Dear reader,

Welcome to The Director’s Dilemma July 2024

It's end of financial year time in Australia and, if you have director development, board review, or training budget unspent, please read past the case study to find my special offer for readers.

Every month this newsletter looks at a real-life board scenario and considers a range of responses. The scenarios are de-identified to protect the individuals concerned. This month we think about what to do if we suspect our board papers have been 'enhanced' by an AI.

The scenarios in this newsletter are general, I work with boards and directors as a confidential mentor and provide director training and development, board performance reviews, and specialist training in writing board papers for executives. If you would like personalised service, please contact me.

To read this email in a web browser, go to www.mclellan.com.au/newsletter.html and click on 'read the latest issue'.  I hope you will enjoy the latest dilemma:

Odette has been on the board of a government-owned utility business for almost three years. She loves being of service and solving the challenges of providing a reliable high class service at a reasonable and accessible fee. She also greatly enjoys getting to know the staff and helping them to grow and develop to reach their full potential.

In the board pack for her next meeting there are a couple of papers that have her concerned. She knows the two people who wrote them, and these papers are not written the way they normally write. Some of the grammar is very American (and she is in England) and the persuasive tone is just not what she expects from these two authors.

Odette suspects that the papers may have been enhanced using an AI tool. She knows that the company has not invested in its own proprietary tool so - if her suspicions are founded - this is likely an open source tool and possibly a free version that might be learning from, and sharing, any information put into it.

She doesn't want to cause any problems for the staff concerned but wonders how to set some guiderails around the risks of this practice before it becomes too widespread to contain.

What is the best way for her to bring her suspicions to the board for a policy solution?

Data and Cyber Security are one of the top concerns for boards in today's digital world. With the increasing use of AI tools, it's crucial for board members to address these risks. Odette's insights highlight the critical agenda of data and cyber security in board discussions.

To address this issue, Odette could consider the following actions:

1. In the case that company has a Risk Committee which inter-alia has a responsibility of managing data and cyber security risk, she should refer her insights to the committee;

2. In the case that there is no Risk Committee, she can take the following steps either in the board meeting or otherwise (preferred in the board meeting where this process gets noted):

i. She should speak with those two people and while appreciating their work, put her risk perspective.
ii. She should ask the Management to set up a Standard Operating Process for using open AI tools, keeping in mind the pros-cons.
iii. She should also suggest for subscribing/buying an authentic AI tool for the company that meets its data and cyber security standards.

Also, one side point, Odette should be aware of her boundaries to maintain independence while offering assistance, whether voluntary or fee-based.

Pradeep Malu is the Founder of Inovent Solutions, a Member of the Board of Advisors for SmartGaon Development Association, mentor for business and change and a member of faculty at BSE Institute. He is based in Mumbai, Maharashtra, India.

It is likely that staff in every organisation are 'playing' with AI. Some will carefully ask only general research questions. Some will use 'internal' AI platforms. Some will set the parameters of public platforms so that questions and answers should not be shared with other users. Some will be on public platforms asking questions and blissfully unaware that their identity (and provenance) as well as any information they give or receive, is known and noted.

All staff activity should occur in the context of a culture and a policy framework that clearly sets out expectations for behaviour, including online and use of technology.

If Odette's company does not have an AI policy, they urgently need to make one.

Odette should talk with her chair about the need to find out what AI are being used and what risks and opportunities each may create for their business. Staff should not be punished for investigating a new technology or for using it if it appears to save time and generate good results. They should be encouraged to share with the board what they are using and what they use it for so that the company can become aware of the potential and start to create some standards that can be applied.

A ban on using a tool that staff have proactively employed will be counterproductive and only drive the use out of sight. The board needs to set guideline that allow staff to grow skills whilst protecting the company from any potential downsides.

The board should model the way by investing in AI education and using this to generate additional insights into both AI and the issues their business faces.

Julie Garland McLellan is an experienced non-executive director and board advisor based in Sydney, Australia.

I recommend that Odette take the following steps to address her concerns and help shape a policy solution at a board level.

1. Ensure a Clear Fact Base: Speak privately with the individuals who wrote the papers to confirm suspicions without public accusations. Highlight the observed changes in writing style and inquire about the use of open AI tools. It's important to avoid giving the impression of condemning AI in general, as AI can be beneficial for business. Emphasize the need for proper policies and secure systems for its correct and safe use. Inform them that a solution for the secure use of AI is being discussed, but until then, they must not process confidential content with AI tools.

