The Integration and Reliance on Technology to Enhance the Independence and Accountability of Company Directors in South Africa

The most indispensable means of change in contemporary business society is technology because it offers convenience to both businesses and their clients. Almost every business has been influenced by technology. Traditional corporate governance systems have been affected as technology has ceased to be a mere business enabler but is now a source of a company's future potential opportunities. The infusion of corporate governance and technology has been quite slow in South Africa. This may either be attributed to the fact that it is costly to do so, at least in the short term, or that company directors in South Africa do not yet trust technological measures with corporate decision-making input. Consequently, the impact of decision support technology on corporate entities and their governance has received less academic interest in South Africa than in developed countries. This article seeks to discuss the integration and reliance on technology to enhance corporate governance principles in developing countries like South Africa. The article also discusses the practical challenges and the benefits to be anticipated by directors in South Africa when they integrate technology in decision making to enhance their independence and accountability.


Introduction
The most influential means of change in contemporary business society is technology because it is convenient to businesses and their clients. 1 The scarcity of literature on the integration of corporate governance and technology in South Africa makes it pertinent to define some key terms that are employed in this article. Technology comprises of the infrastructure, devices, systems and software that produce, transfer or process information to facilitate business decisions. 2 There is no universally accepted definition for artificial intelligence (AI). 3 However, John McCarthy, who coined the term AI, defined it as the art and engineering of making intelligent machines, particularly intelligent computer systems. 4 This definition, though archaic, remains relevant even today because it retains the key characteristics of AI. 5 AI can also refer to a computer programme that performs tasks that normally require human intelligence such as visual perception, speech recognition, decision making and language translations. 6 Almost every business has been influenced by technology. 7 Traditional corporate governance systems have been affected as technology has ceased to be a mere business enabler but is now a source of a company's future opportunities. 8 AI is a form of digital technology that has long been incorporated in the medical and business fraternities in other countries as Petrin 2020 Colum Bus L Rev 967-968 records that in 2018 the chief executive officer (CEO) of SalesForce revealed that he was using an algorithm to comment on deliberations during the company's weekly staff meetings. In 2014 Deep Venture Capital, which is a company based in Hong Kong, was using an AI machine called VITAL to corroborate the board's decision making. Financial companies in the United States of America (USA) have also been using similar technologies to survey the markets and generate suggestions for directors. Also see Hamilton et al 2019 J Oncol Pract 277. Both developing and developed countries use the same software products. For example, apple products are sold in the USA and South Africa and most insurance companies in South Africa have bought software from the USA to deal with big data. 10 SYSPRO 2018 https://www.researchandmarkets.com/reports/4715503/mobilecorporation-in-south-africa-2018. 11 Microsoft News Center 2020 https://news.microsoft.com/en-xm/2020/02/19/theseare-the-skills-south-africa-needs-to-compete-in-the-4th-industrial-revolution/. However, it must be noted that the statistics relied on did not differentiate between listed and unlisted companies. Insurance companies who are not listed on the Johannesburg Stock Exchange (JSE) make use of artificial intelligence (AI) to some extent. 12 SYSPRO 2018 https://www.researchandmarkets.com/reports/4715503/mobilecorporation-in-south-africa-2018. The above statistics apply to South Africa in general. The picture would be different if consideration were to be given to the activities of a company. For example, an insurance company with more than 200 000 policy holders would more likely make use of AI. 13 Hilb 2020 JMG 2; Alalawneh and Alkhatib 2020 EJISDC 1-3; Dignam 2020 Cambridge J Reg Econ Soc 38-40. There is no difference between first-and thirdworld countries in this regard since all countries use similar software except from an economic perspective. integration of technology and directorial independence and accountability. 