In this episode of On Boards, hosts Joe Ayoub and Raza Shaikh speak with Babs Ryan, an innovation executive, board director, and AI strategist with experience spanning global technology, marketing, consumer products, and financial services.
Ryan discusses the evolving role of artificial intelligence in governance, the future of AI on boards of directors, and realistic scenarios for AI adoption, in a discussion about the possible ways AI can be integrated into boardrooms.
The episode also explores broader governance issues, including board refreshment and oversight responsibilities, and how AI could help surface blind spots in leadership decision-making.
Key takeaways
- AI as an accelerator
- Ryan believes that an AI entity on the board could be programmed to make decisions in the best interests of shareholders.
- AI would be able to look far beyond a typical human board members’ scope of knowledge and realm of experience.
- Organizations should focus on strategic and operational priorities with CEOs applying AI to those priorities, where it would be most effective.
- AI is evolving in the boardroom but not enough to take a board seat, at least in the near future
- Short term: Boards receive education on how to utilize AI as a tool to prepare for meetings, review minutes and retrieve information.
- Mid-term: Focus on strategy and building confidence with AI and use it to challenge assumptions and help identify blind spots and risks.
- Trust in AI, like trust in new board members, must be earned over time through consistent, reliable contributions.
- Legal, regulatory, and cultural readiness will ultimately determine how far AI can go, and when, in serving formal governance roles
- Exposing governance weaknesses
- Concerns about AI exposing bias or underperformance point to broader challenges around board evaluation and refreshment.
- AI adoption in the boardroom may accelerate necessary conversations about board member accountability, succession, and governance discipline.
- Strong boards with high-performing directors are more likely to welcome AI-enabled scrutiny.
Quotes
“ AI is not a strategy and it’s not a product. It’s an accelerator, something that helps you do something else better, faster, higher quality.”
“People should stop looking for the ‘use case’ for AI and focus on their current strategic and operational priorities and then apply AI where it makes sense.”
“An AI entity on the board… can be programmed to actually give decisions or answers in the best interest of the shareholders, which people don’t always do.”
Links
The Board Selection Short List: Will It Be You or AI?
Guest Bio
Babs Ryan was chief innovation officer of GE Capital’s largest division where one of her many patents generated $800M in incremental revenue. A dual US/UK citizen, she has been onsite in 97 countries. She was a director and audit committee member of Workers Federal Credit Union with $2.6B in assets, overseeing M&A negotiations and CEO succession.
She is strategic advisor for Kintera AI, offering no code back-office processing/reconciliation and regulatory violation remediation for banks; board director and investment committee member at MarTech Main Street, Inc., a private multigenerational family business; and an advisory board director at Aviva Labs, a global beauty/aesthetics manufacturer and distributor.
Babs has also served as CEO of a marketing agency acquired by WPP, SVP of innovation at Capgemini’s product design division (AI, digital twins, biosensors, MedTech, robotics), Agile principal at Thoughtworks, and GVP digital transformation at Publicis Sapient.
Transcript:
Joe: [00:00:00] Hello and welcome to On Boards, a deep dive at what drives business success. I’m Joe Ayoub and I’m here with my co-host, Raza Shaikh. Twice a month, On Boards is the place to learn about one of the most critically important aspects of any company or organization; its board of directors or advisors, with a focus on the important issues that are facing boards, company leadership, and stakeholders.
Raza: Joe and I speak with a wide range of guests and talk about what makes a board successful or unsuccessful, what it means to be an effective board member, and how to make your board one of the most valuable assets of your organization.
Joe: Before we introduce our guest, we want to thank the law firm of Nutter McClennen & Fish who again sponsored our most recent On Boards Summit in their conference center in the Boston Seaport. Nutter has been an [00:01:00] incredible partner with us in every way, we appreciate all they’ve done to support this podcast.
