OpenAI reportedly looking to strip control from nonprofit board, go for-profit in restructuring
Plan for corporate restructuring of Microsoft-backed startup that created ChatGPT would reportedly involve giving equity to CEO Sam Altman
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OpenAI is working on a corporate restructuring plan that would pull control from the ChatGPT creator's nonprofit board and transform the organization into primarily a for-profit entity, according to a report from Reuters.
Citing three unnamed sources, the outlet said the plans involve giving CEO Sam Altman equity in the Microsoft-backed artificial intelligence startup for the first time.
Sam Altman, chief executive officer of OpenAI, speaks at the Microsoft Build event in Seattle on May 21, 2024. (Chona Kasinger/Bloomberg via Getty Images)
OpenAI did not deny the report when contacted by FOX Business on Thursday.
"We remain focused on building AI that benefits everyone and as we’ve previously shared we’re working with our board to ensure that we’re best positioned to succeed in our mission," a spokesperson said in a statement. "The nonprofit is core to our mission and will continue to exist."
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Reuters noted that OpenAI could be worth $150 billion if it goes through with a restructuring that would lift its profit cap.
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Reports of the potential OpenAI restructuring emerged on Wednesday as another leadership shakeup occurred at the organization as three more executives announced their departure, including Chief Technology Officer Mira Murati.
Mira Murati announced Wednesday that she is leaving her position as chief technology officer of OpenAI. (Patrick T. Fallon/AFP via Getty Images/File)
While speaking at Italian Tech Week on Thursday morning, Altman insisted the departures were not related to restructuring talks, but he acknowledged the organization is undergoing changes, saying, "I think this will be hopefully a great transition for everyone involved, and I hope OpenAI will be stronger for it as we are for all of our transitions."
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Tech billionaire Elon Musk – who co-founded OpenAI in 2015 and is currently suing the organization and Altman for allegedly breaching its founding mission of developing open-source artificial general intelligence technology for humanity's benefit – said on X that OpenAI's restructuring plans are "illegal," writing, "You can’t just convert a nonprofit into a for-profit."
Tech entrepreneur and Tesla CEO Elon Musk (Chesnot/Getty Images/File)
Attorney Jamie E. Wright, founder of the Wright Law Firm out of Los Angeles, told FOX Business that OpenAI's reported restructuring plans are not illegal but are also not without risk and that the move is sure to raise concerns.
"When a nonprofit organization shifts to a for-profit structure – one with commercial opportunities like OpenAI – it is crucial that they do not simply benefit a small privileged group," Wright said. "In cases where OpenAI has received donations or public support due to its profit designation, the reorganization could potentially trigger legal disputes regarding the allocation of those funds at present."
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She said worries about legality probably arise from this zone of operation.
"If OpenAI doesn't address this issue correctly, they might be accused of exploiting their profit status for monetary gains, leading to potential legal entanglements," Wright said. "Therefore, even though the reorganization is not unlawful, they need to put in an amount of effort to avoid landing in a contentious situation or facing backlash from the public."