The AI-Ready Director: What Health and Life Sciences Boards Now Require

The qualities of a good director have not changed. What has changed is the risk directors must oversee, and the record they will be asked to show that they did.

In Brief

The Problem. Most descriptions of the ideal director list sound virtues, such as industry knowledge, strategic judgment, financial literacy, and integrity, but say nothing about the oversight duty or about artificial intelligence (AI), which now reaches care, products, evidence, and the workforce.

Why It Persists. Boards recruit for the competencies they already understand, and directors with technology governance experience are scarce, so the gap stays out of view until an incident exposes it.

What Boards Should Do. Restate each director competency in terms of what AI changes, record it in the skills matrix, and hold the chief executive to a named owner, a current inventory, and a reporting cadence.

Board members and strategic advisors in healthcare and life sciences companies matter more now than at any point in my career. In 2023 I described eight qualities these roles must embody. My argument here is that the list still holds, but each quality must now be read against two developments: AI has become part of how care is delivered and how products are developed, and Delaware courts have made the board's duty of oversight more concrete. A director who meets the old description but cannot oversee AI no longer meets the standard.

Directors know it. In the PwC 2026 Annual Corporate Directors Survey, 71 percent of directors named AI as the top skill their boards need to strengthen (Hutchinson, 2026).

Strategic advisors need the same knowledge, and much of what follows applies to them. They do not, however, carry a director's fiduciary duty. Where this article speaks of duty, it speaks of directors.

The Duty Behind the Competencies

Delaware law governs many United States corporations and shapes practice elsewhere. Under it, directors must make a good-faith effort to put in place a reasonable system of monitoring and reporting. That duty traces to In re Caremark International Inc. Derivative Litigation, 698 A.2d 959 (Del. Ch. 1996). In Marchand v. Barnhill, 212 A.3d 805 (Del. 2019), the Delaware Supreme Court let an oversight claim proceed against a food manufacturer's board. The board had no system for food safety, a risk the court called "mission critical" (Marchand v. Barnhill, 2019).

On January 25, 2023, the Court of Chancery held in In re McDonald's Corp. Stockholder Derivative Litigation, 289 A.3d 343 (Del. Ch. 2023), that corporate officers owe a comparable duty of oversight (Micheletti, 2023). On September 2, 2025, the same court sustained oversight claims against directors of the drug maker Teligent. The complaint alleged a long period with no board committee for compliance with the Food and Drug Administration (FDA). It also alleged a reporting system that left escalation to management's discretion (Bonadurer, 2026).

No Delaware court has yet ruled on a board's oversight of AI. For hospital systems and device companies that depend on AI in their products and operations, I think it is reasonable to expect AI to be treated as a mission-critical compliance risk. The duty is procedural: the board must have asked, been told, and acted. The minutes are the evidence. Each of the eight competencies below is measured against that standard.

Deep Industry Knowledge

Board members and strategic advisors must understand the healthcare ecosystem in depth. That includes healthcare policy, the regulatory environment, and reimbursement models, along with the products and services their own company provides. A grounding in science and medicine matters most in the life sciences and medical device sectors, where a director must judge what the clinical evidence does and does not show.

AI adds a test of that knowledge: can the director see when a deployment changes the organization's obligations? Colorado's revised AI law, for example, takes effect on January 1, 2027. Its partial exemption for entities covered by the Health Insurance Portability and Accountability Act (HIPAA) does not extend to employment decisions, and covered entities must still give patients a general notice of their use of such technology (Darch et al., 2026). A director need not interpret each rule. A director should know which rules apply and who in management owns them.

Strategic Vision

Unlike operating executives, board members and strategic advisors must provide broad strategic vision. They need to understand industry trends, anticipate change, and give guidance that fits the company's long-term objectives. That includes the direction of personalized healthcare, precision medicine, genomics, value-based care, and new models of care delivery.

AI now runs through each of those trends, and its returns are uneven. In a September 2026 survey of 226 healthcare executives, self-reported returns averaged 3.5 times spend, led by provider revenue cycle uses at 4.0 times; provider clinical uses returned 2.9 times. The figures are self-reported and not independently verified (Guerra & Kraus, 2026). A director with strategic vision asks whether the organization's AI investments follow its strategy or simply follow the fastest payback.

Governance and Risk Management

Board members play a central role in corporate governance and risk management. They must ensure that the organization complies with laws and regulations, maintains high ethical standards, and manages risk effectively. Understanding the regulatory environment and intellectual property law is essential in sectors as heavily regulated as healthcare and life sciences.

With AI, three risks now overlap. Clinical risk is harm to patients from an incorrect output. Operational risk is dependence on a vendor model that changes without notice. Cyber risk is exposure of the data that trains or feeds a model. A director should expect one inventory of AI systems that lets the board see all three for each system, and should know which committee receives it. The Teligent decision shows what happens when no committee owns a mission-critical compliance risk (Bonadurer, 2026).