Our guest today is Babs Ryan, a dual US-UK citizen. Babs served as Chief Innovation Officer of GE Capital’s largest division. She has been onsite in 97 countries, has served as a director and audit committee member of Workers Federal Credit Union, overseeing M&A negotiations and CEO succession.
Raza: She is a strategic advisor for Quantera.ai, a board director and investment committee member at MarTech Main Street, Inc, a private multi-generational family business, and an advisory board director at Aviva Labs, a global beauty aesthetics manufacturer and distributor. She has also served as CEO of a marketing agency, [00:02:00] SVP of Innovation at Capgemini’s Product Design Division, a Principal at ThoughtWorks, VP of Digital Transformation at Publicis Sapient and Chief Marketing Officer at Kawasaki Motorcycles.
Joe: And Babs is an inventor with multiple revenue-generating patents. Welcome Babs. Thanks so much for joining us today on On Boards.
Babs: Hello, Joe and Raza. It’s great to be here.
Joe: Thank you. Let’s start off by just talking about your work at Quantera.ai.
Babs: So, Quantera.ai, I said I would never be on a startup board. I broke my own rule because I was in love with the product and also the people are great, which are the two most important things for me joining a board, and what they do is they infuse AI into banking [00:03:00] operations or board happenings.
But really what we’ve found is we are already making huge impact, so when people go, “Oh, I don’t know the ROI of AI,” well, we know the ROI of AI. We are getting $120,000 of monthly savings from one little tiny AI-driven loan processing configuration and we’re getting 90% faster processing for loans.
So, we’re saving 14 minutes on each loan. With a hundred loans, we are saving you three days of work and the quality’s better. So, these are the type of things AI companies are doing, and that’s what I love about them.
Joe: Were you interested in AI long before you joined this board?
Babs: I have been working with AI-driven technology for at least 15 years. AI is nothing new. At Cambridge Consultants, which is part of [00:04:00] Capgemini, recently we were using the term AI more frequently, whether it was for sports performance, biosensors, giving real-time feedback on player performance, all those things, medical devices, but everyone’s been using AI that was in deep technology for a very long time. So yes, I’ve been working on AI initiatives for decades.
Joe: That in fact is how essentially we connected. You had listened to an On Boards episode. Nice of you to reach out and tell us you really liked the episode, but mentioned you had written an article entitled “The Board Selection Shortlist, Will It Be You or AI,” which is an article that I think essentially advocates for bringing AI onto the board, which Raza and I have been talking about this really over the last three, four years now with various guests because it’s clearly coming to the boardroom in some fashion. The question is, what’s [00:05:00] it going to look like? Who’s going to do it and what will it mean? And so we’re happy to have you here to talk a little bit about it.
What led you to write the article and why in particular did you position the article to advocate for AI because I think I don’t remember everything in the article. What basically it said, all the trouble you have with a human board member you won’t have with AI.
Babs: Well, I didn’t say you wouldn’t have it with AI, but what I said was, anything that’s wrong with an AI entity being on the board are the same things that are challenging about humans being on a board, and I was advocating beyond using AI for board minutes or asking the right questions.
Joe: No, I understand. But I thought you were taking the position that AI will eliminate some of the issues that humans bring to the board.
Babs: It won’t eliminate them, but what it’ll do is I believe that [00:06:00] an AI entity on the board, someone who has a vote and is actually not being asked off-the-cuff questions for the board, I believe that can make better decisions, and the reason I think it can make better decisions is it can be programmed to actually give decisions or answers in the best interest of the shareholders, which people don’t always do. It can go back and have the history of all the board minutes and all the board conversations that should be remembered when we come to this decision.
Not only that, but it can scan the market and know what the company’s competitors are doing. So, if you know what the market’s doing, what the market trends are, why people are buying the products, what trends are going to stop your company from being in the good position it is, what are the real risks based on the market and the people who buy from you, you get a more objective and broad view of all the data that you need to actually make [00:07:00] the best decisions. So, that’s why I think having an AI entity on a board would be a really good thing.
