To what extent can company directors delegate to, and rely on, artificial intelligence systems when making decisions?
 

Authors:

A Nyasulu & E Olivier
 

Summary:

Artificial intelligence (AI) has the potential to assist a company’s board of directors and enhance decision-making in companies through decreasing manual labour and increasing the efficiency with which information is processed. However, the use of AI to make decisions for a company also raises questions, such as whether and to what extent directors can rely on and delegate their responsibilities to an AI system. It is also important to establish whether the use of AI amounts to conduct that is excusable under the business judgment rule (BJR). This article measures the use of AI against the delegation, reliance, and BJR provisions in the Companies Act 71 of 2008. Since AI systems do not have legal personality in South African law, directors cannot delegate their functions to an AI system, nor rely on its advice, at least not within the contours of the Companies Act. At most, directors can use AI as a tool to process data and information more efficiently. Directors should nevertheless take reasonable steps to ensure that AI-generated advice is accurate and reliable, if necessary, by consulting professionals who can properly interpret it. The BJR can excuse AI use, provided that directors properly assess and monitor it. Unlike the United States of America (USA) and Australia, South Africa has no specific legislation or policy guidelines on the use of AI in corporate decision-making. The article reflects on American and Australian approaches to AI in corporate decision-making and argues that developing an AI governance framework for South African directors will assist them in navigating reliance on AI effectively while minimising legal risks.


Link to journal article