ARTIFICIAL INTELLIGENCE AND CORPORATE GOVERNANCE: LAW AND ECONOMICS PERSPECTIVES ON ACCOUNTABILITY, TRANSPARENCY, AND ESG COMPLIANCE

Abstract

Artificial Intelligence (AI) is increasingly reshaping corporate governance by redefining accountability, transparency, and ESG compliance. This paper applies a law and economics perspective to examine how AI transforms corporate governance structures, alters incentive systems, and generates both efficiency gains and governance risks. This paper synthesizes insights from corporate law, digitalisation, ESG reporting, and institutional reform. Evidence shows that while AI reduces transaction costs in compliance and disclosure, it also amplifies agency problems, information asymmetries, and risk of greenwashing. Comparative benchmarks highlight divergent approaches: the European Union emphasizes ex-ante safeguards and risk-based ESG integration, the United States relies on disclosure and ex-post liability, and ASEAN frameworks, particularly in Indonesia, adopt principle-based proportionally. Each model reveals strengths and limitations underscoring the need for a hybrid system that balances legal certainty, market incentives, and institutional capacity. The study argues that firms should treat AI not merely as an operational tool but as a ggovernance control mechanism, subject to validation, explainability, and independent assurance. Policy recommendations include legal reforms for AI registries and assurance rights, economic incentives to reward transparent ESG reporting, and institutional innovations to embed integrity into corporate practice. The findings suggest that responsible AI governance can evolve from a compliance obligation into a strategic asset that enhances trust, improves financial resilience, and aligns corporate performance with global sustainability goals.