OpenAI dials back conversion plan, nonprofit to retain control

OpenAI has dialed back a significant restructuring plan, with its nonprofit parent retaining control in a move that is likely to limit CEO Sam Altman’s power over the pioneering maker of ChatGPT.

The announcement follows a storm of criticism and legal challenges, including a high-profile lawsuit filed by rival and co-founder Elon Musk, who has accused OpenAI of straying from its founding mission to develop artificial intelligence for the benefit of humanity.

“OpenAI was founded as a non-profit, is today a non-profit that oversees and controls the for-profit, and going forward will remain a non-profit that oversees and controls the for-profit. That will not change,” Altman said in a blog post on Monday.

OpenAI had outlined plans in December to convert its for-profit arm into a public benefit corporation, a structure designed to balance shareholder returns with social goals, unlike nonprofits, which are solely focused on public good. Under that proposal, the nonprofit parent would have been a big shareholder in the PBC but would cede control over the startup.

On Monday, OpenAI said the nonprofit parent would continue to control the PBC and become a big shareholder in it. The company will push ahead with plans to change the structure of its for-profit arm to allow more capital-raising to keep pace in the AI race.

The move to an outright for-profit was intended to help OpenAI raise more capital and ease restrictions tied to its nonprofit parent. But it sparked concerns over whether the company would fairly allocate assets to the nonprofit and how it would balance profit-making with its mission to develop AI for the public good.

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“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,” Bret Taylor, chairman of OpenAI’s board, said in a blog post, adding that the new announcement meant the startup would continue to have a structure “extremely close” to the current one.

Altman called the move a compromise “that (works) well enough for investors that they’re happy to continue to fund us to a degree we think we will need.” He said OpenAI would work with major backer Microsoft (MSFT.O), regulators and newly appointed nonprofit commissioners to finalize the updated plan, and decide how much equity stake in the for-profit business each party would receive.

“We believe this is well over the bar of what we need to be able to fundraise,” Altman said, adding there were “no changes to any existing investor relationships” and that the company would proceed with the earlier plan to remove caps on the profit that investors can earn.

But questions remain over what exactly was changing, and what level of control the non-profit will have under the newly proposed plan, which lacks details. Currently, OpenAI’s nonprofit fully owns the for-profit entity, and the nonprofit board’s mission is ensuring that “artificial general intelligence benefits all of humanity,” instead of providing value for shareholders.

“We’re glad that OpenAI is listening to concerns from civil society leaders … but crucial questions remain,” said Page Hedley, OpenAI’s former policy and ethics adviser, and lead organizer of the group Not For Private Gain.

“Will OpenAI’s commercial goals continue to be legally subordinate to its charitable mission? Who will own the technology that OpenAI develops? The 2019 restructuring announcement made the primacy of the mission very clear, but so far, these statements have not,” he said.

He added he was concerned that in the PBC structure, the board would be obligated to maximize shareholder value.

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