Artificial intelligence (AI) is seen as an enabler to achievement in spaces such as education, science, healthcare and climate change. AI promises enormous benefits for economic growth, social development, safety improvement and human well-being. As more and more enterprises employ AI and its use expands into new areas, companies may find it increasingly important to adopt AI to avoid the competitive disadvantages of not utilising it. However, issues such as data biases, privacy, and ethical problems pose significant risks for humanity and societies. This opinion piece was motivated by the increasing ethical controversies surrounding the application of IA technologies.

The Social Dilemma, a chilling documentary on Netflix, shows former top Silicon Valley executives sharing ethics concerns about the systems they helped create. It reveals the extent to which social media and other tech platforms can isolate and manipulate users – reinforcing existing interests and viewpoints while stoking societal divisions. It shows how these tech companies profit from disseminating disinformation or fake news rather than the truth. Thus, it sparks a debate on how to embed ethics in the development of AI to avoid the potential harms of algorithms and machine learning. 

As AI advances, a critical issue to address is the ethical and moral challenges associated with AI, such as the case of algorithmic discrimination in facial recognition systems. Most researchers found that facial recognition systems misidentify African and Asian people more often than white people. In some studies, African American and Asian people were up to 100 times more likely to be misidentified than white men, depending on the particular algorithm and type of search.

Another case of algorithmic bias or discrimination was that of Amazon – their algorithm for machine learning to recruit showed bias against women. The algorithm was based on the number of resumes submitted over the preceding 10 years and the candidates hired. As most of the candidates hired were men, the algorithm also favoured men over women. Other ethical concerns in AI include the IBM Watson-Texas MD partnership, where the AI system failed to give suitable medicine suggestions to patients, or the Microsoft-developed AI chatbot, which was released but soon withdrawn after it had learned Nazi propaganda and racist insults.

In South Africa, we face further challenges, stemming from structural biases, security, privacy and the accuracy of collected information. Machine learning algorithms in institutions such as banks and insurance companies can be used to recommend applications for approval. One is wary that algorithms may be “deliberately blinded” to an applicant’s race, gender or class. AI decision-making can be impaired if trained on inaccurate or biased data. Suppose algorithms go wrong or someone with bad intentions manipulates a system. This could have terrible repercussions that potentially extend to the loss of life and ultimately involve reputational risks for corporations.

These are ethical concerns with which boards should be preoccupied as we move towards the Fourth Industrial Revolution. King IV™ explains that the board must govern ethics to ensure that the ethical culture within an organisation aligns with the tone set by the board. This is done through the implementation of appropriate policies and practices. Therefore, it is the responsibility of the board and executive management to ensure that technological advancements in AI align with the organisation’s ethical culture. King IV™ also mentions how to align technological advancement such as AI with ethical principles:

AI ethics are not merely about “right or wrong” or “good or bad”, and there is no quick solution to AI's ethical and moral issues. However, the ethical and moral issues associated with AI are critical and need to be addressed by boards. The future of humanity may very well depend on the correct development of AI ethics.

In 1972 Irving Janis^[1] first defined groupthink as “a psychological drive for consensus at any cost that suppresses dissent and appraisal of alternatives in cohesive decision-making groups.” Groupthink typically occurs in highly cohesive groups that strive for consensus and avoid conflict at all costs. It interferes with an individual board member’s ability to think critically and deters individuals within the group from voicing opposing opinions.

The University of Texas, McCombs School of Business believes that group members often suffer from overconfidence and hold an unquestioned belief in the group’s competence and morality. Dissent by group members may be discouraged and even lead to expulsion from the group. Due to the fact that people do not want to endure such exclusion, they remain silent, which creates an illusion of agreement or unanimity within the group. Groupthink promotes harmony and consensus at the expense of independent judgement and analysis.