15 Some African nations such as Zimbabwe, 16 Ghana 17 and Kenya 18 have already partially modelled their company law and corporate 15 Muniandy and Hillier 2015 Pacific-Basin Finance Journal 109. 16 For example, see ss 100 (1) and (2) of the Companies and Other Business Entities Act 4 of 2019 [Chapter 24:31] provides that "The board of directors may issue authorised shares only for adequate consideration to the company, as determined by the board of directors; or in terms of conversion rights associated with previously issued shares or debentures of the company; or as a capitalisation share. Before a company issues any particular shares, the board must determine the consideration for which, and the terms on which, those shares will be issued" and ss 40(1) and (2) of the South African Companies Act 71 of 2008 (Companies Act 2008) provides that "The board of a company may issue authorised shares only for adequate consideration to the company, as determined by the board; in terms of conversion rights associated with previously issued securities of the company; or as a capitalisation share as contemplated in section 47. Before a company issues any particular shares, the board must determine the consideration for which, and the terms on which, those shares will be issued". Also see s 102(1) of the Companies and Other Business Entities Act 4 of 2019 [Chapter 24:31] which provides that "for any purpose of this Act, a company satisfies the solvency and liquidity test at a particular time if, considering all reasonably foreseeable financial circumstances of the company at that time the assets of the company or, if the company is a member of a group of companies, the aggregate assets of the company, as fairly valued, equal or exceed the liabilities of the company or, if the company is a member of a group of companies, the aggregate liabilities of the company, as fairly valued; and it appears that the company will be able to pay its debts as they become due in the ordinary course of business for a period of twelve (12) months after the date on which the test is applied; or in the case of a distribution contemplated in paragraph (a) of the definition of 'distribution' in section 2, twelve (12) months following that distribution" and s 4(1) of the Companies Act 2008 which provides that "for any purpose of this Act, a company satisfies the solvency and liquidity test at a particular time if, considering all reasonably foreseeable financial circumstances of the company at that time the assets of the company, as fairly valued, equal or exceed the liabilities of the company, as fairly valued; and it appears that the company will be able to pay its debts as they become due in the ordinary course of business for a period of 12 months after the date on which the test is considered; or in the case of a distribution contemplated in paragraph (a) of the definition of 'distribution' in section 1, 12 months following that distribution". 17 For instance, compare s 35(2) read together with item 6 of Schedule 5 of the Companies Act 2008 and s 43 of the Ghana Companies Act 992 of 2019 provide that "a share does not have a nominal or par value" and "the shares created or issued under this Act are shares of no par value" respectively. Regarding the legal nature of shares, compare section 42(1) and (2) of Ghana's Companies Act 992 of 2019, which provide that "the shares of a member in a company are movable property. The number of shares in a company and the rights and liabilities attaching to the shares are dependent on the terms of issue" and s 35(1) of the Companies Act 2008 which states that "a share issued by a company is movable property, transferable in any manner provided for or recognised by this Act or other legislation".  19 The article also discusses practical challenges and the benefits to be anticipated by directors in South Africa as they become more reliant on technology to enhance their independence and accountability.
The article also discusses the consideration of technology as a tool for enhancing corporate governance in South Africa. Thereafter, an analysis of the integration of AI into corporate governance as a way of optimising the independence of company directors will be provided. Furthermore, the integration of AI into directors' decision making will be examined in the context of the directors' duty of care, skill and diligence relevant to the processing of data. The question of whether the inclusion of a technology expert on every board should be mandatory in South Africa is explored. Lastly, concluding remarks are proffered.

