126 M C K I N S EY Q UA RT E R LY A RTIFICIAL INTELLIGENCE— including its many offspring, from machine learning mod els to AI agents—is much more than the latest wave of technology. It is a general-purpose capability that is poised to touch almost every sector, function, and role, with the power to reshape how companies compete, operate, and grow. With trillions of dollars potentially at play and implications that could be exis tential to companies, AI is closer to a reckoning than a trend. And that is why AI is a board-level priority. - - More than 88 percent of organizations report using AI in at least one business function; however, board governance has not matched that pace. While interest in AI seems to have spiked after the intro duction of ChatGPT, as of 2024, only 39 percent of Fortune 100 companies disclosed any form of board oversight of AI—whether through a committee, a director with AI expertise, or an ethics board. - Even more telling, a global survey of directors found that 66 percent report their boards have “limited to no knowledge or experience” with AI, and nearly one in three say AI does not even appear on their agendas. AI-savvy boards outperform their peers by 10.9 percentage points in return on equity. Having a low rate of AI adoption by boards might seem obvious at first, given the often-sizable invest ments many companies have already made in AI and the limited returns to date. AI adoption has not yet led to significantly improved performance for most businesses, with companies reporting modest levels of savings and new revenue. - In our experience, however, many of the issues plaguing AI programs—such as a lack of strategic coherence and unclear value dynamics—are precisely the ones that boards are best positioned to address. In other words, boards have an important role to play in redressing the disappointing outcomes. That role is grounded in developing a strong understanding of how AI can change the business, both for better and for worse. Boards, therefore, need to become fluent in AI, not necessarily as a technol ogy, but as a catalyst that affects the competitive dynamics of their sector. This might mean, for exam ple, understanding how general-purpose AI systems can undermine a specific product line or service or how an AI-powered capability creates an opportunity to expand into a new market or adjacency. - - AI-savvy boards will be able to help their com panies navigate these risks and opportunities. According to a 2025 study from the Massachusetts Institute of Technology, organizations with digitally and AI-savvy boards outperform their peers by 10.9 percentage points in return on equity, while those without are 3.8 percent below their industry average. - What boards should do, however, is the bigger question—and the focus of this article. The intensity of the board’s role will depend on the extent to which AI is likely to affect the business and its competitive dynamics and the resulting risks and opportunities. Those competitive dynamics should shape the com pany’s AI posture and the board’s governance stance. - To better understand how boards can evolve to address AI, we conducted interviews with directors from 75 boards across various industries and geog raphies. We also analyzed the findings from the - McKinsey Global Survey on the state of AI and its data sets, which cover thousands of executives glob ally. This analysis highlights two priorities for boards: - Defining the company’s posture toward AI adop tion. Most organizations still lack a clear view of how AI fits into their strategy or transformation agenda. Without alignment between the board and management, oversight becomes either superficial or paralyzing. - Tailoring the governance model to match the company’s AI posture. The board’s task is to cal ibrate its role around where to engage, what to oversee, and the cadence to use. - This article explores how boards can address these two priorities and also lays out six governance actions that every board should consider. AI Reckoning