Joe: Yeah, I agree that it’s going to happen. I’m not, and everyone on this podcast can speak for themselves, convinced that an AI is positioned now to do what you’re saying. And I’m curious, what’s the basis for your contention that companies should be bringing AI onto the board now rather than five years from now?
Babs: Why wouldn’t you? So, I’m always asked my role as an innovator. I have a lot of patents. The first question people usually ask is, “Why shouldn’t I do this? Why should I do it? I shouldn’t do anything. Why should I change?” And so, if you look at a report that Fast Company produced, 90% of people actively block change in an organization.
In fact, [00:08:00] the Johns Hopkins Institute found that 90% of people that had a bypass surgery, when they were told they were going to die if they didn’t change their lifestyle habits, 90% didn’t change a thing two years later. So, if you’re not going to change because you die, you’re not going to change because you think the business is fine the way it is, so bring bring AI?
Joe: But see, I think I’m just going to push back on that because that means you don’t want people on your board who are the same people that wouldn’t change after a cardiac arrest. So, am I an advocate of being very careful about who you identify and recruit onto your board? Absolutely.
I guess my question really is, is AI now advanced enough and positioned well enough that it could actually do what you described earlier that would be a benefit to the company. because I agree when that happens, it’s likely that [00:09:00] it will be of huge benefit.
Babs: So, great question, an intelligent entity that could actually do what I’m saying is around the corner. It’s within the next few years.
Joe: Okay, okay. But that was my point, it may be a few years away. That’s all what I’m saying.
Babs: But what you put in is what you get back. And the biggest problem with AI agents today is they only respond to what the input is that they’re given or instructed to have as an outcome or the end. So, if you’re telling an AI agent, “I want you to solve the problem of an EV battery lasting a longer time,” it’s not going to solve the real problem, which is people never want to have to recharge their car, so it won’t figure out a better way to recharge the car, maybe through the air, then plugging it into some EV outlet, it’ll focus on the question you asked.
So, people on boards typically are asking [00:10:00] questions that are in their realm of experience, so they’re not going outside. What you can do today with AI is ask it to look farther than the question you’re asking and look at the shareholder point of view and find out what shareholders would want to know and what they think the priority should be based on the business growing and being successful.
Raza: As you alluded, it is actually a change management problem. The noise around AI is so intense that we’ve kind of lost that question a little bit. So, first, instead of the board, I kind of want us to zoom out at the org level, and in your view, what is AI adoption for the org right now? What should that mean for organizations?
Babs: So, there’s a lot of questions both on boards and in organizations about what should we do about AI, thinking that AI is the product or the [00:11:00] strategy. AI is not a strategy and it’s not a product. It’s an accelerator, something that helps you do something else better, faster, higher quality. So, I think people should stop looking for the use case for AI and focus on their current strategic and operational priorities and then just apply AI where it makes sense to do that instead of trying to find what should we use AI on. Look at what you’re doing that’s most important on your list of to-dos. Does it make sense to do it over here to make that better?
Raza: It does sound like that. Maybe there are three types of organizations in the world, one that are trying to disrupt somebody else using AI. The other’s way up where they might be getting disrupted by somebody else that has now AI capabilities and they didn’t. And maybe the third category is for whom [00:12:00] the only play is the efficiency play, where they’re neither getting disrupted nor they’re disrupting, but they themselves could become more efficient in doing things better, faster, cheaper for their stakeholder. Would you think the world looks like this? Or maybe again, like the AI is going to solve everything and it’s going to be everything for everybody?
Babs: I would reclassify the three companies. I would reclassify them as companies who are going to offer the best product or service in the world. Companies who are okay with being fast followers or just offering something that they can make money or stay alive with. And then the third where there’s individuals within companies who use it when it makes sense for them to get their job done.
