Opinion Why there is a need to reimagine corporate governance in the AI age

I found the workshop useful not because of what was said or what I learnt but because it triggered reflection on corporate vocabulary, processes and governance. It struck me that notwithstanding the radical and transformative nature of AI/AGI, the questions and responses were structured for the pre-AI era. I felt there was a disjunct between the somewhat generic formulation of the problem and questions — understandable because of the uncertainties surrounding the speed, scope and consequence of AI’s evolution — and the framework within which the answers were sought and provided.

My career has been predominantly in the corporate world — public and private. I have also been an ID of several international and Indian conglomerates. The buzzwords “vision”, “strategy”, “value “, “risk”, “ opportunity “ and “governance” have been part of my corporate vocabulary. Recently, a new word has entered this lexicon — “disruption” — the consequence of technological innovation, geopolitical rivalries, supply chain tensions, global warming, pandemics and environmental stress.

Prima facie, this word requires no explanation. It sits, however, at the nub of corporate dilemmas. How does one write a vision, develop a strategy, define value, map risk, surface opportunity and/or build a governance structure if one knows the world is headed off the beaten path but does not know the direction?

I worked for years with the Royal Dutch Shell Group. This conglomerate was well known for being the architect of scenario planning. The purpose of scenarios, or stated differently, the writing of descriptions of logically-consistent but different futures, is to prepare corporate mindsets to respond to the unexpected. Shell scenarios hit the headlines in the early 1970s for describing a future built around the surge in the price of oil. It was the only company to have foreseen such an eventuality.

The methodology for developing scenarios starts with the structuring of so-called “predetermined” trends. The presumption is that there are some trends that underlie all futures. Shell has, for instance, built scenarios around the predetermined trend of growing population, rising per capita income and, therefore, higher energy demand.

The question today is what predetermined trend(s) will underlie the development of future scenarios? Will it be a variant of the linear prognostications above? Or, something radically different?

In my view, the pathway of our future will be anything but linear. It will be marked by “disruption”. Scenarios built on this foundation could describe varying futures. One in which man loses control over his own creation and Intelligent Machines become anthropomorphic. Another which mirrors Joseph Schumpeter’s paradoxical concept of “ creative destruction” wherein new innovations “destroy” the old to “create” a refreshed and sustainable new. Whatever the future, my larger point is that scenarios must presume discontinuity. The past will provide at best an imperfect guide.

It is perhaps because of this professional backdrop that the workshop triggered four messages in my mind.

One, the questions raised at the workshop are important but the answers offer little more than the hope of doing better what companies are already doing. This is because the answers are framed through the prism of conventional assumptions and existing processes. Such a framing can mislead leaders into thinking they have matters under control.

Second, the current “technology of governance” is at variance with the “technology of the future.” One example is illustrative. Directors are currently required to carry out an annual 360 degree evaluation of the functioning of the board and their colleagues. The objective is laudable — to improve the quality of governance. This exercise has, however, not materially improved governance. It has, instead, created a “tick in the box” inconvenience and led to the commingling of process and outcome — neither is contemporaneous with the demands of governance for exponential technological change. A new approach and new processes and products are required to breach this variance.

Third, Indian boards comprise, in the main, elderly individuals with similar experiences. This results in the homogenisation of corporate thinking and (inadvertently perhaps), the shrinkage of space for contemplating “out of the box” alternatives. Few like to challenge the “wisdom” of the many. Boards must become more diverse, especially with regard to age and gender. This would help their companies better manage, mitigate and realise emergent risks and opportunities.

Finally, the following questions have to be asked: Is the extant corporate vocabulary tethered to contemporary reality? Are the buzzwords of vision, strategy, value and governance used too loosely and interchangeably? These are abstract questions and my thoughts are hazy. But I am clear of their importance. The answers should not be generated by turning to narrow experts, other than for technical matters, but through broad based internal discussions.

The writer is chairman and distinguished fellow, CSEP