Artificial intelligence is making its way into the boardroom—particularly as a tool to help sift through complex board papers and committee materials. For Australian directors bound by fiduciary duties, this raises a critical question: how do you use AI to enhance your role without undermining your duty to understand and act with care?
Fiduciary duty to understand: a non-delegable matter!
Australian directors cannot delegate away their duty to read, understand, and critically engage with board materials—AI can assist, but it doesn’t replace judgment.
In ASIC v Healey (2011)(“the Centro case”), directors argued the financial reports were too voluminous to grasp. Justice Middleton was clear: directors must make time or demand better presentation, but they cannot offload understanding. In light of this finding, directors and the CFO were found to have breached their fiduciary duties of care and diligence.
Likewise, in Daniels v Anderson (1995) the NSW Court of Appeal confirmed an objective duty of care and diligence: directors must actively remain informed and cannot passively rely on others. It may be well be argued that using AI is no exception to this rule.
And in Cassimatis v ASIC (Storm Financial), directors were found to have breached duties by relying on inappropriate systems without proper oversight—reminding us that adopting tools without monitoring their use is not defensible.
What this means for directors
AI can:
- Save time by distilling complex information.
- Highlight anomalies across reports.
- Make technical disclosures (like climate or cyber risk) more accessible.
But: the law is clear—directors must still read, engage and decide for themselves, and if they don’t, legal actions may result.
Quick takeaways for directors
Rejecting AI entirely may itself be negligent if better tools exist to improve insight and efficiency. The ethical question is not “AI or no AI” but how AI is used. Directors, CEOs and the C-suite should:
Use AI as a tool, not a crutch: You remain responsible for decisions.
Understand AI’s limitations: Transparency builds trust.
Treat outputs as advisory: Your judgement carries the legal weight.
Maintain oversight: Safeguards prevent bias and blind spots.
Always review key documents: Courts won’t accept “the AI missed it.”
AI can sharpen, not replace, director insight
AI won’t (and shouldn’t) replace director insight—but it can sharpen it. Used ethically, it enables deeper focus, sharper risk oversight, and stronger boardroom dialogue. The key, as should be the case with all external resources, consultants and now, AI tools: keep your experts on tap, not on top!
⚖️ Important Note This article is provided by Management Governance Australia (MGA) for general information purposes only. It does not constitute legal advice, and directors and organisations should seek their own independent legal advice on fiduciary duties and compliance obligations.
For governance, business, or strategic advice, MGA can help. Contact us at:
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- mg-australia.com.au/contact-us