Financial Acumen

Financial acumen remains a core qualification. Board members and advisors must understand financial reports, assess fiscal health, contribute to financial planning, and ensure that the organization makes sound financial decisions. In healthcare this includes the economics of reimbursement and pricing strategies that are competitive, sustainable, and compliant. The margin for error is thin: the median year-to-date hospital operating margin was 1.9 percent in February 2026 (Dyrda, 2026).

Financial literacy now also covers the economics of AI: the cost of models, data, and validation, and the terms on which the organization licenses data and technology in or out. Upfront, milestone, and royalty payments can fund growth. The same agreements decide who may train on the organization's data and who carries liability for a model's output. Directors should read those terms as risk terms, not only as revenue.

Technological Fluency

Board members and strategic advisors do not need to be technologists. They do need a working grasp of technology and its uses in healthcare, including AI, machine learning, real-world data and evidence, software as a medical device (SaMD), and wearable devices. The scale is no longer marginal: the FDA had authorized more than 1,400 AI-enabled medical devices as of its March 4, 2026 database update (Reuter & Han, 2026).

Fluency means enough understanding to ask where AI is used, what it decides or influences, how it was validated, and what happens when it fails. Avancer calls this posture "nose in, fingers out": close attention to the questions, no hand on the operation. Few boards have it yet. Disclosed AI expertise among S&P 500 directors rose only from 1.5 percent in 2021 to 2.7 percent in 2025, and 25 percent of executives surveyed rated their boards as having low or no AI fluency (The Conference Board, 2026).

Stakeholder Engagement

Effective board members and advisors engage a wide range of stakeholders: employees, patients, providers, payers, regulators, and investors. They advocate for the organization, help negotiate partnerships, and build the relationships that support its strategic goals.

AI makes this competency practical. Clinicians expect a voice: in a March 2026 American Medical Association (AMA) survey, 81 percent of physicians reported using AI, and 85 percent wanted to be consulted or directly involved in decisions about its adoption (American Medical Association, 2026). Directors should test whether management has heard from the people who use or are affected by a system before it is approved, and whether patients are told when AI plays a role in their care.

Ethics and Social Responsibility

Healthcare carries its own ethical obligations, among them patient privacy and the equitable distribution of care. Board members and strategic advisors must bring a strong ethical compass. They must also recognize the organization's social responsibilities and ensure that its practices contribute positively to society.

Automated decisions make these obligations concrete. Federal rules under Section 1557 of the Affordable Care Act required covered entities to review patient care decision support tools for potential bias by May 1, 2025, although the extent of enforcement under the current administration remains uncertain (Pressly & Leeds, 2025). In Estate of Lokken v. UnitedHealth Group, plaintiffs allege that an AI tool replaced physicians' judgment in post-acute coverage decisions; the company disputes the allegations. On March 9, 2026, a federal magistrate judge ordered discovery that reaches the insurer's internal AI review board (Greenberg et al., 2026). A director's ethical judgment should show up as conditions attached to approvals: what the system may not be used for, what monitoring is required, and when the board will review it.

Commitment to Diversity and Inclusion

In my experience, a board that brings a range of backgrounds and perspectives asks better questions and is harder to capture by a single view. That matters more with AI, where the people a system may fail are often the people least represented in its design and in the room that approves it.

The external requirements have changed. On December 11, 2024, the United States Court of Appeals for the Fifth Circuit, sitting en banc, vacated the Securities and Exchange Commission's approval of Nasdaq's board diversity disclosure rules. Investors and proxy advisors nonetheless continue to weigh board composition (Paul, Weiss, Rifkind, Wharton & Garrison, 2024). Breadth of perspective is now a choice the board makes for the quality of its decisions, not a disclosure it makes to an exchange.

What the Board Should Expect of the Chief Executive

The board does not run AI programs; it holds the chief executive accountable for them. Directors should expect the chief executive to name a single accountable executive for AI and to keep a current inventory. They should expect a report on AI risk at a set cadence, and clear communication from the chief executive when an AI-related incident occurs.

Directors should also expect the chief executive to understand the licensing and partnership structures through which the organization acquires AI capability. Those structures allocate risk as much as they allocate revenue. I have found that this is where a chief executive's command of the business shows most clearly in an AI discussion.

Building the Board for It

A board can close gaps in three ways. It can provide education for all directors. It can recruit one or more directors with technology governance experience. It can assign AI oversight to a named committee with a written charter. The skills matrix in the proxy statement or the annual governance review is the natural place to record which directors bring which competencies.

