AI, geopolitics, and the boardroom: The new geotech landscape

Intro/Outro: Welcome to the Corporate Director Podcast, where we discuss the experiences and ideas behind what's working in corporate board governance in our digital tech field world. Here you'll discover new insights from corporate leaders and governance researchers with compelling stories about corporate governance, strategy, board culture, risk management, digital transformation, and more.

Dottie Schindlinger: Hi everybody and welcome back to the Corporate Director Podcast, the voice of modern governance. My name is Dottie Schindlinger, executive Director of The Diligent Institute, and I'm joined once again by my amazing co-host Meghan Day strategy leader here at Diligent. How's it going today? 

Meghan Day: Oh, Dottie. I am counting down the days till my beach vacation after this winter, you know?

Dottie Schindlinger: This winter has kind of taken it out of us. Those of us who live in the cold, snowy, northeast, it's been one for the record books and it's interesting because I feel like we had a good decade and a half where we didn't have winter like this, and so we're all, yes. Not used to it.It's such a pain. Yes. It's such a pain to deal with the mountain of snow. 

Meghan Day: Yes. Dottie Schindlinger: Listen, this actually will be the last, podcast recording you'll hear my voice on for a few weeks because I'm heading out next Friday to go down under. Dottie goes to the land of Oz.

Dottie Schindlinger: I'm heading down to Sydney and to Melbourne for a series of events. We're gonna be speaking at a number of different conferences and doing some customer events, so really looking forward to the trip. Most, because I think it's gonna be a gorgeous time to be in that part of the world.It's, you know, basically kind of late summer, early fall. It should be sunny. It should be, you know, nice temperate weather in Sydney. Might be a little rainy in Melbourne, but still very, very lovely. So, yeah, I'm looking forward to, to being in not big, bulky sweaters for a few weeks. 

Meghan Day: I, I wasn't joking about, you know, retirement plans, Dottie, that sounds like a, a, a great place to go.Uh, if you're looking to, you know, kick back your, your heels a little bit early. And this is all of my, my terrible segue into talk about what, has been some really interesting news coming out of search firms and some of the other, folks that pay close attention to, CEO appointments. But also CEO departures.And there's some really interesting stats coming out of Russell Reynolds. Globally, 234 CEOs departed last year, which was up about 16% from 2024, but only about a third of those were related to plans successions, which is really, really interesting. 

Dottie Schindlinger: Yeah, a lot of surprise goodbyes as this article points out.I mean, it's been really interesting. You know, we talked a couple weeks ago on the podcast about the number of board members leaving seats and now you know, it's also interesting to take a look at the CEO tenure. You know, it seems like CEO tenure is falling, you know, it kind of always is averaged about.Five years, but I think it's really gone down in the last couple of years and we're seeing a lot more unplanned, unexpected CEO departures that are not necessarily at the discretion of the board, but at the discretion of the CEO who's leaving for a different role. 

Meghan Day: Oh, another interesting, survey out of Spencer Stewart.According to. Some studies that they have done of about a thousand CEOs, some 61% of CEOs in their first year on the job said they plan to leave in the next five years. 

Dottie Schindlinger: Isn't that interesting? I mean, 

Meghan Day: burnout, nearly 60% of all of the CEOs said they expected to leave within three years. 

Dottie Schindlinger: I think for any board that hasn't been talking about CEO succession planning. You know, the, the thing about it is we all know we have to do it. We all kind of have that name in the drawer. But we always, I think, have kind of taken the mindset of if something untoward were to happen to the CEO, right?Or if we have to make a change, you know, it's always sort of in the mindset of. It's either something unexpected that happens to us or it's something that we need to take action on. We haven't, I think, maybe spent as much time talking about the fact that CEOs are getting burned out. They're really getting burned out.A a lot has to do with the range of disruptions to business over the last several years. I mean, think about COVID. Think about, you know, what happened with tariff and trade policy. Like about AI disruption. I mean, there's a lot happening that is making these jobs far more stressful, far harder to stay satisfying.Um, yeah, it's, it's a real phenomenon. I think Worth, worth board spending some time talking about. 

Meghan Day: Definitely and maybe a, a great future episode for us to dive into. 

Dottie Schindlinger: Well, it's actually in, in a weird way, a little bit of a segue to our interview today because you had the opportunity to sit down with Claudia Allen.Yeah. Because you had an opportunity to sit down with Claudia Allen at KPMG and talk a little bit about what's happening on the geopolitical landscape and sort of what's the role of AI in all of that. And of course that's, that conversation wasn't specifically about CEO departures, but I do think it paints a picture and provides some.Context within which we're seeing a lot of CEOs heading for the Hills. So why don't we give that interview a listen, Meghan, and we'll come back and talk about some of the things that we heard.