Problem statement
Regardless of the influence of technology on most businesses, there has been a dearth of literature on the use of and reliance on innovative technology to promote good corporate governance standards by company directors in South Africa. As a result, the potential benefits of integrating technology such as big data, AI and cognitive computing systems to enhance directorial independence and accountability have not yet been considered in South Africa. Furthermore, the question whether companies in South Africa should have a technology expert has not been sufficiently addressed. This article addresses these two issues and seeks to trigger further research on the integration of technology to promote good corporate governance measures in South Africa. one is known as assisted AI, which entails the execution of certain tasks by AI without the machine becoming an independent decision-maker. 21 Assisted AI can completely assume all administrative duties such as setting a record date for determining shareholder rights, 22 calling a shareholders' meeting 23 and delivering notice of meetings. 24 Considering that company secretaries generally spend most of their time on administrative work such as ensuring that the minutes of all shareholders meetings, board meetings and the meetings of any committees of the directors are properly recorded, the integration of and reliance on assisted AI by South African company directors would save them a lot of time. 25 Company directors may also use AI to prepare for board meetings and to provide sound opinions. 26 Currently, applications such as Google assistant can compose emails based on voice prompts and set up and keep track of schedules of meetings. In the business context, assisted AI can be used by company secretaries to take and compile notes during board meetings, to schedule meetings and to prepare reports for directors. 27 The second level at which South African company directors can incorporate AI to enhance their independence and accountability is known as augmented or advisory AI. This involves the use of algorithms to aid human intelligence without the algorithm's assuming the role of an independent director. 28 Augmented AI can assist company directors in South Africa with judgmental decisions which require creative thinking without absolving directors of their responsibility and liability. 29 South African company directors can employ augmented AI as a valuable tool in their decision-making process. Augmented AI may ask and/or answer questions and develop simulations of complex models of various business scenarios. 30  South African companies should employ augmented AI or synergic intelligence where natural persons and algorithms work together to enhance directors' independence and accountability. The incorporation of augmented AI fits well within the purposes of the Companies Act 2008. Section 5(1) of the Companies Act 2008 provides that the Act must be interpreted and applied in a manner that gives effect to the purposes set out in section 7 of the Companies Act 2008. Some of the purposes of the Companies Act 2008 include promoting the development of the South African economy by encouraging enterprise efficiency, encouraging transparency and high standards of corporate governance and balancing the rights and obligations of shareholders and directors in companies. 43 Therefore, the use of augmented AI would encourage the balancing of shareholders and directors' rights and obligations in South Africa by minimising bias, since an algorithm's analysis cannot be influenced by the emotions of directors. Consequently, the use of augmented AI would enhance the independence of directors, since directors with dissenting opinions might be encouraged to contribute their views by simply relying on decision-support AI recommendations as the basis of their dissent. 44 Furthermore, augmented AI allows an algorithm to generate initial recommendations on questions presented to it and such recommendations will be subject to the directors' approval. The directors can also provide additional insight into the algorithm's recommendations. 45 Augmented AI entails that decision-making power remains vested in company directors in line with section 66(1) of the Companies Act 2008 to maintain the traditional separation of ownership and control dichotomy. 46 In circumstances where the board of directors fails to explore other 41 The JSE listing requirement 3.84(i) states that the board of directors or the nomination committee, as the case may be, must have a policy on the promotion of gender diversity and the promotion of race diversity at board level. Also, directors' background and the environment can shape their approach to problems. Having directors of different races, nationality and gender on the board of directors therefore brings diversity to how they decide various corporate issues. Kamalnath 2020 Alb L Rev 52. Therefore, augmented AI and big data analytics would offer South African directors an opportunity to consider alternatives that might have been missed either due to time constraints, groupthink or structural bias. 45 Hilb 2020 JMG 11. 46 Also see Ameer-Mia, Pienaar and Kekana "South Africa" 255.
PER / PELJ 2021 (24)  9 alternatives, directors could consider the recommendations of the AI system. 47 Due to its ability to analyse huge volumes of complex information in a very short space of time, decision-support AI can be employed by directors to align companies to the Companies Act 2008 and the relevant regulations so as to impartially protect several stakeholder interests. 48 The Companies Act 2008 reflects a shift from the shareholder primacy approach to the enlightened shareholder value approach to corporate governance. 49 The shareholder primacy approach has been criticised and blamed for the 2007-2008 global financial crisis (GFC) and the other corporate collapses that followed. 50 It is argued that some of these corporate collapses were a direct result of the shareholder primacy approach. 51 Augmented AI can easily cater for multiple stakeholder interests concurrently and it is not easily susceptible to bias.
