Artificial Intelligence: deployment in company secretarial and governance functions

November 20, 2024
Sean Murphy Megan Skipper
Sean Murphy Megan Skipper
Posted in Artificial intelligence Corporate

The integration of Artificial Intelligence (AI), including Generative AI, into company secretarial and governance tasks, such as recording or otherwise assisting with board meeting minutes, has the potential to enhance efficiency and productivity.

With this in mind, the GC100 commissioned a poll looking for insights to provide a better understanding of how AI and other forms of legal technology are shaping the minute-taking process.  However, as we discuss in this blog, in addition to such benefits, organizations must navigate the various risks and legal requirements associated with using this technology.

The GC100 poll into the practice around AI and minute-taking 

106 companies responded to the poll, although not every question was answered by each company.  Most were public companies or other institutions, with only 29 respondents being private companies.

There were mixed views from respondents about whether AI should be used in the boardroom, but at the moment very few are using it, with 92% respondents indicating it has not been introduced either to assist with minute taking or to assist with the preparation of minutes.  Further, 84% of respondents do not currently have an internal policy on the use of AI transcription in relation to minutes.

However, those respondents that do use AI to produce minutes and transcripts indicated that these are typically reviewed by the company secretary or a member of their team.

A link to an article summarising all the result of the poll can be found here.

What is the legal backdrop to this?  The Companies Act 2006 (CA 2006) is fairly light touch in respect of keeping minutes, but regulatory bodies recognise their importance.  

The CA 2006 mandates the recording and preservation of board meeting minutes for at least ten years, with failure to comply a criminal offence.  Such minutes serve as a formal record, evidencing the proper convening and proceedings of director meetings.

The lack of regulation on the specifics of minute-taking means practices vary, but the importance of accurate and impartial minutes is underscored by regulatory bodies like the FCA, which views them as a reflection of effective governance.

In addition, the Chartered Governance Institute's guidance on minute-taking emphasizes:

  • The role of minutes in providing a clear and concise internal record, which is critical for demonstrating directors' compliance with their statutory duties.
  • That minutes should be an accurate, impartial, and balanced record, clear and concise to serve as evidence in legal or regulatory proceedings. They should document directors' challenges to executive management and considerations of shareholder/stakeholder impacts.

Using AI for minute-taking can streamline the process, particularly for routine mattes (e.g. through the creation of templates for minutes and/or board papers), but companies have to be comfortable with the reliability and levels of bias, and need to ensure AI’s use does not discourage open debate. 

Whilst it may save time to use an AI tool to generate a template for minutes and/or board papers, particularly where resolutions relate to routine matters, it will obviously be critical to review AI-generated minutes, ensuring they capture the material actions and reflect the collective decision-making process without bias.  Bias in AI outputs is a recognised problem – see, for example, our video, Foundations for good AI governance.

Companies must also consider where AI-generated content is stored - for example, is the content produced and located on an in-house system with the company’s approved cyber security and other controls attached to it, or is it hosted outside the company.  AI can both assist with, and raise concerns in relation to, cybersecurity – see our blog, Ontario government introduces new bill for strengthening cybersecurity and for responsible AI.

In addition, thought should be given to whether there is a risk that, if a digital recording of a meeting is made with a view to AI analysing or summarizing it, might this make attendees behave differently and impede authentic and useful discussion?  Furthermore, the existence of AI-generated transcripts could challenge the status of minutes as the sole record of a meeting, necessitating a document management and retention policy that addresses the unique considerations of AI-produced content.

The discharge of directors' duties requires a level of human judgment, especially in capturing the nuances of board challenges to management and the recording of dissenting views – key for regulated entities

During the boardroom debate, directors may put forward a view with which they personally disagree in the interests of ensuring a thorough discussion, challenge and examination of all perspectives.  These comments are not necessarily for inclusion in minutes, and including such details may discourage the free-flowing discussion that should be part of a well-functioning board.

However, there is a considerable level of ‘human’ judgment required to assess the key points of a discussion and to discern which are relevant to include to show that the directors have discharged their section 172 (CA 2006) duties. While AI can transcribe and summarize, it cannot yet make the judgment on which points are appropriate to include.

This is also an issue for the way in which boards ‘challenge’ management and the extent to which this challenge is reflected in minutes. While a matter for judgment in each case, this is an important issue for directors’ conduct (particularly for directors of regulated entities), and the minutes need to record significant issues raised with management by directors and the responses received or action agreed to be taken.

In general, the recording (or not) of dissenting views is an area where AI struggles at the moment, both in terms of detail and the circumstances in which a company records dissent in practice. At the moment, based on the current state of play of the technology, AI may not be able to exercise the degree and subtlety of judgment required in this area that a human minute taker, with detailed experience of the company, might be able to bring to bear to the task.

In addition to these concerns, the use of AI for board minutes introduces risks related to data privacy, intellectual property rights, accuracy of output, potential for toxic content, regulatory compliance, reputational and financial damage, and the need for AI literacy among directors and management

As organizations explore the integration of AI into their governance processes, it is clear that careful consideration, policy development and human oversight are essential to ensure that the benefits of AI are realized without compromising the integrity and legal standing of board minutes.

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