Legal challenges of artificial intelligence driven corporate decision making and corporate governance
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Date
2024
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University of the Western Cape
Abstract
The rise in the use of Artificial Intelligence in the boardroom has significantly transformed corporate governance, necessitating an examination of the legal challenges it presents. This study aims to explore whether the South African legal landscape is equipped to incorporate the use of Artificial Intelligence into corporate governance and decision-making. This is achieved by establishing the foundations of the current legal framework governing corporate governance and analysing the impact of AI in decision-making on directors' duties, accountability, and the overall effectiveness of corporate governance practices. Using desktop research methodology, data was collected from a wide range of primary and secondary sources, including case law, legislation, and academic journals. This method provided an in-depth analysis of existing findings related to the role of Artificial Intelligence in corporate governance. The findings indicate that the use of AI in decision-making impacts ss 76(4) and (5) of the Act, specifically concerning delegation, reliance, and the business judgment rule. Notably, the paper demonstrates that directors cannot delegate their duties to AI, can only indirectly rely on AI, and may invoke the business judgment rule to avoid liability under certain conditions. This study highlights the need for the legislature to establish clearer regulations and guidelines regarding the application of AI in corporate governance and decision-making. These measures should ensure that AI is implemented in a way that upholds accountability, transparency, and ethical standards, while also addressing concerns about directors' duties and the potential risks of delegating key decisions to AI systems.
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Keywords
AI Regulation, Artificial Intelligence, Business Judgment Rule, Corporate Decisions, Delegation
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