ADAM CRAKER: Ethical governance must meet innovation imperative in King V draft

On the eve of its fifth iteration the world-renowned King Code of corporate governance has been published for public comment until April 4. The update comes a time when the fourth industrial revolution (4IR) is racing ahead of human evolution. Some refer to this as the fifth industrial revolution (5IR), where humans and machines converge, hopefully to collaborate rather than clash.

In this complex, exciting and sometimes terrifying environment, leaders in business and government are required to balance competing legal and governance prerogatives of risk mitigation with an imperative to innovate, stay competitive and do so ethically while remaining accountable. As Moore’s Law goes exponential, we must ensure that humans don’t get left behind. 

Traditional governance models have until now been steeped in conservative language, top-down control, risk management and compliance. Today, in the context of digital transformation, this approach must rapidly progress if we’re to innovate and create key opportunities.

The King V draft recognises this reality and has devoted principle 9 to a governance framework for IT and emerging technologies. While this is a welcome and necessary update, aspects of the draft could go further to encourage businesses to take bold, ethical and accountable steps towards technological development. And that is precisely the point of opening a respected document to the public for comment: with some adjustments, more can be done to ensure that corporate governance fosters the courageous, ethical innovation required for humans to guide technology in our new era, and in our SA context.

It’s no secret that the tension between mitigating risks and fostering innovation is one of the most pressing challenges businesses and governments face today, and it demands a delicate, sensitive balance. This is evident in the global digital economy as the US innovates, Europe regulates and China replicates. 

As a starting point, principle 9 stresses that governing bodies must manage the security, control, and optimisation of information. It mandates the protection of data, compliance with regulations, and the mitigation of emerging risks in technologies like AI and machine learning. These safeguards are crucial for maintaining integrity and avoiding disruption, but it’s not hard to foresee an overly conservative or luddite-dominant board inadvertently using the code as a barrier to tech experimentation that requires a “fail fast” approach and some understanding.

We know the opportunities for innovation through tech and data are immense, but so too are the challenges. Without bold steps and empowering principles to responsibly adopt and leverage these technologies, organisations risk falling behind. Principle 9 is unequivocal that governance bodies must ensure the ethical use of emerging technologies like AI.  

However, while this legal requirement is certainly crucial, the principle’s current language risks creating an overly cautious approach. It calls for “appropriate levels of ethical and trustworthy characteristics” in AI systems and demands human oversight in processes involving continuous learning algorithms. In my experience, the potential practical effects of hyper-focusing on the risks baked in to tech disruption will come at the cost of an empowering framework that encourages business and government to proactively seek or create these opportunities. As technology becomes a competitive differentiator, the code must evolve to empower leaders to take ethical, calculated steps to innovate without hesitation or fear, and this is the chance to do so.

The 5IR demands a governance framework that allows the pursuit of innovation with courage and a strong ethical compass, always. Principle 9 could further enhance this balance by not just requiring that organisations mitigate risks but also enable them to explore transformative technologies. In this digital age, leaders must not only manage risks, they must encourage and tolerate proactive, accountable technological development. 

Vitally, ethical oversight in technology deployment must be central within a framework that enables innovation, and this remains a cornerstone of King V through principle 1, which demands ethical and effective leadership.

The truth is that we are in a world where AI, data big and small, and automation are reshaping governments, industries and business models every second. King V, through principles 1 and 9 can support boards and executives to move beyond simply managing risks to actively fostering an environment where innovation can thrive without compromising on ethics or accountability. This is a philosophy that should be embodied at board or governance body level, and not relegated to a culture problem at management level, the chief innovation officer or the often scapegoated “IT team”.

Practically applied in the 5IR, businesses and governments need governance structures that do not simply act as gatekeepers but that actively empower responsible experimentation. This means creating safe spaces, like “sandbox” environments, where AI and other technologies can be dreamed, created and tested without fear of regulatory failure or breach. These virtual and real experimental spaces allow organisations to innovate while maintaining ethical standards, giving them the freedom to test new boundaries responsibly.

An integration of ethical foresight into innovation strategies throughout an organisation is necessary, from technological capabilities right through to social implications. This means AI and big data systems should be thoroughly examined in a 360° process for fairness, transparency and potential biases or harm before deployment that are clearly tied to outcomes. Ethical and effective leadership will identify any concerns early and make the right adjustments that still allow quick and decisive deployment of new technologies.

It’s evident that King V is drafted for a dynamic and robust future, confident in the knowledge that overly conservative governance codes will leave business, government and society stagnating. But it must be combined with bold innovation, grounded in ethical principles, to enable growth and success to create jobs, prosperity and relevance. The time has come for a governance framework that not only protects business and government from technological risks but actively encourages bold, responsible steps towards innovation. We’ll be playing our part in this digital integration. 

• Craker is CEO of IQbusiness.