Robots in the Boardroom: Artificial Intelligence and Corporate Law

Due to its rapid technological development, artificial intelligence will enter corporate boardrooms in the very near future. My recent paper explores the interplay between artificial intelligence and corporate law, and analyzes how the two fit together. Do current corporate law rules match the challenges posed by artificial intelligence, or do they need to be adapted? 

Back in 2014, the media reported that Deep Knowledge Ventures, a Hong Kong based venture capital firm, had appointed an algorithm named Vital (Validating Investment Tool for Advancing Life Sciences) to its board of directors. According to these reports, the algorithm was given the right to ‘vote on whether the firm makes an investment in a specific company or not’, just like the other – human – members of the board.  Vital was appointed because of its ability to ‘automate due diligence and use historical data-sets to uncover trends that are not immediately obvious to humans surveying top-line data’.  For instance, Vital helped to approve two investment decisions, namely to fund Insilico Medicine, an enterprise which develops computer assisted methods for drug discovery in aging research, and Pathway Pharmaceuticals, which selects and rates personalized cancer therapies on the basis of a platform technology. However, Vital was not granted an equal vote on all financial decisions made by the company. Legally speaking, it has not even acquired the quality of a corporate director under the corporate laws of Hong Kong. It is just treated ‘as a member of [the] board with observer status’ by its fellow (human) directors.  Nevertheless, Vital has widely been acknowledged to be the world’s first artificial intelligence company director. 

Vital’s (quasi) appointment to the board marks an important if not fundamental step for corporate law. It also demonstrates the impact of artificial intelligence on corporate decision-making. Where business decisions need to be taken on the basis of numerous and complex sets of data, computer algorithms are increasingly superior to humans to take such decisions, in particular if artificial intelligence and machine learning allow those algorithms to permanently improve their respective capabilities. In fact, artificial intelligence is increasingly being used to support management decisions across many business sectors, above all in the financial industry.  Computational progress and digitalization will therefore inevitably lead to the support – if not to the substitution – of corporate directors by artificial intelligence. Dmitry Kaminskiy, founding partner of Deep Knowledge Ventures and the human mind that created Vital, estimates that most duties in typical corporations will be automated within five to ten years, and that artificial intelligence systems will, at least in some cases, be able to make decisions themselves, without any human support. Robo-directors, it seems, are about to take over corporate boards on a broad scale

In my paper, I consider the extent to which human directors should be allowed – or required – to rely on artificial intelligence. Technology will probably soon offer the possibility of artificial intelligence not only supporting directors, but even replacing them. Another question is therefore whether or not such a replacement is legally admissible. At any rate, the legal strategies currently adopted by corporate law are tailored to human directors. The paper tests whether those strategies would still be suitable for boardrooms filled with robo-directors. It concludes that corporate law is highly relevant for the use of artificial intelligence in corporations, but that it will also need to be adapted to the challenges posed by this technology. In that sense, the interplay between artificial intelligence and corporate law promises to be dynamic in both directions. 

Florian Möslein is Professor of Law at the Philipps-University Marburg.