Morgan Stanley
Institute for Sustainable Investing

How Boards and Executives Are Governing the Rise of AI

Aug 27, 2026

As artificial intelligence adoption accelerates, companies are assessing how boards and executives oversee its risks and opportunities. A Morgan Stanley Institute for Sustainable Investing analysis explores how corporate leaders are building governance structures to support responsible AI use.

Key Takeaways

  • Boards are building depth in AI expertise. Two-thirds of S&P 500 companies have at least one non-executive director with AI skills, while 24% have three or more—building towards the depth of AI expertise that boards routinely have for other technical skills.
  • Data risks dominate executives’ concerns today, but priorities may shift as AI adoption scales. Among surveyed AI governance executives, 56% cite data risks as their top concern today, while regulatory compliance, legal risks and execution risks are expected to become more prominent over the next two to three years.
  • Human oversight remains central to AI governance. 41% percent of executives say separate human review in higher-risk situations is the most important guidance for employees using AI—more than double the next most common response.

As artificial intelligence becomes more deeply embedded in corporate workflows, companies are navigating a new set of governance questions: Who should oversee AI strategy? What risks are most material? And what control measures do they need to implement?

 

New analysis from the Morgan Stanley Institute for Sustainable Investing looks at these questions from two angles. First, we examined board composition within the S&P 500 to assess AI skills among non-executive directors, drawing on a dataset from Institutional Shareholder Services (ISS) compiled in June 2026. Second, the Institute surveyed 200 executives involved in AI governance strategy at global corporates to explore views on how AI strategies are being implemented.

 

Together, the findings suggest that AI governance is becoming a board- and management-level priority, but approaches remain uneven. Companies are building expertise, assigning accountability and defining controls at different speeds, underscoring the need for governance models that can evolve as AI use expands.

 

How Boards Are Building AI Skills

One-quarter of Boards Have Multiple Sources of AI Expertise

 

Across the S&P 500, 68% of companies have at least one non-executive director—i.e., a board member with oversight responsibilities but no day-to-day involvement in the running of the company—with AI skills, according to the ISS data. One-quarter have three or more non-executive directors with AI skills, building towards the depth of experience that boards can routinely draw on in other technical skill areas. Almost all (96%) of S&P 500 companies have three or more non-executive directors with Technology skills, and 80% have three or more with Information Security skills.

 

AI expertise also varies by sector. Information Technology and Real Estate companies have the highest rates of board-level AI skills, with 34% and 32% respectively having three or more non-executive directors with AI skills. Energy is lowest, with no companies in the dataset having three or more non-executive directors with AI skills, followed by Communication Services at 15% and Utilities at 16%.

 

Source: Institute analysis of ISS data as of June 2026.

 

Who Brings AI Expertise to the Boardroom?

 

Today, almost 700 non-executive directors serving on S&P 500 boards—around one-fifth of the total—are identified by ISS as having AI skills. They are more likely than others to have Technology and Information Security skills, as well as CTO experience.

 

The findings also suggest that boards are not relying solely on new appointments to strengthen AI oversight. Almost two-thirds (62%) of non-executive directors with AI skills were appointed in 2022 or earlier, similar to the broader board population (63%). As a result, these non-executive directors are unlikely to have been in an executive role during a company’s AI adoption phase—suggesting that companies do not necessarily require this experience to view a non-executive director as qualified in this area. 

 

AI Oversight Is Spreading Across Board Committees

Some companies have begun to define where responsibility for AI governance sits at the board level, although in many cases this is still in progress. The Institute for Sustainable Investing’s analysis found that non-executive directors with AI skills are fairly evenly distributed across the three main board committees: 46% sit on Audit committees, 39% on Nominating committees and 42% on Compensation committees.

 

That distribution differs from non-executive directors with Information Security skills, which are more concentrated on Audit committees—typically where the responsibility for risk management lies (outside of those companies, mostly in Financial Services, with a dedicated Risk committee). The broader spread of AI skills may indicate that boards are approaching AI as broader than risk management, reflecting its comprehensive impact across the business. 

Boards are responding to this period of rapid change. We expect continued efforts to deepen AI knowledge among existing non-executive directors, as well as active consideration of AI skills in recruiting new board members. AI expertise has broad relevance across board committees and across sectors, enabling companies to capture the full opportunity from AI adoption while also ensuring strong oversight.
Melissa James
Managing Director, Vice Chairman of Global Capital Markets and Head of the GCM ESG Center of Excellence

How Companies Are Managing AI Risks

The Institute’s 2026 Sustainable Signals: Corporates survey, conducted in April 2026, included a subset of 200 executives involved in AI governance at global corporates with revenues of more than over $100 million. Their responses to the survey offer a view into how companies are prioritizing AI risks and putting governance measures into practice.

 

Data Risks Lead Today, but Priorities Are Shifting

Among AI governance executives in the survey, data risks are the most material concern today: Ninety percent of respondents say data risks, including privacy, cybersecurity and discrimination, are material sources of risk from AI adoption. More than half (56%) identify data risks as the top risk from their company’s use of AI today.

 

Looking ahead, respondents expect other risks to become more salient as AI adoption scales. Over the next two to three years, 35% expect regulatory compliance or legal risks to be their top concern, while 32% highlight execution risks.

 

Source: Institute for Sustainable Investing, April 2026

Companies Are Defining Who Owns AI Governance

AI governance leaders often work across multiple functions, most commonly strategy (26%), marketing and communications (20%) and business development and sales (17%). The survey also points to some overlap between AI governance and sustainability roles: One-third of sustainability decision-makers in our sample are also close to their company's AI governance strategy, either as decision-makers or with comprehensive knowledge.

 

Around 90% of respondents say their companies have defined, or are in the process of defining, where responsibility for AI governance and risk management sits.  Just under half say responsibility is fully allocated across corporate functions, senior executives and the board, while a further 45% say this work is in progress.

 

Companies are also putting specific model controls in place, though progress varies. Across the full survey group, 41% say their company has a formal inventory of AI models in use with assigned ownership fully in place, and the same share say formal model testing and validation protocols are fully in place.

 

Human Review Still Matters

Companies are also giving employees guidance on AI use. The most common forms of guidance are that only company-approved AI tools may be used for work-related tasks, cited by 71% of respondents, and that AI outputs must be referred for separate human review in higher-risk situations, cited by 69%.

 

When asked to identify the most important piece of guidance, separate human review stood out. Forty-one percent of respondents selected this option, more than double the next highest response. 

 

Source: Institute for Sustainable Investing, April 2026

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