Another form of digital technology that South African company directors could rely on to enhance independence is big data analytics. Big data refers to huge volumes of data which cannot be processed by the traditional data processing methods. 52 For example, Walmart processes about 2.5 petabytes of data per hour from customer transactions. 53 Big data analysis refers to analytics technology that stores, analyses and processes huge amounts of data in a short space of time to enhance decision making. 54 It can also be defined as the employment of analytic techniques and technologies to analyse voluminous data in order to acquire valuable information for making decisions by directors. 55  There is a need for companies to consider efficient ways of sorting out useful data from that which is useless since too much information is being generated nowadays from devices such as cellphones, laptops, radiofrequency identification tags, customer transactions and personal sensors. 57 Big data analytics could improve corporate decision-making by directors in South Africa at all levels of a company including human resources, marketing, pricing, distribution and procurement. 58 South African company directors could also apply big data analytics to gain competitive advantages inter alia through the determination of customer preferences regarding their real-time products and services. 59 Therefore, it is submitted that real-time data analysis has become a major business resource for directors in South Africa. 60 Nonetheless, most South African companies are yet to fully embrace the use of big data analytics for decision making and to realise its benefits regarding quality decisions. 61 The Companies Act 2008 already provides a platform for employing big data analytics by allowing the storage of corporate information in electronic form. 62 It is submitted that big data analytics and augmented AI could help South African company directors to process large volumes of information effectively and make informed decisions. 63 If company directors are overwhelmed by the amount of information they have to consider before making a decision then they may fail to make an informed decision. 64 In make decisions pertaining to the probable consumer reaction to a new product or the expected sales volumes for their products. Davenport further states that prescriptive analytics combine data and algorithms to determine the best alternative to advance corporate performance by directors. South African company directors could use prescriptive analytics to decide whether or not to undertake certain projects taking into account the best interests of the account, see Davenport 2015 The Wall Street Journal 1. 57 Alalawneh and Alkhatib 2020 EJISDC 2; Motau and Kalema "Big Data Analytics Readiness" 2 states that only processed data is useful for decision making. Australian Securities and Investments Commission (ASIC) v Healey, 65 the respondent directors noted that some vital information was lost "in a very large board packet". 66 Digital technologies like AI and big data could assist South African directors to keep and process crucial information in order to discharge their fiduciary and statutory obligations effectively and to enhance their independence.
Companies from almost every industry and sector are committed to exploiting data to gain a competitive advantage because technological advances in the Internet have made available huge amounts of data to the directors. 67 The volume and diversity of data available to companies in South Africa cannot be analysed manually, and in most cases it exceeds the capacity of conventional databases. 68 The ultimate goal of capturing, processing and analysing big data for company directors in South Africa should be to enhance decision-making through establishing trends in people and organisations from different perspectives. 69 Some of the benefits of data-driven decision making which South African companies can enjoy if their directors employ big data analytics include higher market value, increased return on assets and equity, and optimum asset utilisation. 70 Scholars such as Provost and Fawcett also submit that datadriven decision-making increases firm productivity by 4 to 6 percentage points. 71 Some of the big data technologies that could be employed by company directors in South Africa to enhance decision making and independence include Hadoop, Hbase and CouchDB. 72 However, AI can be subject to bias, which is usually a result of two factors. Firstly, AI bias can be a result of human bias; that is, it can be a product of the algorithm designer/programmer's preferences. 73 This is known as designed bias. Designed bias could lead to distorted AI recommendations. Ultimately directors' independence will be compromised since they will be relying on biased AI recommendations. AI designers and programmers may deliberately develop software and algorithms to achieve certain intended goals. 74 For example, since more men than women are involved in the production of algorithms, it has been alleged that Internet job searches have been biased towards men. 75 Another practical example of designed bias relates to online retailers such as Amazon, which are capable of using differential pricing based on algorithm bias. 76 The problem of designed bias can be addressed through public interest regulation, as AI should not be elevated to assume the position of an autonomous decision-maker that determines the price of goods and interest rates. 77 The second source of algorithmic bias can be linked to the type of information fed into the system, since algorithms can process only the information that has been fed into them. 78 If biased information is fed into the AI system, biased results will be produced. In the second scenario, correct and accurate data is key. 79 Section 66(1) of the Companies Act 2008 provides that the business and affairs of a company must be managed by or under the direction of its board, which has the authority to exercise all of the powers and perform any of the functions of the company. 80 Company directors are appointed to reduce shareholders' agency costs by monitoring and scrutinising corporate management's conduct to ensure that they act in the company's best interests. 81 The current unpredictable economic landscape coupled with some recent corporate challenges has led to high demand for competent directors in South Africa. 82 As a result, reputable directors tend to serve on several boards at the same time. 83 The problem of busy directors is further compounded by the fact that South Africa has a limited pool of eligible black female directors. 84 95 Consequently, it follows that if a director misses some board meetings then the company's performance will be negatively affected. The independence of busy directors is questionable in that sometimes, due to time constraints, they may fail to consider all the relevant information before making a decision. Ultimately this results in conflicts of interest being overlooked, thereby impairing directors' independence. Big data analytics may assist and create more time for busy directors by processing huge amounts of corporate data in a short space of time.

