ARTIFICIAL INTELLIGENCE AND DIRECTORS’ FIDUCIARY DUTIES IN CORPORATE DECISION MAKING

Abstract

In the world of business, the speedy adoption of artificial intelligence (AI) into decision-making has started to change the reality of what directors actually do in their fiduciary roles, even if not the formal legal framework. From capital allocation, risk evaluation and recruitment, credit analysis, fraud detection to mergers and acquisition due diligence, any major strategic decision made by a corporate board is increasingly supported by machine-learning tools and algorithmic forecasting systems powered by generative AI. This dependency calls into question the continued viability of the primary responsibilities of care, loyalty, good faith and oversight that have long been the pillars of corporate accountability. This article will examine the doctrinal and comparative impact of AI on the directors' fiduciary duties in Nigeria, focussing on the Nigerian Companies and Allied Matters Act 2020 and the UK Companies Act 2006 as well as Delaware corporate jurisprudence in the United States. It asks whether the business judgment rule, as it has been understood, can adequately protect directors who rely on opaque algorithmic guidance, and whether use of AI systems might be enough to meet or fail to meet the informed and independent judgment test. The article also examines the ‘black-box’ issue, in which the internal workings of complex AI systems are often not comprehensible even to the developers of these systems, and the difficulty of proving good faith, due care, and independent judgment required of directors under fiduciary law. It also explores the evolving role of oversight, analysing the Caremark-line jurisprudence, and considers this duty within the evolving regulatory regime encapsulated in the European Union's AI Act and the United States National Institute of Standards and Technology's AI Risk Management Framework. The article, with doctrinal and comparative approach, concludes that while the current concepts of the fiduciary are conceptually valid, they may be interpreted in a more purposeful manner, with the aid of codified expectations of technological-literacy, algorithmic audit and better statutory guidance especially in developing jurisdictions like Nigeria. The article concludes that, as the future integrity of corporate governance in an AI-mediated economy depends on the directors' having ultimate non-delegable responsibility for corporate judgment, even when such judgment is greatly informed by algorithmic means, the directors must still exercise that judgment. This paper considers the role of Artificial Intelligence in fiduciary duties under the Business Judgment Rule, Directors' duties and CAMA 2020.