June 17, 2024

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OpenAI ‘unusual’ board structure led to CEO Sam Altman firing

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OpenAI’s dramatic decision to fire its CEO Sam Altman on Friday, and the days-long power struggle that followed, was only possible thanks to the unusual power held by its directors. The ChatGPT developer’s extraordinarily powerful board doesn’t answer to shareholders or an ownership group, but instead to none other than all of mankind. “Our primary fiduciary duty is to humanity,” OpenAI’s charter reads. 

Microsoft CEO Satya Nadella, who’s taken a central role in negotiating OpenAI and Sam Altman’s future, now wants governance changes at the pioneering AI startup. “Surprises are bad,” he told Bloomberg during an interview Monday evening. 

The surprise, in this case, is OpenAI’s firing of Altman on Friday, without informing Nadella until a minute before it went public, reports Axios. OpenAI’s unique corporate structure doesn’t give deep-pocketed backers like Microsoft, which has invested $13 billion in the AI developer, seats on its board.

OpenAI’s board “can essentially take decisions unilaterally” without conferring with investors, says Karen Brenner, executive director of law and business initiatives at NYU’s Stern School of Business.  

Nadella, who has in the meantime committed to hiring Altman at Microsoft, says he plans to remain in business with OpenAI but will now push for changes to its board structure.

In normal for-profit entities, investors usually have some ability to influence strategy, whether through governance rights and board seats. Not at OpenAI. “It’s unusual that when you form an entity to pursue a strategy, which requires an unusual amount of capital, that the people who provide the capital wouldn’t have some degree of voice or control or oversight of the capital that they provide,” Brenner says. 

Why is OpenAI’s board so powerful?

OpenAI’s unique board structure comes from its founding as a nonprofit. In 2015, Altman, Greg Brockman, and current board member Ilya…

Paolo Confino

2023-11-20 22:43:45

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