So, I would kind of reclassify it not as companies being on levels of AI. I would focus on levels of getting things done and making money and being profitable [00:13:00] and offering the best things in the universe.
Raza: Then in thinking about that, to me, it sounds like essentially for each organization, this noise hype conversation should translate to like a transformation project. Is that kind of the right way of thinking about what should orgs be thinking about AI?
Babs: Yeah, so I don’t think boards should really be talking about AI at all, except for probably the risk of everybody using their own agent and putting their private information all over public large language model platforms. That’s a problem, right? So, boards should look at it for that, but it shouldn’t be in terms of an AI project in an organization. They already have projects in the organization, just go do those projects.
So, I’ll give you an example. At Quantera, loan processing, it’s a big problem for anybody in loan processing. A lot of it’s manual. [00:14:00] Believe it or not, there’s still a human collecting paperwork to put with the loan. So, it might be paperwork, and I can mean digital paperwork. It can be their credit file; I want their credit rating. I want the title for the automobile, if it’s an auto loan. I want proof of insurance, so there might be a whole set of paper. This is being manually done by human beings.
Almost every process in a company now is being done manually where people don’t want to do this stuff, it’s ridiculous. So, instead of thinking, “Let’s find an AI project,” I go, “You’re already doing loan processing. Why don’t you just fix that thing that everybody’s having to do that they don’t want to do?”
Raza: They promised us a paperless office, but we got an office filled with PDFs.
Babs: Right.
Raza: And I think this is the next level of automation that make [00:15:00] the job of the human more efficient, more meaningful, and the human can add value to what they’re best at, rather than just moving the PDFs.
Babs: Yeah, like why am I looking in this file and looking in this folder? You can use AI and it’ll just pick that information out of all the disparate folders it’s already in. Another process, how many companies are using Excel spreadsheets for their financials and then they have to produce their income statement or some other financial report and they’re spending their time cutting and pasting from three Excel documents into one. Why are you doing this? I don’t understand. AI isn’t this big fluffy thing that’s going to change your great company tomorrow unless your NVIDIA.
Joe: Yeah, I don’t think anyone thinks it’s fluffy, first of all. It’s more scary than that. When you talk about board shouldn’t be talking about AI, my [00:16:00] view is that the job of the board is to make sure that the company is moving as quickly as it makes sense in adopting AI. Some companies will do it on their own, some won’t. But like every other thing that boards oversee, the job is to say, “Are we doing it as much as we should, more than we should, as efficiently as we should. How are we doing this? And the competitors in the business in which we are involved, what are they doing and are we at least doing what they’re doing? If not, how do we get ahead of them?”
So, it’s the same as any other major topic that a board has. It’s not let’s get AI, it’s how are we doing this thing that’s clearly coming to some companies that’s way more important than others. There’s some companies that won’t be as impacted by AI for quite some time actually, and there are some that will be transformed very quickly. So, I think it’s up to the board to just oversee that to [00:17:00] make sure management is doing everything it can to make the maximum value for whatever it is in that company. Does that make sense?
Babs: It makes sense. The board is there to oversee the CEO, and I believe that it’s a CEO’s job to ensure that people get the mission and the strategies done, and the level of AI that would best achieve those strategies really should be the mandate of the CEO to his executives in getting the job done. So, I think it’s more the board is saying, “Hey, it’s great if you want to use AI, but just make sure you hit this revenue number.”
Joe: I think it’s way more than that. I really do. If you’re looking at a strategic plan that comes from senior management, it’s not like, “Oh, this is great, whatever you think is right,” it’s, “Have you thought about this? Have you thought about this? Have you thought about this? Why didn’t you [00:18:00] do this?”
So, it’s not telling the CEO what to do, but it’s looking at it and part of what a board does is, “What haven’t you thought of? What risks haven’t you seen? What ideas maybe you didn’t think of?” The best, CEO, no matter who she or he may be, will not think of everything and the board is there to do that.