Shiller has indicated that groupthink can also translate into the fear that “deviating too far from consensus leaves one feeling potentially ostracised from the group, with the risk that one may be terminated.” Warren Buffet, in 2002, wrote a letter addressed to shareholders stating, “all too often I was silent when management made proposals that I judged to be counter to the interests of shareholders. In those cases, collegiality trumped independence.”

Currently on South African boards, there is an overdue, marked increase in membership of all racial groups, which introduces a wide variety of cultural norms and expectations. The concept of ubuntu has been transferred from the social concept of a universal bond of sharing that connects all humanity – of behaving well to others – to the boardroom in the form of consensus, agreement and harmony. Ubuntu is unintentionally driving groupthink and subduing the independent opinions of well-qualified board members.

I recall participating in a group discussion at a prominent business school, where the facilitating academic was a professor of philosophy. As the group discussion progressed, he drew out opinions from all participants. He encouraged differences of opinion and built on the independent views of his students. After a while, he pointed to a student that had to that point remained silent and asked his opinion. Out came an amazing interpretation that stunned us all. The professor smiled and said, “Beware that still small voice within a group. They very often have the most to offer.”

This is what we as board members in South Africa must remember. Heed the advice of that independent opinion, reject groupthink and recognise “that still small voice.” He or she may well have incredible insight or unique knowledge on a subject. If the wide variety of boards that exist in South Africa heeded this advice and encouraged chairpersons to facilitate independent opinion and promote robust debate, we may well be placed on a path on which independence trumps collegiality.

Dr Brian Suckling holds a B.Iuris, LLB and LLM degrees as well as an MBA and Doctorate of Business Administration. He is an admitted Advocate of the High Court of South Africa and serves as a board member and trustee in large institutions. He is currently an LLD student at UNISA.

The current business environment is complex, dynamic and continuously evolving. We have witnessed a global pandemic, mass rioting, severe weather changes and cyberattacks as some of the more recent high-impact risks in South Africa. We are in a state of “deep uncertainty” in which businesses are unaware of what it is that they do not know. We thus need to focus not only on developing strategic flexibility to deal with these uncertainties but also on adopting a forward-looking perspective that will promote the continuous exploration of new strategies in response to threats and opportunities.

It is widely accepted that enterprise risk management (ERM) plays a key role in ensuring that the strategic goals of an organisation are achieved through the comprehensive assessment and mitigation of key risks. ERM also aids in the successful implementation of business opportunities. ERM is therefore inherently positioned to positively enhance strategic flexibility. There are, however, mixed views regarding ERM – many still view it as a compliance function and opt to apply only the minimum requirements to meet corporate governance requirements.

Although ERM should be positioned as a key strategic resource, the required integration between ERM and strategic planning is not common practice. Current risk management practices are often limited to the strategic execution phase, with limited involvement in strategic planning. In addition, the theoretical side of ERM has exploded into a number of processes that can skew the very objective of ERM when greater effort is made to embed these processes in the organisation. Various stakeholders drive the direction of risk management, each with their own authoritative pull, which results in the possible counterproductivity of limited ERM resources. These are some possible reasons why ERM is not effectively contributing to informed decision-making and, as a result, not enhancing the organisation’s strategic flexibility.

The point to be made here is that much more effort is required from organisations to position ERM correctly and allow this strategic flexibility to be driven from within the organisation, through the already established ERM function. Equally, ERM professionals need to demonstrate their ability to positively contribute towards building the organisation’s strategic flexibility. A shift is required wherein risk professionals begin to focus on the provision of strategic advice and assume forward-looking practices.

Risk management practices then also need to be promoted to the strategy formulation and planning phases. ERM professionals need greater autonomy in the execution of their roles and should take the lead in directing the future of organisations or stand to lose credibility in terms of their value offering during these crucial times.