Meghan Day: Joining us on the Corporate Director podcast today is Claudia Allen, senior Advisor at KPMG's Board Leadership Center. Claudia, welcome back to the show. 

Claudia Allen: Well, thank you. It's a pleasure to be with you. 

Meghan Day: Let's start off by having you do a quick intro for our audience. Tell us more about your role at KPMG, if you don't mind.

Claudia Allen: The Board leadership Center is essentially our think tank on corporate governance, and I spend a lot of my time working with boards, committees, members of the C-Suite on governance issues, and I also write and speak a fair amount. My background is as a corporate lawyer. I was a partner and co-chaired the corporate governance practice at a national firm.

Meghan Day: Well, you have been doing a lot of work lately looking at the intersection of AI and geopolitics. I'd love to shape our conversation around that and maybe start big picture. When you hear the term geotech, what does that really mean? 

Claudia Allen: Well, Meghan, I think that's what you were talking about. It's the intersection of technology and geopolitics.It focuses on how global politics and policy affect technology, investment, and corporate strategies and tech is now central to national security, not just to business. So for example, we hear a lot of discussion of dual use technology. Meaning tech that can be used for commercial as well as military purposes.And it's being targeted by industrial policies and and other government interventions like export controls. And then the shift we're seeing from globalization to sort of country first unilateralism really has amplified the importance of tech for economic growth and national security. I think the geotech dynamic is playing out most prominently around AI with some called the AI arms race between the US or the West on the one hand, and China on the other.And I think it also encompasses a number of topics including efforts around tech sovereignty, so the interplay between tech and countries. Involving efforts to maintain strategic control over tech systems that are critical to economic competitiveness and security. Cybersecurity and ai, which sometimes are called weapons of mass disruption that are used by state and non-state actors.And then other issues like export controls, tariffs, data privacy, data localization. You know, the competition between the US and China is becoming really challenging for companies and third countries, and among other things, it requires navigating these complex supply chains and choosing between competing and, and often incompatible tech stacks and markets.

Meghan Day: Can you talk, maybe expand a little bit more about some of those implications between this US and China tech competition for multinationals? 

Claudia Allen: Sure the US and China have distinct tech value chains, and then Europe is seeking its own tax sovereignty. In other words, it's trying to reduce. Its reliance on American Tech, and all of this presents trade-offs for multinationals, and they need to choose sometimes between which tech stack or camp they wanna operate in.And all this is really also complicated by what seems to be transactional diplomacy at times. So instead of having these clear technology divides along geopolitical lines, we're seeing some unpredictable regulatory pivots. So for instance. US approved the export of some high tech H 200 chips to China, and that seemed to reflect prioritizing commercial interests and US China trade over AI related national security.And then we also have supply chains facing friction and the needs for recalibration, and that can affect vendor choices and market access. So I think the challenge for many companies will be maintaining efficiency, competitiveness, global operations to the extent they're global, despite this fragmentation.And it requires companies to rethink operations, alliances, resilience, often on an ongoing basis because the landscape is changing so quickly.

Meghan Day: I wanna turn more to AI and specifically the AI arms race that you mentioned before. And in fact, I'm thinking now of the headline I saw in the New York Times opinion section yesterday.I just returned from China. We are not winning. What are some of the issues driving this competition? 

Claudia Allen: I mean, I think there are four big issues that underlie a lot of this. First is computing power, meaning both the chips and energy. And, and we know there's really large demand for both. Second energy and water.AI data centers are driving up energy demand as we keep reading about. And countries with abundant energy and water may well have an advantage in scaling ai. Third, I would say data, both the quantity and the quality as well as algorithms. And fourth is talent, and we're seeing huge, intense competition for talent in the tech sector.

Meghan Day: Well, given the complexity of those issues shaping AI's direction, how should companies be thinking about the interplay of AI and geopolitics, and particularly from a risk perspective? Claudia Allen: That's a great question. I think companies need to treat the AI races involving multidimensional risk management, so that means mapping dependencies, stress testing Meghan Day: scenarios, building redundancy.