So, it’s not as simple as the board, “Don’t worry, the CEO will take care of it.” There’s almost no company that should do that. There’s no board that should be so comfortable that their CEO is going to do everything right that they just go, “Oh, that’s good. Don’t worry about it.” Otherwise, why would you have a board?
Babs: Yeah, I do think we’re obviously there to help a CEO. It’s really funny because I was sitting on a panel with someone who consults CEOs and he said their biggest stressor is their board meetings. Can you believe it? I had no idea. They are [00:19:00] completely stressed out before a board meeting and I’m thinking, “We’re actually there to help. We want you to succeed. We’re not there to grill you, we’re there to help you succeed. How can we best do that?”
So, I think you’re right. I think we’re absolutely there to help them and ask the right questions, so they’ll think of what they should do. What I think the board should not do or suggest to the CEO is they create another process role with a Head of AI. Because those functional roles that have no authority, no budget, no responsibility, and they’re supposed to push other people to actually do their jobs, I think that’s a really bad idea because those roles usually fail in organizations and a lot of companies have these Head of AI. What do they do? So, why don’t you educate each of your people in the organization on how they can use AI for what they do.
Raza: I think at the [00:20:00] initial onset, everybody thought that was a good idea, but I think we all now kind of have come to that place it’s not necessarily a good idea. It’s kind of like asking for a head of memes, because we don’t understand memes and somebody needs to have this role. But that’s coming, bringing it back to AI in the boardroom itself. Maybe thinking about it.
Earlier we talked about the mean critical point is whether the quote-unquote AI is a voting full board director or an assistant, but you can also view it as like near-term, long-term, medium-term evolution of that. Maybe talk to us a little bit about that, like how should we kind of progressively think about it over time coming and becoming more active participant in the boardroom.
Babs: Yeah, I do think for the short term, I [00:21:00] think board members want education on what it means. I think it is important for us to know what is being talked about because AI can mean just about anything and everything. The types of AI are completely different. The applications are all different, so I do think board education is really important.
If companies want to use on their board tools to help put together the board packet, help them prepare for meetings, look at board minutes and make sure have a double check they’re correct, and of course, there should always be a steward for AI that’s checking because we all know ChatGPT and Copilot, they all make stuff up. So, yeah, absolutely have a steward, but I think it’s good to be educated. That’s a short term.
I think middle term, the NACD, the National Association of Corporate [00:22:00] Directors, did a study about AI on the board, and they said the two biggest barriers for board members that they saw to AI being adopted was uncertain return on investment, which a third of board members said that’s why they weren’t really doing much, and the other one was unclear metrics for success. I think if they got back to the strategy, that’s midterm.
Raza: Did the study pertain specifically to board member AI or AI in the boardroom versus AI in the organization?
Babs: Yes, this was the National Association of Corporate Director study for corporate board directors, and they were being asked why they weren’t adopting AI in their organizations more.
Joe: Oh, in the organization.
Babs: In the organization. They were on the board of why isn’t AI being adopted, and they were saying it’s because they can’t see a ROI improvement. So, I think for the middle term, [00:23:00] it’s just making sure you’re focusing on the strategies that deliver ROI and ensuring you’re asking the questions. Back to Joe’s point, are you doing this in the fastest, best way possible? Are you using the tools available?
Raza: I think the education part has another component. It’s not about like, “Hey, let’s give you guys a lecture or a presentation about what is AI.” I think a lot of the board members themselves kind of don’t use ChatGPT or similar things themselves, so really don’t understand what it can and cannot do for you; hence, think, “Well, we need to be educated.” That’s kind of like having Microsoft Word classes for seniors type of a thing.
Babs: Okay.
Joe: Yeah. But isn’t that going to go away in a few years? In other words, it may be true now that some percentage of board members don’t fully understand how AI is going to be helpful in the boardroom or even in the organization, [00:24:00] but there’s going to be a time in the not too distant future that any decent board member will because it’s something new, but it’s not really that new anymore, and it’s moving very quickly so boards have to at least understand how do we oversee what the organization is doing if this is important to our organization, and how can we use it effectively in the boardroom. Now, I don’t think that we’re at a point. I think AI as a board member with a vote, we’re not ready for that.
