🤖 Can good AI governance help companies become long-term winners?
❓ Question:
How are Australian company boards approaching artificial intelligence, and can strong AI governance help companies create long-term value while managing emerging risks?
✅ Answer:
Artificial intelligence is rapidly becoming an investment issue rather than simply a technology issue. According to Sue Lyn Stubbs, associate director in sustainable investing at Fidelity International, investors are increasingly assessing not only whether companies are adopting AI, but how effectively boards are governing its implementation.
To better understand the state of AI governance in Australia, Fidelity engaged with 31 ASX-listed companies across sectors including financials, healthcare, technology and real estate. The research focused on five areas: strategy and value creation, board oversight and skills, risk and controls, governance and ethical AI, and workforce impacts.
One of the key findings was that many companies remain in the early stages of AI adoption. Fidelity's assessment framework, based on Microsoft's AI maturity model, required an additional category "Stage Zero" to classify companies that were not yet actively implementing AI. Most organisations currently sit between experimentation, pilot programs and early operational use.
🚩 One of the key governance red flags was a disconnect between executives and boards. In some cases, CEOs described ambitious AI strategies and extensive use cases, while boards appeared significantly more conservative in their understanding of AI opportunities. This mismatch raised questions about strategic alignment and whether AI investments were being directed effectively across the organisation.
🚩 Another concern was the absence of clearly defined "no-go" areas for AI. While many boards acknowledged potential risks, few could clearly articulate where AI should not be used, particularly in sensitive areas such as workforce surveillance or customer decision-making that could create biased outcomes. As AI becomes more embedded across organisations, investors are likely to expect stronger guardrails and clearer accountability.
🌟 Despite these challenges, the research highlighted several examples of emerging best practice. Leading companies are investing in AI talent, building internal capability, expanding workforce training and, in some cases, incorporating AI-related measures into employee incentive programs. Some companies are also engaging directly with regulators and policymakers on the future development of AI governance frameworks.
From an investment perspective, Stubbs believes strong AI governance could become an important indicator of long-term success. Drawing comparisons with previous technology disruptions, she argues that companies that can adapt their business models, embrace change and govern emerging technologies effectively may be better positioned to create sustainable shareholder value.
⚠️ The report also challenges the common assumption that "human in the loop" oversight is enough to manage AI risks. While human review remains important, there is a growing risk that employees become overly reliant on AI-generated outputs. Boards may eventually need additional layers of monitoring and control to manage potential errors, compliance issues and unintended consequences. Meanwhile, the growing use of unauthorised AI tools by employees, sometimes referred to as "shadow AI", presents another governance challenge for organisations seeking to protect intellectual property and manage operational risk.
Ultimately, the research suggests that investors should view AI governance as more than a compliance exercise. A board's ability to oversee AI effectively may provide valuable insights into whether a company can adapt, compete and thrive in a rapidly changing business environment.
💡 Why it matters:
Artificial intelligence is reshaping industries, workforces and business models at an unprecedented pace. While much of the public discussion focuses on productivity gains and innovation, investors are increasingly concerned with governance, accountability and risk management. Companies that can successfully balance AI opportunity with strong oversight may be better positioned to create long-term value, while those that fail to establish appropriate guardrails risk operational, reputational and strategic setbacks.
🎙️ Sources:
• Sue Lyn Stubbs, associate director, sustainable investing, Fidelity International
• Michelle Baltazar, executive director of media, FS Sustainability
⏱️ Timestamps:
00:00 – Why AI governance matters for investors
02:05 – Researching AI adoption across 31 ASX companies
04:59 – Understanding AI maturity and Stage Zero
07:33 – Red flags and governance gaps
11:39 – Examples of emerging best practice
15:25 – Linking AI governance to long-term value creation
17:51 – Why "human in the loop" may not be enough
19:50 – The risks of shadow AI
21:25 – What boards should focus on next
Link: Insights from Fidelity International’s 2025 Australian AGM season AI governance survey
🌿 We record on Gadigal Land and we pay our respects to the traditional custodians of country and elders past and present.
This podcast uses the following third-party services for analysis:
OP3 - https://op3.dev/privacy
Netherlands