When these directors serve on SOE boards, they often have only the business and shareholders’ interests at heart not stakeholders’ interests. The South African governance model, however, has both social and capital elements, and, as such, SOEs have a dual mandate, which is what King IV™ encourages through its principles. ^[4]

“A wise visionary” comes to mind; being one who manages the present whilst securing or contributing to the sound running of the future as a continual reality. Upon reflection of where we find ourselves as a country and where I find myself, as both an individual and a leader in the spaces in which I operate, I could not resist the remanence of these words.

Pressure (whether financial, qualitative or a balance of both): one’s reaction to pressure becomes the greatest reflection seen by the forward looking and an immediate indicator of a leader’s performance. Looking at some of the key external factors of the last couple of years, over and above Covid-19, we experienced riots, our country’s credit rating status and stability continually being questioned, an industry strike and, more recently, substantial petrol price hikes. These have tested the sound governance and effective leadership of every organisation and leader. As the calamities multiplied, I found it imperative to focus on the objectives and organisational goals of our existence. This allowed me to remain grounded and more in control of each situation, whilst upholding my fiduciary duty to the organisation and other stakeholders. Focusing on the reason why our organisation exists permits me to arrive at resolutions that will outlive the circumstances at hand.

Keeping close the immediate and important resources needed to achieve goals (including the critical and, ever so fragile, human resource) and keeping control helped me to not overcomplicate or “corporately personalise” challenges, which misplaces the necessary energy needed to mitigate trying circumstances.

It takes focus and inherent desire to maintain sustainable, healthy staff morale. As management and core leadership, our habits and decisions form the true culture of our organisations, as opposed to what it is claimed to be – that which is posted as culture flags on our corporate building walls and intranet spaces. Team members observe and assess a leader’s ability by observing their decisiveness and ability to communicate timeously and give clear and sound direction as matters arise; all of which are perceived through personal filters.

Generally, any situation or event that impacts the organisation significantly also gravely impacts on employees. Effective leadership and respect for each leader in their skilled area, cohesion, and acting with one accord could not be more imperative in trying times. Where strategy, objectives and performance milestones are clear, even if the pressure is immense, we can firmly hold on to the reason for and importance of our core existence.

And even though not every decision made has or will satisfy each and every stakeholder, making decisions that consider stakeholders outside of management is a great step and one which, as a leader, I pride myself in making.

For enterprise development (ED) to prosper, boards must make the link between environmental and social issues in the projects they support. For the social impact to last, ED projects must address the environmental issues in ED supply chains.

In The impact of enterprise development in South Africa, the University of Stellenbosch Business School lists three major challenges that hamper the transformative potential of ED:

An important addition to this list of challenges is the lack of successful approaches to address the environmental effects of ED supply chains. By addressing the environmental effects, we can ensure that good corporate social performance translates to good business performance in the long term.

It is important that South African companies capitalise on the benefits of implementing ED.

However, to fully achieve ED’s main goal, which is to create sustainable businesses and contribute to economic growth, ED projects must equally invest in addressing the environmental issues in the ED supply chains, otherwise the social impact will not last. Paying proper attention to environmental issues in the supply chain builds resilience, ensures sustainable businesses, and leads to long-term social impact.

According to the Mckinsey & Company podcast, 2020 was the year that put to the test the social impact that supply chains could have on local communities.

In building back better, boards of directors have a critical role to play in ensuring that management is well prepared for a range of potential shocks, some of which are due to environmental stress in their corporate supply chains. These environmental pressures will have a negative impact on the social outcomes of ED in the long term.

For publicly listed companies that are increasingly expected to contribute to a climate positive future, their ED contribution must be underpinned by an environmental performance imperative that addresses climate impacts and biodiversity loss.

There are three credible approaches that corporate boards could adopt when investing in ED for greater social impact:

By: Joy-Marie Lawrence, CD(SA)® PCC (ICF) Executive MBA (with distinction) LLM, LLB, BA

The board of directors is generally considered to be the most important leadership collective in an organisation, tasked with the all-important mission of guiding the fortunes of the institution. As such, it is composed of the best and brightest minds available, who apply their considerable collective intellect to rationally address the challenges that the organisation faces. As the apex body within the organisational ecosystem, the board embodies the best traits of the organisation and serves as the template for everyone else in the ecosystem. Or at least that is the perception of its ethos, purpose and function.

