & Elkins, and Gibson Dunn—recently hosted a series of events for board members at large cap public companies. Across the events in Los Angeles, San Francisco and New York, we were joined by dozens of directors who collectively serve on the boards of more than 60 public companies as part of the Diligent Forum Dinner Series.   

Our robust discussions centered around two topics:  

1. Accomplishments and goals in the boardroom  

2. Oversight of emerging technologies 

Accomplishments and goals in the boardroom

Participants shared the issues that have been a focus for their boards in the past year and the ones they expect to focus on in the next year. We surfaced several key takeaways:  

CEO succession

CEO succession is an ongoing priority for boards – even those with a successful CEO who is not nearing retirement. Picking the right CEO is one of the board’s most important duties, but the board’s work is not limited to selection. Directors emphasized that their boards are starting the succession process earlier and making it more robust. This includes engaging experts and coaches to work with high potential candidates internally, having board members spend more time with executives two or even three levels down from the CEO, adding senior talent to strengthen the bench, and highlighting to the CEO that a successful transition–even if it does not happen for many, many years—is a key to their legacy. 

Board succession and culture

Board succession and culture has also emerged as a focus, and not just for the Nom-Gov committee. Several directors expressed the view that age limits (which remain a leading trigger for board transitions) may not be the best approach. Some are considering term limits, but more are starting to have open conversations—often guided by the results of individual director performance evaluations—about when a director should depart. Director retirements create space for new directors, many of whom bring different backgrounds. As board composition changes, directors said that they are focused on creating a board culture in which new board members are welcomed, treated as equals, asked for their opinions early and often, and celebrated for bringing fresh perspectives.  

Risk management

Risk management is another area where boards are stepping up their oversight. Directors said that getting a handle on the company’s process to manage risk is a start, but not enough. Several noted that their boards and committees are spending more time with individual risk owners for deep-dive discussions on the topics that are either emerging or near the top of the risk register. The risks that are getting the most board-level attention include: supply chain, technology/cybersecurity, geopolitical, talent/workforce, sustainability, interest rates/macroeconomic, and shareholder activism.  

Cybersecurity

Cybersecurity remains a major focus for boards due to the combination of new regulatory requirements from the SEC, the nature and proliferation of attacks on companies, and the fact that more and more company operations are conducted on connected machines and devices. Boards are upping their game on cyber by allotting more time for the topic on the board agenda, engaging with the information security team between board meetings, hiring the board’s own experts to test the company systems and present to them, participating in continuing education programs, and considering director candidates with cyber experience.  

Oversight of emerging technologies 

The rapid ascent of generative AI, along with other technological advances, will transform companies in some ways we know and many we cannot yet predict. Board members shared fascinating real-world examples of AI in action as well as what they are doing to provide oversight as their companies pursue these opportunities and consider the risks.  

Opportunities

Companies are testing a wide range of AI uses cases as they seek to pursue two main goals: efficiency gains and competitive advantage. One director suggested companies find “low risk use cases in non-critical parts of the business and see if they can scale.” Some of the early AI success stories that directors shared were in areas including customer service, customer acquisition, pricing, sentiment analysis, summarizing documents, and first draft copywriting. Longer term success is likely to depend on integrating artificial and human intelligence. One director said, “leaders must learn how to manage a co-mingled team of bots and humans.” 

Risks

Directors understand that adopting new technologies comes with new risks. Many noted that they are asking more questions about how their companies can use AI safely and without sharing company secrets. One said that every board should “review the company’s responsible use policy for AI – and make sure that the company drafts one if it doesn’t exist.” More broadly, they suggested companies create a framework for governing AI that includes an assessment of the opportunities and risks of each project. A big part of this is ensuring the integrity of the data being used by the algorithms, both for accuracy and equity. A director said, “Before we try to make money, we need to ask ‘What do we stand for? What are our own rules?’ Then we apply them religiously.”  

Oversight

Boards are still sorting out the best way to provide oversight. According to a recent study from Deloitte and the Society for Corporate Governance, the majority of companies have not yet delegated AI oversight to the full board or to a committee. This is consistent with our discussions. One director noted that oversight is not likely to fall in one place: “Questions about risks related to AI governance are likely to end up in the audit committee. Discussions about grabbing opportunities might go to the full board.” Regardless of where oversight sits, directors agreed that this is a topic for continuing board education.    

If you’d like to learn more about Diligent Institute and our programs for board members and senior executives, please reach out to diligentinstitute@diligent.com!