Raza: The legal framework is not ready. Law is not yet ready. The society is not ready.
Joe: Insurance, all of that. But I also don’t think that the kind of AI member is at a point where you could be comfortable that it has a vote that you can rely on. What you said earlier, Babs, is it’s still all over the place. So, there’s going to have to be, in my view, a process where you start at some baby steps. Can it do this? Can it do [00:25:00] this? Can we trust it? And if over time understand what it does and hopefully gain some confidence that it’s not going to do something really odd or do something, it’s not going to hallucinate in the boardroom.
If you had a board member that was hallucinating in the boardroom, you’d probably take them off the board. So, you don’t want to bring one on knowing that AI has this problem now. So, I think it’s just a matter of how long and how do you test this in a boardroom to get to the point where you may be comfortable enough by asking it questions to challenge assumptions.
I think you had said this when we last talked, use it to challenge assumptions, see blind spots, maybe identify risk that the board is missing. Things like that where you can independently assess whether the input it’s giving you is really beneficial. That’s where I think we are. We’re entering into [00:26:00] that phase, and at some point, if that works well enough, then you’re right, Raza, we have to get the legal framework, the insurance, everything has to come to play so that an AI member can actually vote. I think we’re legally
Babs: I don’t think any public company, SEC regulations, Raza is actually the one that said this to me. He said, “SEC regulations aren’t going to allow this.”
Joe: Even a private company, which isn’t regulated by the SEC, it’s still important to make sure that whoever or whatever’s in the boardroom you can rely on. And as someone that helps people identify and recruit board members, one of the things you want is some people are really well suited for the boardroom, some people may not be, and so AI is not different. It’s not that, “Oh, because it’s AI, it’s going to work.”
How is it configured? How is it working? What is it doing? What’s its [00:27:00] temperament and how do you get reassured that when it gets into the boardroom with a vote, that it’s going to comply with certain norms that you think are important for board members on your board?***
Babs: So, there’s a company in Abu Dhabi that is doing that with the concerns that you’re raising. So, they’re called International Holding Company. They appointed Aiden Insight as their AI-powered board observer. They said Aiden Insight gave them their “groundbreaking” recommendations and so what they’re doing is they’re saying, “Let’s try this out and have them. Just like boards do, we’ll have a board observer.” So, they appointed it as a board observer.
I think the other thing to really think about is what we are doing on Copilot or ChatGPT, that’s not the AI that’s out there being used in business [00:28:00] and certainly isn’t the type of platform that you would be using for something of this gravity. So, AI does a lot of things using those models, which are really search models right now for most people, or help me write a cover letter to so and so. That’s what people are using those for mostly.
Raza: Yeah. Babs, we kind of know that that’s like brilliant marketing and not necessarily that it actually gave them any real insights or challenges or assumptions and so on. And the reason I know this, because what we know that AI, the current large language model based AI, has now this term that everybody understands called AI slop, and what it means is that it produces average, it produces mediocre, it synthesizes the entire knowledge that it knows and then comes up with the management [00:29:00] consulting answer of something that is truly average.
You could say that when I asked it the question, my child has a fever, what should I do, and I was like, “Oh, I didn’t think about Tylenol,” and it’s a brilliant insight and so on, meaning the level today is based on that. It’s not going to be truly creative, contrarian and come up with unique insights is very less likely. So, I’d say kudos to them for brilliant marketing. Everybody now knows their company. Other than that, it’s not at the state yet. It may be at the state where it can help you synthesize information, you, the human, and then lets you do the normal board thing more effectively.
