Key takeaways 

• AI can help directors manage information overload, but it is not a substitute for reading, analysing and understanding board papers.
   
• Directors remain legally responsible for their decisions. Reliance on AI-generated summaries does not remove directors' duties or potential liability for breaches of those duties.
   
• Boards should adopt clear AI governance practices. Any use of AI by directors or management should be transparent, controlled and supported by formal policies.
   
• The Federal Court has recognised AI's potential in board governance, while emphasising that ethical judgment, decision-making and oversight cannot be delegated to AI.

Can AI Read the Board Pack for You?

Directors have long struggled with information overload. Board papers often stretch into hundreds of pages, making it increasingly difficult to identify the issues that arise and make informed decisions.

The problem appears to be getting worse. Faced with pressure to ensure boards are fully informed, management often responds by including more information rather than better information. Lengthy reports can set out matters in great detail, but with little analysis or guidance. The result is often volume without clarity. 

This challenge is frequently raised by directors when defending a claim for breach of their directors duties, arguing that critical information was buried in impenetrable board materials, making it unrealistic to adequately identify and assess every relevant issue.  

Courts have consistently rejected that argument.  

The law is clear: information overload is not a defense to a claim for breach of directors’ duties.  Directors cannot passively accept whatever management provides. If information is not presented in a way that is capable of being understood, then it is the board’s responsibility to require management to provide information in a more effective form. 

Despite this clear legal position, this problem persists.

Directors are turning to AI

Against that backdrop, it is unsurprising that some directors are turning to Artificial Intelligence (AI). AI tools can instantly review and summarise lengthy reports to identify key themes and highlight matters that require attention.  Faced with a lengthy board pack, the appeal is obvious. 

But can directors use AI in this way? And what happens if the AI-generated summary hallucinates or omits or mischaracterises an issue, resulting in flawed board decision-making? 

There are presently no specific legal rules about this. The AICD has issued some recommendations to assist boards, And some academics have even suggested that directors have a positive duty to use AI to assist in carrying out their functions.

However, the use of AI in this way has now been considered by the Federal Court of Australia in a way that at least provides some general but reliable legal guidance.

AI has the potential to assist directors

In Australian Securities and Investments Commission v Bekier (Liability Judgment) [2026] FCA 196, Justice Lee made a number of general comments and observations that are instructive to directors and boards in their use of AI.

Quite appropriately, Justice Lee was accepting and indeed encouraging in relation to AI and boards generally. He said in a positive frame:

• Australian boards are cautiously but increasingly experimenting with AI as a governance support tool to assist directors in the discharge of their duties
   
• Any consideration of the issue of the exchange and analysis of information in this era (such as from management to board) must recognise the profound impact of artificial intelligence.
   
• There is considerable potential for AI to assist directors in this regard.

Directors may breach their duties by relying too heavily on AI

These observations suggest that boards may have scope to formally consider and test the use of AI as a tool to assist with information gathering and decision-making. 

However, Justice Lee’s comments were carefully qualified. His observations make clear that any use of AI by boards must be controlled, transparent and subject to governance. He said further that:

• While the issue of overload could be addressed in part by principled and transparent use of AI, ultimately analysing and understanding information provided by management is a core function of a board. This remains the primary way by which directors access the information necessary to make informed, bona fide decisions.
   
• Any use of AI should be controlled and transparent. Boards should discuss and deliberately govern any AI use by directors (or by management in the creation of director packs) by formal adoption of policies, rather than simply tolerate “shadow” use.
   
• AI is not of itself a solution to the problem of boards being overloaded with material. Directors must be furnished with information in a form that is both comprehensive and capable of proper digestion without resort to ingestion and summarising by AI.
   
• The use of AI-generated summaries is not a substitute for the careful reading and interrogation of board materials. Rather than assisting directors, inadequately deployed or misdirected AI may increase risk and legal exposure rather than mitigate it. 
   
• Ethical reasoning and judgment necessary for bona fide decisions rests with directors and cannot be outsourced or delegated to AI.

The last comment is not doubt partly informed by the fact that current AI models perform particularly weakly on matters requiring reasoning, judgment and decision-making. 

What is the bottom line for directors and AI?

Taken together, these statements show that, despite AI’s potential and the pressure to improve productivity and profitability, there remains no clear pathway for directors to use AI in discharging their duties. 

A director who solely uses and relies upon AI to summarise and identify issues in board materials presented by management, will face significant risk of liability for breach of directors duties. 

The potential liability arising from directors’ use of AI remains undeveloped and evolving.  We will provide updates as the courts consider these issues. In the meantime, boards should seek legal advice before adopting AI tools with the intention of assisting directors in carrying out their roles.

_{AI disclosure – AI has not been used in preparing this article.}