AI in the Boardroom

A recent Federal Court of Australia decision has offered a timely warning on AI’s growing role in the boardroom. The court also commented on AI use, warning that AI-generated summaries are not a substitute for directors actually reading and engaging with board materials themselves.

While the decision is not binding in New Zealand, directors here are subject to their own duty of care under the Companies Act 1993 that requires directors to exercise the care, diligence and skill of a reasonable director.

This duty applies regardless of whether AI is involved in a director’s decision-making process. If a director relies heavily on an AI-generated summary without checking it against the underlying material, they may struggle to demonstrate that they exercised the care, diligence and skill required by the Act.

As AI becomes more prominent in board processes and decision-making, this is a useful reminder that directors must properly engage with information and exercise independent judgement rather than relying solely on AI-generated material.

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