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Cardozo Law Review

Abstract

As quantum computing and AI surge toward mainstream adoption, how corporate directors satisfy their duties of care and oversight requires some fiduciary recalibration. The current fiduciary framework that allows directors to escape liability absent “gross negligence” or “utter failure” in oversight may no longer be defensible in a world where advanced analytics offer unprecedented capacity to model, monitor, and foresee significant corporate risks. Behavioral economics makes clear that humans (including corporate managers) remain vulnerable to a variety of biases and heuristics shortcuts in decision making. Technological evolution provides the means to correct such cognitive distortions if boards take an active role in harnessing data. Integrating these insights paves the way for doctrinal reform that merges classical concepts of reasonableness with an updated recognition of the tools now at directors’ disposal. The proposed enhancement of the current fiduciary framework hinges on elevating the fiduciary standards from low-threshold “good faith” to a dual obligation of “reasonable tech-enabled diligence” in decisions and “proactive oversight” in monitoring. Courts need not prescribe the minutiae of quantum or AI implementations, but they could articulate that ignoring widely available analytics or failing to heed the warnings such tools generate may constitute a breach of care or oversight. By layering in safe harbor provisions for good faith adoption of advanced systems and calibrating requirements to firm size and complexity, the law can avoid imposing unworkable mandates while still nudging boards toward best practices. Furthermore, embedding stakeholder considerations into the data that boards must examine reflects the modern reality that many shareholders and the marketplace at large demand ethically and socially informed corporate strategies. Ultimately, this realignment serves the core purpose of fiduciary law: ensuring that directors act as conscientious stewards of the corporations entrusted to them. Moving beyond “gross negligence” and “utter failure” does not create a guarantee of infallibility. It does, however, align legal principles with the technological and behavioral capabilities of the twenty-first century, bridging the gap between a time when boards could plausibly claim ignorance and a future where advanced analytics are a basic component of responsible governance. In that future, the next wave of large-scale corporate scandals might be less likely to stem from willful blindness or unchallenged biases, offering a more stable economic and social foundation in which corporations can innovate without succumbing to the oversight lapses of the past.

Disciplines

Business Organizations Law | Law | Science and Technology Law

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