2. Raise Board Awareness: At the next board meeting, Odette should introduce the topic of AI-generated content. This could be part of starting a broader discussion on AI, IoT, robotics, etc. Invite an expert to discuss the opportunities and threats of AI. Additionally, discuss the required security systems and policies.

3. Action Points: Involve the CIO and CISO to take responsibility for selecting secure (preferably proprietary) AI tools for internal use. They should also define and implement a policy on AI tool usage and train staff on usage, opportunities, risks, and compliance. If the positions of CIO and CISO do not exist or are inadequately staffed, the potential need for recruitment should be another discussion point for the board, and an external expert should be consulted.

4. Inform the individuals who used open AI that their actions have initiated two critical discussions: firstly, the importance of actively engaging with trends like AI; and secondly, the necessity of having appropriate systems and policies in place for secure use.

Throughout all steps, ensure that all board members are aligned and in agreement with the actions being taken.

Dr Julia Zdrahal-Urbanek is the Founder/Managing Partner AltoPartners Austria; co-founder and initiator of the Women Corporate Directors (WCD) Austria Chapter; and a Non-Executive Director on a large family-owned business. She has profound experience in filling board and top-management positions in Austria and Europe for global conglomerates as well as family owned and start-up/scale-up businesses.

Firstly, Odette should conduct thorough research to gather evidence supporting her suspicions. This may involve comparing the writing style and content of the questionable papers with previous works from the authors in question. If there are significant discrepancies, it could bolster her case.

Next, Odette should approach the situation with tact and discretion. She should consider scheduling a private meeting with the authors of the papers to discuss her observations in a non-confrontational manner. This allows her to express her concerns and gather more information without causing undue alarm or embarrassment.

Once armed with evidence and insights from these conversations, Odette can bring her concerns to the attention of the board. In doing so, she should emphasize the potential risks associated with AI-generated content, such as issues of authenticity, intellectual property, and data privacy. By framing the discussion around these broader implications, Odette can underscore the importance of implementing clear policies and guidelines to mitigate these risks.

Odette should advocate for transparency and accountability within the organization, urging the board to establish protocols for vetting and verifying all written materials, particularly those with significant impact or influence. This may involve implementing training programs to educate staff about the ethical use of AI tools and fostering a culture of integrity and responsibility.

Ultimately, Odette's goal should be to foster a proactive and collaborative approach to addressing the challenges posed by AI technology within the organization, ensuring that the company continues to uphold its commitment to excellence, reliability, and ethical conduct.

Chat GPT is an artificial intelligence (or a pattern recognition, data analysis, and prediction engine). It resides in Cyberspace.

End of financial year, do I have an offer for you?

Of course!

To thank you for being a subscriber I have reserved a 15% discount for you on all board reviews, director training and development, and in-house deliveries of my "Writing Better Board Papers" training. Simply book your preferred service and pay a deposit before 30 July and your discount will be applied.

If you have unused budget allocation from this year, or would like to plan ahead for next year, this offer will help you to access the service you need at a price you can't beat.

To book just call me on +61 411 262 470.

Meet me in Melbourne

I'm excited to announce Governance Unplugged - an exclusive opportunity for in-depth Q&A sessions and networking with peers. Book your spot at this exclusive, free, live experience - Governance Unplugged.

Think of it as a webinar brought to life. Come meet your peers and ask Steve Bowman and me your most challenging governance questions. Questions can be submitted anonymously if you prefer.

The room will be packed with the brightest, most ambitious, experienced, emerging and aspiring company directors, so come along and join the fun.

You can book at https://events.humanitix.com/governance-unplugged-melbourne

Hurry. Seats are limited and it's first come first served.

Masterclass on Writing Better Board Papers

The next scheduled deliveries are:

8 August, Melbourne. Book at:
https://www.eventbrite.com.au/e/writing-better-board-papers-melbourne-8-august-2024-tickets-781201654177

12 September, Sydney. Book at:
https://www.eventbrite.com.au/e/writing-better-board-papers-sydney-12-september-2024-tickets-871383199607

If you would prefer an in-house workshop for your executive team, please reply to this email and I will gladly schedule one for you. Act fast and you could get the benefit of the 10% discount for EOFY.

