Miran Legal

Attorney

03.01.2023

The Legal Status Of Artificial Intelligence And Possible Effects On Company Management

       Artificial Intelligence (AI), a term coined to describe the capability of digital computers or computer-controlled robots to undertake tasks typically associated with intelligent entities, is frequently utilized in the pursuit of creating systems endowed with distinctly human cognitive functions. These functions include reasoning, assigning meaning, generalization, and learning from historical data. Following the advent of the modern concept of the computer in the 1940s, and despite continuous enhancements in computational speed and memory capacity, there remains an absence of any software capable of emulating the human aptitude for adaptability in tasks of broader scope or those demanding extensive information. Consequently, the full integration of artificial intelligence in fields that rely heavily on human flexibility, such as legal practice, commerce, philosophy, and sociology, remains a future objective rather than a present reality
 

            On the other hand, some programs have reached the performance level of human specialists and professionals in performing certain tasks. Thus, the use of artificial intelligence in various applications, such as medical diagnosis, computer search engines and voice/handwriting recognition is rapidly expanding. This leads to the widespread use of artificial intelligence, especially in areas such as e-commerce, payment control systems, chatbots, pricing, intelligent logistics.

 

            What does the concept of intelligence mean? Even the simplest human behavior is considered an indicator of intelligence, while the most complex behavior of an animal is never considered an indicator of intelligence. What is the main difference here? In general, human intelligence is not explained by a single feature; but in the form of combinations of multiple features. The concept of artificial intelligence, based on this explanation, includes learning, reasoning, problem solving, perception and language use features.

 

            The rapid development of artificial intelligence leads to its widespread use in all sectors. The use of artificial intelligence is becoming more widespread even in the field of law, which keeps up with technology slower compared to other sectors. AI is involved in search engine, e-discovery, contract analysis, case prediction and document automation in the field of law. The use of artificial intelligence in these areas provides lawyers with the opportunity to access information more efficiently, faster and cheaper.

 

            In turn, it should be noted that in addition to the benefits of using artificial intelligence, it also has a number of risks in its structure. Artificial intelligence has reached a level that greatly exceeds human capabilities by analyzing a large number of data using the algorithms it embodies. Therefore, the artificial intelligence increasing its capacity independently is an uncertainty that damages the reliability of artificial intelligence. In the event that the risk in question occurs, since various damages may be caused (for example, human rights violation), it will be necessary to take legal measures. The question of which legal grounds to base the liability that will arise for damages that artificial intelligence may cause is one of the main topics of artificial intelligence law.

 

            The possibility of putting artificial intelligence in a position to make decisions on various events and situations has recently been considered by the company managements. For many years, studies have been carried out to expand the areas of use of artificial intelligence in companies. For example, in some companies, artificial intelligence programs are used in recruitment processes. But beyond such examples, is it possible to use artificial intelligence as a member of the board of directors of a company?

 

            For example, let's think of a company. Let an artificial intelligence algorithm be assigned to the current board of directors of the company and have voting power, as well as other members. It will be accepted by everyone that the artificial intelligence in question can perform due diligence by analyzing previous data, revealing possibilities that were forgotten or unnoticed by people. However, in this situation, it is impossible to accept that an artificial intelligence that has neither the title of a natural nor a legal entity in a legal sense has legally acquired the status of a company manager. The argument that artificial intelligence is a “member of the board of directors with the authority to make observations” is more acceptable from a legal point of view. However, given that the law must keep up with this developing technology sooner or later, it is possible that artificial intelligence will be nominated to become an essential member of the board of directors in the future. This is a very important change for corporate law.

 

            Nowadays, there are problems such as the inability of the company's boards of directors to convene, to make decisions, and the managers to work fully efficiently. Considering that artificial intelligence is an algorithm and a problem-solving-oriented formation, it can be concluded that there are advantages of this aspect that can solve these problems. Additionally, people's working hours is out of the question for artificial intelligence. Artificial intelligence is in a position to be available at all times. This means that the board of directors meets and take decisions quickly.