Claudia Allen: And obviously this requires considering the potential impact of different AI scenarios on strategy in your business model. And we did a survey late last year and we asked about the top threats to the execution of a company strategy and advances in AI and tech was within the top three. And then I think you also wanna understand or try to understand the different drivers and, and incentives that are shaping regulatory, environments around the world.So, for example, the US seems to be focused on rapid AI technology development and innovation. The EU is, is focusing on digital sovereignty. It's prioritizing safety and regulation. China's emphasizing state control and, and industrial efficiency and self-reliance. And then we have different laws and regulations across the states and many municipalities in the US and we don't have national clarity in the us And so companies are gonna need to adapt on an ongoing basis too.Fragmented regulatory landscape. 

Meghan Day: What about third party risks? 

Claudia Allen: Well, I think companies need really need full visibility into third party dependencies, and so that means that your risk management and business continuity plans need to address the dependencies. This in turn means mapping the exposures and rebuilding or building resilience.Resilience really is so vital and over reliance on third party providers really can be quite risky. So I think one of the tasks for boards is to help ensure that management has done scenario planning for the new risks from ai. And those risks continue to change and that management has redundancies built in.

Meghan Day: We see in survey after survey that geopolitical risk is a top concern in the boardroom. Certainly given all of the things we just discussed in the state of the world today, how do you see boards getting their arms around it?What should they be focused on in the conversations they're having with management? 

Claudia Allen: We put out a useful paper together with Eurasia Group, and it lays out three areas of focus for boards to help them take a systematic approach to overseeing geopolitical risk. I think the first area of focus is having robust processes, to basically manage geopolitical risk.And some of those processes would be processes to identify the key geopolitical risks and their impacts to establish clear responsibility and accountability for each. Geopolitical risk. Also having robust periodic reporting to the board on the key risks. So that would be the current risks, emerging risks, future scenarios, and crisis readiness.I think a second area of focus would be making sure you obtain diverse perspective. So you really need to obtain, third party expert views. And then I think the last area is looking at the board's own, geopolitical acumen and its oversight framework. And if you step back from it, I think one of the messages is that geopolitical risk is no longer just a once a year discussion.It probably needs to be quarterly and depending on the business and geopolitical development, so you, you may need it to be a more frequent discussion. 

Meghan Day: Very true. And great. Recommendations. Before we wrap up, head into our questions, we ask all of our guests any best and final thoughts for our audience.

Claudia Allen: Well, I think there are a few things to watch with a big caveat about how quickly the geopolitical landscape is changing. So, you know, the, these could become, uh, created quickly. But I think one of the things to focus on is the US-China relationship and negotiations, particularly around export controls and supply chain, how quickly China becomes self-sufficient in semiconductors and computing power.The advancement of the US' AI models, and I think a big issue is the broader impact of AI on work and global change. 

Meghan Day: Well, Claudia, as we wrap up, what do you think will be the biggest difference between boardrooms today and 10 years from now? 

Claudia Allen: Well, I think directors are gonna have access to more and better real-time information as well as better tech.So that will help eliminate some of the information asymmetry between a board and management. But it'll still be important to remember that board should not be getting into the weeds on a regular basis. That is not their role, but I think these tools can help the board extract better insights. 

Meghan Day: What was the last thing you read, watched, or listened to that made you think about governance in a new light?

Claudia Allen: Well, I was a member of a blue ribbon, commission that put out a paper on the board CEO relationship late last year. And that project really helped me focus on the importance of the interpersonal dynamics between the board and the CEO and the impact they can have on contributing to the success of the business or leading to a CEO, not succeeding.

Meghan Day: And finally, Claudia, what is your current passion project? 

Claudia Allen: Well, I'm the reporter for the Model Business Corporation Act. It's the corporate statute followed by a majority of states, and I'm pleased to announce we just published the 75th anniversary update. And that update among other things, explains the evolution of the statute, including changes in the last 10 years and it's now available through the American Bar Association.

Meghan Day: Very cool and congratulations. 

Claudia Allen: Thank you. 

Meghan Day: Well, thank you so much Claudia, for taking the time to join us again on the Corporate Director Podcast. 

Claudia Allen: Well, thank you for having me. It's a pleasure.

Dottie Schindlinger: Meghan, thank you so much for that interview. Really interesting conversation. Um, you know, it was kinda wide ranging, so what were some of the things that stood out for you? 

Meghan Day: I think for me it's, it's easy to stay focused on what is happening in the United States. There's plenty of things that, are catching our eye and are shifting priorities, throughout organizations and on agendas in the boardroom on a regular basis.But, you know, hearing her talk about China and just the speed at which they're able to move, that has implications on. Every single organization in the world ultimately. 

