How To Boost Your Board’s AI IQ

Dario Amodeo, CEO of Anthropic, one of the world’s leading artificial intelligence (AI) developers, recently published an article on his website with a surprising insight: nobody really understands how Generative AI works. “This lack of understanding is essentially unprecedented in the history of technology,” he wrote. If you’re a board member for a community financial institution (CFI) reviewing a complex new GenAI initiative that seems tough to fully understand, know that you’re not alone. Even the people who conjure up these tech wonders don’t completely grasp how they work. This AI knowledge gap is a significant challenge for boards charged with reviewing and adopting GenAI initiatives. It is of particular concern for CFIs, which tend to have less technical expertise than many larger banks. Since there’s no turning back, CFIs should be looking for ways to make their boards more tech savvy, particularly when it comes to GenAI.The Challenge of Keeping Up with TechGrappling with technological advances has been an ongoing challenge for corporate boards. MIT has been studying this issue for decades. In 2019, only 26% of boards were digitally savvy. By 2024, 72% of boards were digitally savvy, but then along came AI and the knowledge gap started all over again. In 2024, only 26% of boards were both digitally and AI savvy.

Source: MIT Center for Information Systems Research
The Tech-Savvy Premium Boards that keep up with the latest technology have been shown to produce better bottom-line results. MIT found that companies with boards that were both digitally and AI savvy saw an average return on equity that was 10.9% above its peers. So, what makes a boardroom AI savvy? Boards that are well-versed in technology place greater emphasis on issues such as cybersecurity and emerging innovations. Many establish dedicated committees to provide oversight in these areas, and best practice suggests that at least two board members should bring meaningful technology expertise to the table. For CFIs, however, building such an AI-savvy board can be particularly challenging given the slower pace of board turnover.The National Association of Corporate Directors (NACD) has developed a list of competencies and aspects that boards need to have to be AI savvy. These include:

Once a CFI identifies that it needs a more tech-savvy board, the question is: how does it create one? The quickest route is by adding tech-savvy board members when openings arise. However, if board turnover is low, then this option will take considerably more time. An alternative is to expand the board by adding one or two new seats specifically designated for directors with AI or broader technology expertise. Beyond board composition, directors can also strengthen their own skills. The NACD has outlined several practical steps to help boards become more AI savvy:

It’s not enough to be digitally savvy these days. CFI boards also need to be AI savvy, which can contribute to better performance and higher return on equity. By focusing on ways to elevate the AI expertise of boards, CFIs can improve their ability to effectively deploy and benefit from this new wave of innovation.