Book review - Technofeudalism by Yanis Varoufakis

This book is almost unnerving in its clarity. I wish my MBA text books had been this clear; I might have done far better in Economics if they had.

The premise of the book, that capitalism started to fail and the GFC and Covid have hastened its demise, is interesting. The spectre of what we may be creating in its place is enough to keep me awake at night (and not with the excitement of Christmas eve).

How did the owners of cloud capital platforms manage to have people work for free or for a pittance and to intersperse their platforms between us and the world we inhabit until there appears no other way to reach through? How can we thwart them?

What, as directors of organisations designed to survive in the capitalist system, can we do to discharge our duty of care and diligence as the world is shaped by technologies too rapidly evolving for a mere human brain to comprehend, let alone counter?

This book hints at answers which would be politically difficult and technically challenging. I'm not sure I agree with them. But at least I have a better understanding of the questions and the underlying trends that give rise to them. For that, I am grateful to this book. I read it, ironically, online!

You can get a copy at amazon.com.au ... or your technofeudal platform of choice!

Board reviews - Every board - just like every other team - needs to measure its performance if it hopes to improve.

When your board next needs to conduct a performance evaluation or a governance review, please remember that I would be delighted to help.

You can contact me at julie@mclellan.com.au.

Inspirational quote for July

Maybe not 'inspirational' but definitely something to ponder before you next speak in a board meeting.

A note on names - A note on names - A few readers have asked me where I find the names for the protagonists in each case study; I 'borrow' them from people I meet or things that I read. Odette is a feminine name of French and German origin, meaning "wealthy". This name is derived from its masculine counterpart Otto which itself comes from the Old High German words otho and odo, a version of the French word auda meaning "rich." Our protagonist is rich in insights and needs to use those to protect the wealth and intellectual property of her organisation.

Video resources - I post short video insights on LinkedIn. They disappear after a few days. You might like to visit (and please subscribe to) my YouTube channel to see the videos whenever you want to watch them. Let me know if there are any topics you would like to see addressed.

This newsletter - If you have any ideas for improving the newsletter please let me know. If you are reading a forwarded copy please visit my website and sign up for your own subscription.

Suggestions for dilemmas - Thank you to all the readers who have suggested dilemmas. They are greatly appreciated. I will answer them all eventually. I could not write this newsletter without your help and without the generous help of all the experts who respond each month to the case studies.

Be a contributor - if you would like to attempt a response to the dilemmas for publication you will be most welcome. Simply reply to this email and let me know. I am always on the lookout for new talent from around the world so please reach out if that sounds like something you could do. I am also always grateful for the generous sharing of the current and past contributors. I couldn't create such an engaging newsletter without their help.

Spread the word - if you have read this far, I assume you enjoy the newsletter - please help me to reach more directors by sharing the newsletter with your board colleagues and suggesting that they also become subscribers or by posting a recommendation on my LinkedIn page to let others know that you find the newsletter valuable.

Let's connect - I use LinkedIn to share information about boards and directorship with my friends and acquaintances. If you use LinkedIn and we are not yet connected I will welcome a connection from you. You can find me at linkedin.com/in/juliegarlandmclellan.

Farewell until the next issue due 1 August 2024. I look forward to greeting you again then.

Enjoy governing your companies, it is a privilege!

Best regards,
Julie

Main Photo by Meta AI

Quote Illustration by Julie Garland McLellan

Disclaimer - The opinions expressed above are general in nature and are designed to help you to develop your judgement as a director. They are not a definitive legal ruling and do not constitute legal advice. Names and some circumstances in the case study have been changed to ensure anonymity. Contributors to this newsletter comment in the context of their own jurisdiction; readers should check their local laws and regulations as they may be very different.

Privacy - I am privileged to have your contact details and keep them as safely as possible. I will alert you if they are ever accessed by any unauthorised person (the technical staff at ayuda help with publishing and issuing the Director's Dilemma and have access so they can send the newsletters to you). I do not sell your details to anyone; they are kept only for the intended purpose - sending you this newsletter and helping to build the judgement of company directors by providing a safe way to consider potential responses to real life events.