The Strongest Objection: Recruit an Expert Instead

The strongest objection is that this asks too much of every director. A board could simply recruit one director with deep AI experience and rely on that person. Recruiting such a director is often wise. It is not enough. A single expert can become the board's only channel of judgment, and the others then defer rather than ask. The oversight duty belongs to the board as a whole, and the record must show that the board, not one member, asked and acted. The expert raises the quality of the questions; the fluency of the other directors ensures they are asked at all.

None of these steps substitutes for the questions directors ask in the boardroom and the record those questions leave.

For the Board

• Which committee holds AI oversight, and does its charter say so?
• Do we have a current inventory of AI systems, with a named accountable executive for each high-risk use?
• When did the board last receive a report on AI risk, and do the minutes show what we asked and decided?
• Does our skills matrix identify which directors bring technology governance experience, and what education have the others received?
• What conditions did we attach to the last AI deployment we approved, and who reports back on them?
• Before we approved it, did we hear from the clinicians and patients it affects?

Explore the board question sets in the Avancer AI Governance Navigator, or book a conversation about a Board Readiness Workshop.

References

American Medical Association. (2026, March 12). AMA: AI usage among doctors doubles as confidence in technology grows [Press release]. https://ama-assn.org/press-center/ama-press-releases/ama-ai-usage-among-doctors-doubles-confidence-technology-grows

Bonadurer, J. (2026, February). Delaware court denies dismissal of Caremark oversight claims in Teligent case, highlighting board and officer compliance obligations. Jenner and Block. https://www.jenner.com/en/news-insights/publications/delaware-court-denies-dismissal-of-caremark-oversight-claims-in-teligent-case-highlighting-board-and-officer-compliance-obligations

The Conference Board. (2026, April 22). Report: In the S&P 500, disclosure of AI risks surges from 12% to 83% [Press release]. PR Newswire. https://digital-release.wowktv.com/business/press-releases/cision/20260422NY41234/report-in-the-sp-500-disclosure-of-ai-risks-surges-from-12-to-83

Darch, J. E., Brooks, P., Daudi, S., Hinckley, D., & Kaye, A. (2026, May 19). Colorado scales back AI law, with targeted implications for health care. Ropes and Gray. https://www.ropesgray.com/en/insights/alerts/2026/05/colorado-scales-back-ai-law-with-targeted-implications-for-health-care

Dyrda, L. (2026, May 11). Hospital profitability: 20 things to know in 2026. Becker's Hospital Review. https://www.beckershospitalreview.com/finance/hospital-profitability-20-things-to-know-in-2026/

Greenberg, D. S., Heilman, K., & Shlaferman, H. Z. (2026, April 23). Federal court orders broad discovery against UHC in AI coverage denial lawsuit. ArentFox Schiff. https://www.afslaw.com/perspectives/alerts/federal-court-orders-broad-discovery-against-uhc-ai-coverage-denial-lawsuit

Guerra, S., & Kraus, S. (2026, September 30). The 2026 healthcare AI ROI scorecard. Bessemer Venture Partners. https://www.bvp.com/atlas/the-2026-healthcare-ai-roi-scorecard

Hutchinson, D. (2026, September 23). Most board directors say AI skills are lacking, survey shows. Bloomberg Law. https://news.bloomberglaw.com/esg/most-board-directors-say-ai-skills-are-lacking-survey-shows

In re Caremark International Inc. Derivative Litigation, 698 A.2d 959 (Del. Ch. 1996).

In re McDonald's Corp. Stockholder Derivative Litigation, 289 A.3d 343 (Del. Ch. 2023).

Marchand v. Barnhill, 212 A.3d 805 (Del. 2019). https://law.justia.com/cases/delaware/supreme-court/2019/533-2018.html

Micheletti, E. B. (2023, June 7). The Court of Chancery holds that corporate officers, like directors, owe a duty of oversight. Skadden, Arps, Slate, Meagher and Flom. https://www.skadden.com/insights/publications/2023/06/insights-the-delaware-edition/the-court-of-chancery-holds-that-corporate-officers-owe-duty-of-oversight

Paul, Weiss, Rifkind, Wharton & Garrison. (2024, December 16). Fifth Circuit strikes down Nasdaq board diversity disclosure requirements. https://www.paulweiss.com/insights/client-memos/fifth-circuit-strikes-down-nasdaq-board-diversity-disclosure-requirements

Pressly, D. F., & Leeds, E. I. (2025, April 17). Section 1557: Deadlines approach, but long-term prognosis unclear under executive orders. Ballard Spahr. https://www.ballardspahr.com/insights/alerts-and-articles/2025/04/section-1557-deadlines-approach-but-long-term-prognosis-unclear-under-executive-orders

Reuter, E., & Han, J. Y. (2026, May 27). AI in medtech is booming. Track new devices here. MedTech Dive. https://www.medtechdive.com/news/ai-medtech-track-new-devices-fda/748397/