Artificial intelligence (AI) tools have the power to transform how businesses operate and generate efficiencies that can improve an organization’s ability to analyze data, resulting in increased profitability and reducing costs. AI promises to continue streamlining business processes and decision-making, thereby reducing overhead costs, time, and labor. This evolution, however, comes at a price if AI technologies are not deployed within a safe and fair regulatory framework.
Companies run the risk of violating privacy and data protection laws, being accused of bias or discrimination, and engaging in unfair practices that, ultimately, could lead to legal issues, such as investigations by federal and state agencies as well as class action lawsuits.
As decision makers enter the new year, this forward-looking piece highlights some of the current and pending AI-related legislation and guidance in the United States and identifies issues that boards and management should consider and address to protect their organizations.
As companies increasingly integrate AI into their regular business operations, general counsels now find themselves monitoring a new patchwork of federal and state regulations. With new legislation, regulations, guidance, and recommendations already enacted or anticipated, here’s what general counsels should be monitoring in 2023.
Similar to data privacy regulations, states rather than the federal government have taken the lead in developing and enacting AI legislation.
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Media Module - Datasource Item: Hot Topics in AI Under Consideration by the Executive Branch
A quarter of employers already incorporate AI into their employment-related technology. This widespread application has brought some scrutiny to employer’s efforts to avoid bias and discriminatory tendencies when employers use AI systems in their hiring processes.
Watch our on-demand Artificial Intelligence Boot Camp session for more information about ways employers can review their AI tools.
Media Module - Datasource Item: AI in Hiring and Recruiting
Ensuring responsible use of AI is a team sport requiring engagement from the business, marketing, security, privacy, legal, compliance, and human resources departments. Using an established governance process when implementing AI is critical to ensure consideration of all relevant risks associated with the use of AI by an enterprise. Importantly, aside from the legal risks, businesses face potentially significant reputational risks if they do not implement AI tools carefully and deliberately. The business sponsor or owner of the platform, along with a cross-functional team, should address specific threshold questions about the use of AI and the relevant risks.
Proactive companies create governance or steering committees to review and approve guiding principles, identify relevant risks, discuss solutions that fall within a gray area, create individual management action plans to ensure accountability for each solution, and outline escalation paths. This group should report to the board of directors or a subcommittee advising with respect to the use and implementation of the AI and seeking guidance and approval for use cases that present novel or enhanced risks, as senior management and the board are ultimately responsible for balancing the overall risk to the company.
AI is transforming the way companies engage in organizational decision-making and implement risk management practices. These tools can also enhance corporate governance and effective leadership strategies by ensuring operations are running with maximum efficiency. Some of the ways AI can elevate corporate performance include: providing more reliable and accurate market predictions; incorporating data-driven decision-making and analysis; supporting risk management; protecting against fraud; and improving real-time information processing to better inform business decisions and strategies.
For companies operating in multiple locations, AI use raises other legal concerns. What if certain AI practices are illegal in some jurisdictions or subject to differing regulations depending on where businesses operate? Is it possible to implement the use of AI in an inconsistent but lawful manner throughout the enterprise? And if so, is it advisable?
Looking at the employment space, would doing so raise fundamental employee fairness questions or other issues? Take for an example, a business implements AI technologies allowing for enhanced employee surveillance in certain jurisdictions in accordance with relevant law. What if an employer rewards or subjects employees to adverse employment action as a result of such monitoring, but at the same time, other employees at the same company who engage in similar conduct, receive none of the benefits or burdens due to different state laws that restrict that type of AI-enabled surveillance? These are some of the questions a governance board can help address.
Watch our on-demand Artificial Intelligence Boot Camp session for more information about the ethical use of AI.
Media Module - Datasource Item: The Ethics of Artificial Intelligence-For Businesses For the Legal Profession
When implemented carefully and deliberately, AI tools and software technologies can make a substantial difference for companies. Consulting company Gartner expects that by 2026, enterprises that operationalize AI transparency, trust, and security will see their AI models achieve a 50% result improvement in terms of adoption, business goals, and user acceptance. Furthermore, by 2028, Gartner predicts that AI-driven machines will account for 20% of the global workforce and 40% of all economic productivity. In the United States, as AI technology continues to grow in its popularity and implementation into business operations at every level, decisions makers should keep up to date on the ever-developing regulatory landscape to support and to achieve their business objectives.
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