However, when we examine the reality of the boardroom, a different picture emerges. Firstly, non-executive directors are usually eminent persons in their own right, who have ascended to their positions thanks to their successful pursuits in other areas of business. For some, it is a reward for their achievements in other businesses or industries. For others, it is recognition of their loyal service to the industry or the company itself. Yet others are appointed by shareholders who are intent on pursuing their own strategic objectives and interests. Still others have lobbied for their board position to further their own business interests. Then we have the executive directors in senior management, who are embroiled in resolving the day-to-day internal contradictions within the organisation while juggling the demands of founders, shareholders, staff, customers, regulators and society at large – a weighty responsibility indeed.

Viewed from this perspective, the board looks more like a collection of strong-minded, egotistical, opinionated individuals with disparate and often competing interests who are vying to impose their will on the organisation – a scenario that can result in boardroom proceedings descending into a battle of wills and finally a battle of egos.

In reality, both perceptions are true to a greater or lesser extent. The underlying tensions can either be managed in a collegial, mature manner that keeps the best interests of the organisation at the heart of proceedings. Or, during times of tension and high drama (which is not uncommon in the boardroom), the ego-driven approach can rule the day.

Therefore, the lessons to be learnt on our journey to becoming self-aware, ethical and effective directors are to:

(1) Recognise the board’s descent into ego wars; and

(2) Manage its ascent back to its rightful place at the apex of the ecosystem.

It’s a hard reality to confront, but it is in this confrontation that we learn the most important lessons on the journey to true board leadership.

How often do small and medium-sized enterprises (SMEs) and non-profit organisations (NPOs) feel lost in their ambitions to develop best-in-class governance practices only to never quite meet these lofty standards? Unlike their larger corporate peers, smaller organisations rarely have the resources or knowledge to develop their governance frameworks.

For many SMEs and NPOs, the leap from a zero-governance environment to being King IV™ ninjas is a chasm too great, which is why so many are too intimidated to begin the journey at all. What if there was an alternative route to governance proficiency: a digestible, practical way to grow governance philosophy in line with the organisation’s pace of maturity? Where do you start?

To encourage a young organisation to start thinking about governance application, one approach is to consider this governance journey in the context of prescriptions, policies and people – in that order. Prescriptions relate to what the law prescribes: which acts and regulations are the entity governed by and is the organisation fully compliant with legislation? These non-negotiable legal prescriptions establish the licence with which an organisation can exist to fulfil its mandate.

Sometimes we neglect that governance also encompasses the institutional architecture that gives organisations the control and structure to create a stable ecosystem within which to operate. So, once the legal prescriptions have been addressed, the organisation can turn to its policies. Policies establish behaviours and rules that set boundaries within which the organisation’s stakeholders must operate. Some core policies that nearly all organisations require are those that determine how to manage key resources, such as finances, employees and operations. It’s critical to build policies over time and ensure they are fit for purpose. The temptation exists to draft innumerable policies, but these can quickly overwhelm a growing organisation. We must, instead, introduce new policies and practices gradually to protect the organisation as and when the organisation envisions emerging risks in the future.

Once compliant with the law and one’s own set of policies, leadership can then pay a greater share of its attention to more medium- to long-term risks and opportunities. In this phase, an organisation may wish to introduce new people to its governing body. Although the gold standard may be a fully fledged board of directors, not every entity is in a position to sustain this. There are no rules that prevent an organisation from growing its board organically, perhaps in the first instance with just one or two professionals who plug a gap in the organisation’s growth journey. For example, human capital or strategic thinking might be areas of risk or weakness, in which case recruiting governance actors with these skills would add immense value to an organisation’s board of directors.

