Clarifying the respective duties of the CEO and the board of directors is one of the most important challenges confronting corporate leadership today. It’s the “you do this, and we do that” dynamic, and it can be the source of substantial internal tension and discord if not properly addressed.
And nowhere does that challenge more acutely arise than with decisions on AI deployment, especially when it carries the risk of substantial workforce displacement. And, as the headlines remind us, there’s a lot of displacement going on these days. This, primarily in the form of mass layoffs (including those involving white collar employees) as major companies increase their AI investment in search of efficiency gains.
To provide some perspective, the outplacement firm Challenger Gray & Christmas has tracked 48,414 announced job cuts due to artificial intelligence. These announcements explicitly stated AI was a large part of the reasoning behind the layoffs. Another 20,219 cuts occurred where the company cited updating its technology with AI as a piece of it.
But AI deployment is also changing workforce culture in other ways. Some companies, in the legitimate pursuit of internal AI efficiency, are mandating workforce training, and “exiting” employees deemed unlikely to accept “reskilling”. AI is also reportedly a factor in corporate decisions to end the practice of “labor hoarding”. And traditional employee-employer loyalty compacts are evolving in the face of economic and technology changes.
Andy Challenger, chief revenue officer for Challenger, notes that “there’s an ongoing debate on whether AI is actually taking jobs or just making existing workers more efficient. The answer is both. Many industries, particularly Tech and industries that have already embraced automation, are likely replacing workers with this technology, while others are just beginning to explore what AI can do for their businesses.”
Clearly, the CEO and its executive leadership team have an overarching responsibility for implementing AI deployment strategies, and evaluating their subsequent impact on the workforce. And as opportunities for AI-driven efficiencies increase, management must also address calls from investors and other stakeholders to expedite its deployment.
But the board of directors has an important role to play in that process, as AI related layoff decisions become more material, prevalent and public. It’s a role based upon the board’s accepted oversight responsibility for human capital. Recent thought leadership from the National Association of Corporate Directors (“NACD”) speaks to a specific role for the board in the oversight of technology integration.
As described by NACD, the board’s role includes monitoring the potential negative impact of AI deployment on jobs. “Boards should ensure that their organizations adopt these technologies in ways that augment human capabilities, rather than replace them.” The related recommendation is that boards exercise deployment oversight “with the same level of scrutiny as financial risk, ensuring that automation enhances long – term resilience, rather than simply cutting costs.”
A similar view is espoused by the estimable Martin Lipton, Founding Partner of the Wachtel Lipton law firm: “[B]oards should consider in a balanced manner the effect of technological adoptions on important constituencies, including employees and communities, as opposed to myopically seeking immediate expense-line efficiencies at any cost.”
There’s also a social responsibility consideration, for companies that adhere to such principles. External voices ranging from the renowned jurist Leo E. Strine, Jr. to Pope Leo XIV have encouraged companies to deploy AI in a manner that is respectful to the interests of workers.
None of these perspectives should be interpreted as a red light for thoughtful management initiatives, but rather as a yellow light to proceed with caution when employees will be significantly impacted.
Boards can exercise such oversight through such efforts as a) developing AI-related human capital strategies that reflect core organizational values; (b) a management-to-board information flow that provides the board with projections on possible employment displacement; (c) accountability of management for achieving AI prompted efficiency goals; and (d) supporting internal management efforts to quell AI-related employee concerns.
Not all management teams will be thrilled with this level of board involvement. They’re apt to be concerned about micromanagement, and with whether the board’s AI proficiency will be sufficient to assure meaningful oversight. And they wouldn’t be wrong in expressing these concerns (as a recent story in The Wall Street Journal suggests).
But as governance principles indicate, the board should have a seat at this particular table. But before taking this seat, the board should assure that it’s gained a level of knowledge and perspective that allows them to be true strategic partners with management on AI strategy. An effective board/management partnership on AI strategy roll out is in the company’s best interest; a flawed or imbalanced one could expose the company to operational, reputational, and workforce culture risks.