Joe: So, on that note, remember there’s also a company, I think it was in Asia, that appointed AI as their CEO, and I think it’s a similar thing. Everyone, “Oh, wow, great.” Is the AI actually serving as CEO or is [00:30:00] it a marketing thing to call attention to, “We are very advanced in our use of AI.”
Babs: It is marketing and it’s actually brilliant marketing. I don’t think that’s just it. So, Albania just appointed a minister. That’s AI as well. I was just told by one of my friends in the UK. But the models that do averaging, so AI does what it’s programmed to do so those models that give you back an average, that’s the way they’re programmed.
When we are doing work at Quantera.ai , when we’re giving it the instructions and telling it what we want it to do, we are not telling it to come up with an average. We’re telling it to do something very specific. And when you set in the goals, that the shareholders are the principal people that you have to work for and be in their best interest, that’s different.
If you want an AI agent or an AI entity [00:31:00] not to give you creative solutions, it won’t because most people don’t want that when they’re asking AI agents. I think we need to be very careful about talking about what people are generally using today and bespoke AI applications that are being used in organizations that are highly sophisticated and some of them even portray almost human characteristics of understanding other people’s behavior and being able to predict human behavior as well, and that helps in terms of sales behavior or employee behavior. So, I am much more hopeful and optimistic about what AI can do and how it is intelligent, not just producing average facts.
Joe: So, let’s shift a little bit, because one of the things I think that we talked about when we talked recently was that the real threat is that [00:32:00] board members would worry or be threatened actually that AI would surface bias, poor preparation, conflicts of interest, et cetera, that might threaten them, and my response to that is, get a different board because if you have board members that are worried that they’re going to be outed by an AI member or observer in the room, then you have a problem that’s a lot different than not adopting AI as quickly as you should. You have a problem with your board members because a real good board consisting of board members that are really strong would welcome an AI observer because they’d want all these things to be surfaced.
Babs: So, my answer to that is that PwC did a study, I think they said [00:33:00] 53% of board members think at least one board member that should be refreshed, that shouldn’t be there.
Joe: I’ve seen that. But Babs, do you know what that tells me? It tells me what we already know, that boards are really bad at board member management. They’re really bad at offboarding people. They’re bad at having a process to review and think about who should come and who should go.
It’s not AI that’s the problem, and AI is just an aspect of the problem because those board members would worry about strong board members coming in, and I’ve seen this happen, who might look around the boardroom and go, “What’s he still doing here?” And that’s all that AI would be doing. AI would be doing its job better than some board members, and those board members would be threatened, but they’re threatened by other board members too.
Babs: I think it was your organization that actually came out with a [00:34:00] study showing that the number of people being shoved off as S&P 500 boards has decreased, so it’s actually getting worse that board members are being refreshed. It’s frightening that we’re not putting fresh board members on, and I can tell you the uptick in activist campaigns is a total reflection of how difficult it is to get a board member that should be refreshed to resign from the board.
I won’t name the company, but they’re a public company, 84% decrease in shareholder value over four years since a new CEO stepped in. And the chair of the board was the former CEO that put that CEO in there that did that to the shareholder value. Guess who’s still sitting on the board?
After 84% decrease in shareholder value, do you think that board should be refreshed after [00:35:00] allowing that? And the only reason the CEO is now gone is because an activist had to do a marketing campaign to get a change. So, could AI help us with this, but do boards really want it? Is it the majority of people on the board that want to keep the status quo?
You have to ask, some boards are great. I’ve been on phenomenal boards. At one of my boards now, I look around the room and I go, “How lucky did I get that all these people are smarter than I am?”
This is a family board where it just works. It can work on any type of board, but I’ve been on that board where people should leave and what happens to the shareholder value? It goes down into the dumper. And if AI were there, would it help? I think it might.
