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Research recommends companies use artificial intelligence to better serve all shareholders


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A new study recommends that artificial intelligence can help reduce “short-termism” in companies and help companies better serve all shareholders.

The dominance of hedge funds often means that the views and priorities of other shareholders — and broader stakeholders — can be overlooked by management. This can be harmful to the company and to society.

The article, to be published in Journal of International and Comparative Business Law (ICCLJ), says AI can be used to process and collect data from more shareholders and stakeholders through a pre-programmed algorithm. It can generate “outputs” for the board — recommendations or advice for the board.

The research was carried out by Dr Peter Underwood, from the University of Exeter School of Law, and Dr Joseph Lee, from the University of Manchester.

Dr. Underwood said, “AI is there to improve and aid decision-making. AI as a tool has the potential to reduce short-termism. The ability to gather from a larger data set and enable every shareholderespecially minority shareholders, to provide data that reduces the escape from the voice problem.

“The use of an AI director is not feasible in the current regulatory framework. Given the risks and the requirement of mandatory legislative changes, it will likely lead to more problems than it solves.

“AI can transform corporate governance into a more holistic one. This will create a Greater value for both shareholders and stakeholders in the long term. Success as an AI advisor could lead to wider adoption of AI, paving the way for greater AI input by the modern corporation. “

Research says big data AI-generated guidance can provide quick and accurate guidance independent of subjective human judgments focused on shareholder short-termism and board opportunism.

The AI ​​used could be a set of automated announcements, which shareholders subscribe to update for input. One online platform can provide an information database for shareholders to view real-time information about the company of which they are a member.

AI can help investors find and request information in specific formats. This can help with decision making and engagement. Their views can be fed back to the AI, using their votes for review by directors.

The same technology was used by Santander, where they used traditional voting methods but by using blockchain to generate a list of votes.

AI has the potential to add weight to the voice of each stakeholder and help companies become more socially responsible. It can help directors deal with corporate governance failures.

Dr. Underwood said, “The use of AI does not violate or violate the duties of directors. It can help them exercise independent judgment and their obligation to exercise due care, skill and due diligence. physical.”

Research shows that a managing director can be assigned to monitor AI, a “technology manager. “They may be responsible for monitoring the input of data and testing the AI’s functionality to make sure it’s running according to the agreed code to make decisions.

The regulation of AI systems itself can be done as industry best practice or in the form of code like the UK Corporate Governance Code. This will allow clear standards to be established while ensuring that this can be kept up to date with the most recent technological developments.

More information:
Joseph Lee et al., AI in the boardroom: leave the law in the driver’s seat, Electronic magazine SSRN (In 2021). DOI: 10.2139 / ssrn.3874588

Quote: Research that recommends companies use artificial intelligence to better serve all shareholders (2022, November 15) retrieved November 15, 2022 from https://techxplore.com/ news/2022-11-companies-artinking-intelligence-shareholder.html

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