The overarching idea is that governance journeys should be managed at an appropriate cadence. Rather than drowning in a myriad of new practices, what matters is the drive to develop compliance towards a maturing governance framework over time.

“Jo dikhta hai wo hota nahi hai”. This Urdu saying translates as “Whatever you see is not the reality, and whatever is the reality, you don't see.” What defines us more, the things we do or the things we don't do? A board is more likely to be judged on things they do. But what we unknowingly don’t do might be setting the tone for a dangerous subculture of unethical behaviour.

So, what happens when a board doesn’t publicise unethical behaviour or corruption? Well, nothing. If you do, however, you can be sure to receive attention, lots of resistance and possibly more harm to your career than might be worth it. This is one reason unethical behaviour remains a problem; it’s not only because people are unethical, but because ethical people don’t do anything about it.

Despite many boards’ best intentions, they might be setting themselves up for ethical catastrophes by creating environments in which people feel forced to make decisions that balance ethical behaviour with self-preservation or survival. It’s not always unethical people making unethical decisions, sometimes people are forced into situations where they have to make a choice while under stress and being bombarded with emotions. Boards have the power to influence these environments, but often do not realise they’re creating the very environments for others that they try to avoid for themselves.

Often a board not being willing to take a stand and make ethical choices, forces executives into situations where they have to take action. The problem is that the board remains ultimately responsible. There is a set cost to compliance and to non-compliance. There is also a cost connected to the culture and ethics of a company or organisation.

So how do boards create toxic environments or cultures?

When its emotionally or professionally unsafe to speak up

An open door policy or anonymous reporting are great initiatives, but the culture in an organisation will determine if they hold any value.

How management or the board reacts on the concerns of employees sets the tone for whether an employee believes it’s worth the effort, risk and emotional abuse or stress to speak up.

Ensuring that an employee has the confidence that management and the board actually want to listen and that there won’t be retribution for speaking up is no easy task.

Excessive pressure to reach unrealistic goals

Unregulated goal setting can push people to make compromising choices to reach targets, especially if those targets seem unrealistic to them.

A board may very well be “entrapping” or encouraging their organisation to cheat to victory. When an unrealistic goal is paired with great reward, tunnel vision is the natural tendency in ambitious executive teams.

Such teams will stop at nothing to succeed – as they say, money changes hearts.

The adverse to great rewards is punishment for not reaching unrealistic goals. The risk of failure or the ripple effect on their career or reputation often reveals the dark side of good people.

A board’s most important role is to lead, which means not entrapping your own executives or fellow board members. The board must ensure people have the resources, timelines, skill and support they need to achieve the targets set for them, especially ambitious stretch goals. The absence of these prerequisites might rouse people to “cheat” for victory or survival.

Inconsistency

When an organisation senses that their board is inconsistent in its actions – in terms of goal setting, rewards or policies for speaking up – there is a natural decline in ethical culture throughout the organisation. Injustice is provoked and the gun is loaded to release compromised actions.

Resentment increases as people realise that to survive, succeed or reach targets to remain relevant require actions that are publicly frowned upon but privately rewarded by the organisation. This approach forces good people to make bad choices.

When an organisation sees that certain board members’ personal lives or actions are protected, swept under the carpet or ignored because they are “a good guy, our guy” it sends a very real message. The board must accept that they are held to a higher standard. Board members must be extra vigilant about not just their intentions but also how others might interpret their behaviour. Even the smallest transgression can signal that hypocrisy is passable.

Conclusion

Although culture is not easy to define, it’s the personality of a business, board or organisation. Our culture tells us how to act, interact and interpret rules. So, no matter the policies and rules on paper, how the board affects the culture of the organisation must be monitored and reviewed. Boards have an ethical duty to evaluate even their best intentions by reviewing the ripple effect they might have on the culture of the organisation in the long term.