Joe: Well, it might eventually. I will say that over the years that Raza and I have been hosting this podcast, we have come to the conclusion that the single biggest problem that [00:36:00] boards have is identifying board members that need to be offboarded and doing something about it, and it doesn’t really matter whether it’s a great CEO, a CEO who can make decisions, who’s tough, whatever, for a variety of reasons, and we could probably go through it, but we don’t need to do that now, it is the thing that is the most common problem in boards in general, finding a process that works to refresh the board appropriately as it needs refreshing. It’s just not happening in most boards.
So, yeah, if the right AI observer could come in and you could observe it for a while, and eventually one day got comfortable with voting it onto the board, it could help. But here’s my question to you to move this on a little bit, what problems would an AI on the [00:37:00] board create?
Babs: Oh, they could create a lot of havoc.
Joe: No problems, not havoc.
Babs: Oh.
Joe: I’m not saying stir things up. Of course, any board member could stir things up, and that isn’t always a good thing. But what issues would a voting AI member raise and how would we address those issues?
Babs: So, the AI agent might be asking about risks that should be addressed, and most of the board members might simply disagree that they’re not priorities, and they might not be priorities from their human point of view. So, if an AI agent tells you that this year you have a 63% of someone having a successful cybersecurity attack against you, well, you got to do something about it or not, 63% might be not enough to do something different.
Joe: If you had a board member that was one of the biggest experts in the [00:38:00] world in cyber, and she or he said, “I think we are ripe for an attack,” the board could still say, “You may be right. We’re going to do something about it, but we’re not going to drop everything and do it right now.” And so, I would just say the same thing. AI isn’t always going to be right. It may be right some of the time. It may come to conclusions that are not correct. It brings advantages that humans don’t because you can program some of that stuff out. But the fact that AI thinks you should do something doesn’t mean the company should drop everything and do it. It’s one board vote and no one board member should have rule over the whole board.
Babs: Oh, that’s right. So, I’m not suggesting it take over the board or be the board, like the company that made it CEO. I’m suggesting against one of nine votes. But here’s a good example of where it could be not giving the best advice. So, I’ve been through several [00:39:00] M&As on a board. Someone on that board might have had a personal interaction with the leadership at that company or that board in a one-on-one conversation, and it just set off red flags. I’m a believer that you have gut for a reason. If you get a bad gut feel about something, I actually believe it is your brain working to protect you.
Sometimes it’s wrong, sometimes it calls up past experiences where you shouldn’t be triggered, but somebody might have had a one-on-one conversation, and it’s just, “Do we really want to merge with that company and put in that company in the senior leadership or on the board?” And that’s legitimate, but AI wouldn’t have access to that or wouldn’t have knowledge of that, right?
So.
Joe: gut, and honestly, that’s something that AI is missing and will be missing for quite some time. I’m not saying it’ll never have a gut instinct. I don’t even know, I [00:40:00] can’t see that far into the future. But if you brought an AI board member onto a board, it’s going to have some features that humans don’t have. It’s also going to lack some features that humans have, and so you have to take that into account as well, which is one reason you may not want to do. Just because one board member says it doesn’t mean you should do it.
And by the way, when you bring a new board member on, usually it takes a little while for everyone to understand what is this person’s strengths, what are their weaknesses, and then over time, yeah, you know what, they know what they’re talking about. I think AI is going to have to earn its strife just like everyone else.
Babs: I think you’re right. Like this conversation, I’m having to earn the stripes right now.
Joe: Anyway, it’s been a great conversation. Really, really appreciate you joining us today on On Boards.
Babs: It was a lot of fun. Thank you so much, Joe and Raza.
Joe: And thank you all for listening to On Boards with our guest [00:41:00] today, Babs Ryan.
Raza: Please visit our website at OnBoardsPodcast.com. That’s OnBoardsPodcast.com. We’d love to hear your comments, suggestions, and feedback. If you are not already a subscriber, please also be sure to subscribe at Apple Podcast, Spotify, or wherever you get your podcast. And remember to leave us a five-star review.
Joe: And please tune in for the next episode of On Boards. Thanks.