Artificial Intelligence In Corporate Governance: A Mixed Blessing

Arya. A.S, LLM, School of Legal Studies, Cochin University of Science and Technology, South Kalamassery, Kochi, Kerala

ABSTRACT

Artificial intelligence whose official origin dates back to 1950 associated with Alan Turing’s ‘Computer Machinery and Intelligence’ is rapidly developing nowadays with a debate of its benefits to the world with its consequences in different fields including corporate Governance. The scope of AI in corporate Governance is far-reaching and it even helps companies to make managerial and strategic decisions even in times of crisis. The influence of AI in the company can be traced from the bottom employment level to the highest strategic level. Some authors suggest AI to a larger extent can reduce agency cost problems. It has the unique potential to consolidate massive data and can find solutions. The companies may yield significant progress in manufacturing and financial fields with the help of Artificial intelligence. Assisted AI and Augmented AI are going to be a helping hand to the workers in various areas of a company. AI can assist the company in statistical analysis and also can provide good suggestions. A recent survey among the top fifty companies in the US shows almost 70% of the employees found AI helping them to be faster and more productive. VITAL can be marked as the best example of the same. There is no doubt the scope of Artificial intelligence has a positive blessing in Corporate Governance and corporate productivity.

At the same time when we analyse the effect of AI from a legal perspective with some emphasis on the right of employees, we can see another face of this effect. The ultimate truth is that there are no legal provisions either in the Companies Act 2013 or in the new labour code to regulate and manage the impact of AI in Corporations. When we read S.166(3) of the Companies Act with the Business Judgment rule we can find a situation where directors can escape from liability by taking the stand they acted in the good faith and the liability or fault is caused by the fault of AI. The next element of concern from a legal perspective is that the Companies Act 2013 mandates a natural person as a director. In India, either from a company law perspective or from an Intellectual property law perspective AI is not considered as a person. Even if it is argued that AI can reduce information overload and agency cost some recent survey shows large discrimination on the part of ChatGPT including racial and gender choices concerning the consolidated data in the hand of it. When we come to the patent regime the important element of creativity mentioned under the Patents Act will be highly missing in an AI- ruled product of a corporation. This article mainly tries to make a neutral analysis of the impact of AI on corporate Governance and the rights of employees with the gaps in legislation and also tries to suggest the legal framework of AI.