Dottie Schindlinger: Yeah. You know, Meghan, it, it reminded me of listening to Mark Carney, at, at Davos this year. Right. Which, you know, a little bit of a different topic, but broadly speaking, you know, his speech was about the shifting world order and that we just have to come to terms with the fact that. There are different players that are rising in prominence and some are, are reducing in prominence and it's changing what we think about in terms of global trade and global policy. And you know how he has to think about that as the, as the PM of Canada. Whether you agreed or disagreed with what he had to say, it's worth a listen because there, you know, that is a, a pretty common set of assertions that I'm hearing from world leaders around the world and, and it is.I would say particularly around China, you know, China has had, I would say, one of the earliest and probably most comprehensive approaches to sovereign ai, right? We talked, in the last episode with Josh Klein about sovereign ai and China's well far out ahead of most other countries in terms of how it approaches, thinking about deploying ai, from the state level now.There's a lot of reasons for that. I don't think we necessarily are advocating for everyone to become like China, but it is, it is absolutely worth taking Note that as we think about geopolitical risk and geopolitical stresses that are happening on our companies, we really can't. Ignore what's happening in China.Even if we don't have a base of operations there, we can't ignore it because it is gonna have profound implications around the world. A AI has no borders,

Dottie Schindlinger: We have to really pay attention to what's happening there. 

Meghan Day: My question is, I mean, to bring it back to the CEO burnout, I mean, alright, this is yet another.Huge, expansive, petty topic. When I'm talking about geopolitical risk, that 

Dottie Schindlinger: Yeah. 

Meghan Day: Ultimately needs to be on the board agenda on a pretty regular basis. It's a lot. 

Dottie Schindlinger: It's gonna be interesting, Meghan, to see. What happens in the next couple of years? Right. Whether, whether we, one of the things I'm wondering, I don't know if I have no data to back this up.It's just a, it's a question, are we going to see a lot of CEO departures over, say the next two-ish years and then see that kind of stabilize and level off? Because my, one of the things I'm thinking about is there are a lot of CEOs who are kind of getting to a specific age and they may just be feeling like, you know what?There's a lot going on. It's very topsy-turvy. It's very complex. It's fast moving. This is a good time for me to get off the bus, like we talked about with the directors, although as I'm saying that out loud, I'm realizing. I'm not so sure the data backs that up because I'm not sure a lot of them retired.I think a lot of them took different jobs. Maybe they're taking jobs they feel are in a little bit less uncertain areas, maybe a little bit more stable companies. It's interesting. I just wonder if we're gonna see that taper off or if this is just the new normal. 

Meghan Day: Yeah. 

Dottie Schindlinger: Where these jobs are so hard and the risks are so sprawling and so varied that there's a much higher rate of burn burnout and people do these jobs for shorter 10 years.In either case, I feel like this is an area where boards need to spend a whole lot more time. And when we did our, our What Directors Think report, it was a very small percentage of boards that said that they were gonna spend any time on CEO succession this year. I think you might wanna reconsider that boards, I, I think this might be a, a really important topic to put on the board agenda to make sure that you have plans A, B, C, and maybe D because I don't know that.You can rely on any past approaches. Right now, things are getting really complicated, really fast. When do we ever have good news to share? Meghan? We need to have, like, it's been a long, 

Meghan Day: long time. 

Dottie Schindlinger: Yeah, we need to have like a warm and fuzzy episode one of these days. I'm not sure what it would be about, honestly, but yeah, it's anything governance related.It's probably not gonna be all warm and fuzzy anytime soon, unfortunately. Well, that wraps up another episode on a downbeat note of the Corporate Director Podcast, the Voice of Modern Governance. I'd like to say a few special thank yous, first and foremost to our geopolitical commentator, Claudia Allen from KPMG podcast, producers Kira Ciccarelli Steve Clayton and Laura Klein, our sponsors of the show, including KPMG, Wilson Cini and Meridian Compensation Partners, and most especially, thank you to Diligent.For allowing us to have a downbeat show. If you like our show, please be sure to give us a rating on your podcast Player of Choice. You can also listen to our episodes and see more from The Diligent Institute by going to diligent.com/resources. Also, if you serve on a nonprofit or public sector board, tune into our sister Diligent podcast leading with Purpose for expert conversations on governance, risk and compliance that makes an impact for mission-driven organizations.Thank you so much for listening. 

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