Technology and the independence of company directors
The ability of directors to discharge their duties independently is one of the pillars of corporate governance in South Africa. 96 In South Africa all company directors are expected to exercise an independent judgment in their decisions and to act in the best interests of the company when discharging their duties. 97 The independence of company directors includes the exercise of objective, unfettered judgment, and the absence of an interest, position, association or relationship which, when judged from the perspective of a reasonable and informed third party, is likely to cause directors to be biased in decision-making. 98 The agency theory of corporate governance states that one of the traditional and primary ways to strengthen the independence of company directors is by including nonexecutive directors on the board. The King IV Code 2016 does not specifically prescribe the number of nonexecutive directors corporate boards should have except to state that the board should comprise a majority of non-executive members, most of whom should be independent. 100 The King IV Code 2016 further calls for company boards to comprise of an appropriate number of independent directors to improve company directors' independence. 101 What is appropriate depends on the circumstances of each company, taking into consideration factors such as the company's capacity, resources and impact. 102 Furthermore, all companies whose securities are publicly traded on the JSE are required to either have an independent non-executive board chairman or to appoint a lead independent director to enhance corporate independence. 103 Although companies with more independent directors tend to be more profitable than those with fewer independent directors. Petrin and Kamalnath argue that the longer independent directors stay in a company, the more they lose their independence. 104 Independent directors usually serve long terms and this sometimes create collegiality and even friendships with other executive directors, which affects their independence. 105 Groupthink and structural biases or friendships could undermine the independence of company directors. 106 This will ultimately affect the quality of decisions made. and structural bias is the integration and reliance on augmented AI and big data analytics. An AI decision support system will be influenced by data and not by feelings of collegiality. 107 Information asymmetry also negatively affects non-executive directors' monitoring and advisory roles, since they are not involved in the daily management of the company. 108  attempts to ensure that directors discharge their duties effectively. 119 Directors must fully consider all the statutory provisions and other selfregulatory mechanisms before making any decision. Failure to comply with the provisions of the Companies Act 2008 could lead to the personal liability of the affected company directors. 120 In the aftermath of the GFC, the boards of some companies were found to have failed to adequately exercise independent judgement in their decisions. 121 Previous discussions on the independence of company directors seem to have focussed more on financial interest, probably due to the shareholder wealth maximisation approach. 122 However, it must be noted that directors need to be intellectually and psychologically independent to perform their duties optimally. 123 The presence of independent directors on the board and various committees has not always added the expected value due to information asymmetry and structural bias. 124 Furthermore, company directors usually have to make important decisions in a short space of time and independent directors might not be able to read through all the relevant information on short notice. 125 Being de facto corporate outsiders, independent directors face constraints as they usually serve on several boards of companies concurrently. 126 The integration of AI and big data analytics could enhance director independence by minimising bias in decision making.

