In a significant reversal of previously announced restructuring plans, OpenAI announced on Monday that its nonprofit will maintain control of its business operations. This decision likely constrains CEO Sam Altman's authority over the company that makes ChatGPT and other artificial intelligence products.
In a letter to employees, Reuters reported OpenAI CEO Sam Altman as saying that, "We made the decision for the nonprofit to stay in control after hearing from civic leaders and having discussions with the offices of the Attorneys General of California and Delaware."
The AI company is now charting an alternative growth strategy. Altman and the chair of OpenAI’s nonprofit board, Bret Taylor, described the path ahead as a "recapitalization", where the existing for-profit arm of the company will transform into a public benefit corporation "that has to consider the interests of both shareholders and the mission."
As part of the new restructuring plan, profit caps for certain investors of the company will be lifted and shareholders will also receive stock. Altman noted these changes would enable the for-profit entity to function more like a normal company while maintaining mission alignment.
Taylor refused to specify the nonprofit's ownership percentage in the newly-announced structure, but confirmed that the nonprofit will select the public benefit corporation's board members. Initially, reports say that these members will likely be identical to the current board members of the nonprofit.
Altman expressed that converting from a limited liability company to a public benefit corporation “just sets us up to be a more understandable structure to do the things that a company of our scope has to do.”
“There’s so much more demand to use AI tools than we thought there was going to be,” Altman said, and added, that getting access to more capital will make it easier for OpenAI to pursue mergers and acquisitions “and other normal things companies would do.”
Further, Altman said that converting from a limited liability company to a public benefit corporation “just sets us up to be a more understandable structure to do the things that a company of our scope has to do.”
OpenAI: Background and Delaware connection
OpenAI was founded as a nonprofit research laboratory by Altman, Tesla CEO Elon Musk and others with the mission of safely developing artificial general intelligence for humanity's benefit. Today, the company reports a $ 300 billion market value and 400 million weekly ChatGPT users.
The company's restructuring plans faced multiple challenges, including a lawsuit from Musk alleging betrayal of founding principles. While a federal judge had recently dismissed some claims, Reuters reported that other lawsuits will proceed to trial next year.
As per law, public benefit corporations established in Delaware in 2013 and later adopted by other states, must pursue social good alongside profits. Companies like Amalgamated Bank and online education platform Coursera operate under this framework by defining their specific social mission upon incorporation.
Regulatory scrutiny from both Delaware and California attorneys general also complicated the transition. California's attorney general's office stated they are reviewing the plan and "in continued conversations with Open AI."
Critics, including former OpenAI employees and AI pioneer Geoffrey Hinton, expressed concerns about accountability if the company achieves its goal of developing superhuman AI while no longer bound to its public safety mission.
Although other AI companies like Anthropic and Musk's xAI have adopted the public benefit corporation structure, OpenAI's arrangement remains unique with its nonprofit board retaining control.
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