 

            In addition to these advantages, the legal order of almost no other country in the world is ready for artificial intelligence to be counted as a member of the board of directors. As in most legal orders, in Turkish law, the person who will be a member of the board of directors must be in the status of a person by the legal order. Article 359 of the Turkish Commercial Code provides that Stock Companies will have a board of directors consisting of one or more members appointed by the articles of association or elected by the general assembly. If a legal entity is elected as a member of the board of directors, only one natural entity determined by the legal entity on behalf of the legal entity, together with the legal entity, is also registered and announced. Only this registered natural entity can participate in meetings and vote on behalf of the legal entity. It is necessary that the members of the board of directors and the natural entity to be registered on behalf of the legal entity are fully competent. As can be understood from the wording of the article, in Turkish law, the members of the board of directors may be natural or legal entities. However, even if it is a legal entity, representation by a natural entity is mandatory. In this regard, according to the company law rules of the United Kingdom, Australia, Germany, Italy and Switzerland, it is also required that the company's managers be natural entities. In countries such as the Czech Republic, France, Belgium, it is possible to appoint a company manager as a natural and legal entity. Looking at the overall picture in the world, it seems that when determining a company manager, a legal personality is required. Therefore, it does not seem possible for artificial intelligence, whose legal status is controversial, to be in a managerial position according to today's legal systems. However, given the pace of technological development, legal systems will also have to integrate themselves into the developing technology.

 

            Although there are opinions that argue artificial intelligence should have a legal personality with rights and responsibilities in the Turkish doctrine (as well as in the doctrines of other countries), there has not yet been a detailed regulation on this issue. It is seen that legal systems are still distant to the idea of artificial intelligence. This is quite understandable. Indeed, there are examples that show that artificial intelligence begins to act independently, going beyond the will of the people who designed it. After a while, artificial intelligence improves its self-learning ability and, as a result, adds new features to the its programmed features. These developments and changes in artificial intelligence may sometimes cause harm. In such cases, legal gaps arise regarding who will be held responsible for the damages in question.

 

            Let's assume that artificial intelligence is the company manager. Who will be responsible if artificial intelligence damages the company because it is on the board of directors? The artificial intelligence, its developer, or will it be a case of collective responsibility? While there is a possibility that artificial intelligence will act independently of its developer after a while, in this case, will it be legally fair to deduct that the responsibility of the one who developed the artificial intelligence will be lifted?

 

            Article 553 of the Turkish Commercial Code regulates the responsibility of the members of the board of directors of the joint stock company. The article states; "The founders, board members, executives and liquidators are responsible for the damage they caused to their company, shareholders and creditors if they violate the fundamental contractual obligations". As can be understood from the article, the member of the board of directors was held responsible not for the entire damage, but for its extent of defect. A new problem is set forth here about how to determine the defect rate of artificial intelligence. While the legal status of artificial intelligence has not yet been clarified, how to calculate the responsibility rate is also unclear. However, if artificial intelligence is accepted to participate in the company's management while its legal status has not yet been determined, malicious persons may establish companies where there is no responsibility. This will bring about a new problem within the legal system. Due to the described possibilities, it is impossible for them to participate in the company's management unless the uncertainty about the legal status of artificial intelligence disappears.

 

        CONCLUSION
       
The principles of Corporate Law do not contemplate the governance of a corporation by an artificial intelligence entity. Corporate governance, particularly the role of the Board of Directors, is inherently strategic and involves key decision-making processes. While decisions are expected to be rational and consistent, the human element of conscience also plays a crucial role. The human brain’s ability to integrate emotional intelligence with logical reasoning and computational analysis is a facet not replicated by artificial intelligence. As a result, legal frameworks impose duties of care, loyalty, honesty, and benevolence upon board members. Additionally, these individuals are often called upon to make risk-laden decisions, a scenario where the initiative and judgment of humans, as opposed to the numerical output of AI, are indispensable. The potential future resolution of these complexities notwithstanding, the current limitations of AI pose enduring challenges. Such challenges reinforce the legal sector’s ongoing caution and reluctance to fully integrate artificial intelligence, particularly in contexts bearing significant liability for decision-induced harm.
These discussions make a significant contribution to the field of information technology law, not only in defining the relationships between artificial intelligence and corporate governance, but also in determining the legal framework of the technology and information sector.