Technology and the accountability of company directors
Accountability occurs when a party is held responsible for something and is able to explain its actions and/or decisions. 127 According to the agency theory of corporate governance, directors should be accountable to the company shareholders. The accountability of company directors is one of 119 the key principles of corporate governance in South Africa. 128 There are various internal and external accountability mechanisms which companies in South Africa can employ to enhance director accountability. Shareholders' power to appoint and remove directors is one of the primary accountability mechanisms employed by companies in South Africa. 129 The ability of shareholders to amend the memorandum of incorporation and access to shareholder meeting minutes are further accountability mechanisms. 130 Board meeting frequency, adequate reporting and easy circulation of corporate information, access to the shareholders' register, and directors' ability to request a meeting at any time are additional director accountability mechanisms. 131 The liability of company directors in South Africa stems from their accountability. 132 In turn, director accountability emanates from the duties directors owe to the company. The Companies Act 2008 has enhanced directors' accountability by partially codifying the directors' duties, and a breach of these duties will result in liability. 133 These duties arise from the fact that directors hold a fiduciary relationship to the company and shareholders. 134 The Companies Act 2008 provides that a company director must act with a degree of care, skill and diligence. 135 The requirement of diligence is a novel addition to the directors' partially codified duties of care and skill. 136 Diligence implies caution and attention. 137 Therefore, a diligent director attends board meetings, pays attention to relevant paperwork and is devoted to the company's business, affairs and practices. 138

Do boards of South African company directors need technology experts?
Quality informed decisions at board level are a result of accurate expert advice. Some companies such as Kodak, which at some point seemed to be too big to sink, came to an unprecedented demise because they could not keep up with technological changes. 160 Technology governance has become so essential to business models and practices that it should be 152 Chen General technical advisors focus only on ensuring that companies are performing better than their rivals. 170

Concluding remarks
The integration and reliance on technology by company directors in South Africa to enhance their independence and accountability is necessary to keep up with the dynamic and data-driven nature of contemporary society. A combination of digital technologies such as AI, cloud computing, big data analytics and cognitive systems has the potential to improve director accountability and independence in South Africa. Other possible benefits of incorporating technology into the South African corporate governance structure include greater market value, increased return on assets and equity, and optimum asset utilisation. 171 The Companies Act 2008 generally allows directors to rely on technology to enhance their independence and accountability. For example, sections 1 and 24(1)(a) of the Companies Act 2008 allow companies to keep board minutes and any other documents in electronic or any other format for seven years. This facilitates the use of big data analytics and other decision-support tools to enhance company directors' independence and accountability.
As established above, there are some loopholes in current South African company law regarding the independence and accountability of company directors. It is submitted that the lack of proper guidance in terms of the Companies Act 2008 and self-regulatory instruments such as the King Codes allows directors to serve on numerous boards of directors. This results in busy directors who often face time constraints, and their independence may be compromised in the process. Moreover, the lack of trust in AI measures could be another barrier to the use of technological measures to enhance company directors' accountability and independence in South Africa. Difficulties in accessing company records by stakeholders may also undermine company directors' accountability. Human fallibility and natural computational limitations are some of the weaknesses of company directors that may result in a call for augmented AI to improve their decision making. further recommended that all companies should integrate and utilise innovative technology to enhance the accountability and independence of directors in South Africa. Furthermore, AI and other innovative technological measures could promote the accountability of directors by making corporate records more readily available to all the relevant stakeholders. It is also submitted that the Institute of Directors of South Africa (IoDSA) should conduct regular technological literacy workshops and seminars that are mainly aimed at equipping directors, with the relevant knowledge and skills. This could ensure that company directors keep up with any latest decision-making support technologies. Additionally, such educational programmes by the IoDSA could also help to encourage company directors to learn to trust and utilise AI measures when executing their duties and responsibilities.
It is further recommended that all South African companies should appoint a technological expert to their boards of directors. Board chairpersons should also evaluate their companies' preparedness to handle technological integration by mapping the technological expertise required to their current non-executive directors' pool. 172 This should be done to determine if there is anyone from the current board who qualifies to be a technological expert or if there is a need to hire someone external. However, some small companies might not possess the financial capacity to acquire the services of a technology expert. In this regard, it is submitted that such companies might commence by inviting experts in technology to attend their board meetings on an ad hoc basis until such a time as they are capable of appointing a full-time technology expert.