Unusual non-profit structure led to dramatic ouster of CEO

San Francisco: Unlike Google, Facebook and other tech giants, the company behind ChatGPT was not created to be a business. It was set up as a nonprofit by founders who hoped that it wouldn’t be beholden to commercial interests. But the arrangement got complicated. While OpenAI later transitioned to a for-profit model, its controlling shareholder remains the nonprofit OpenAI Inc. and its board of directors. This unique structure made it possible for four OpenAI board members — the company’s chief scientist, two outside tech entrepreneurs and an academic — to oust CEO Sam Altman on Friday. The abrupt removal of one of the world’s most sought-after AI experts led to an employee revolt that has put the entire organization’s future in jeopardy and underscored the unusual arrangement that sets OpenAI apart from other tech enterprises. It’s exceedingly rare for major tech companies to have such a structure. Facebook parent Meta, as well as Google and others, are essentially set up the opposite way — giving founders ultimate control over the company and the board of directors through a special class of voting shares not available to the masses.

The idea comes from Berkshire Hathaway, which was established with two classes of stock so the company and its leaders would not be beholden to investors seeking short-term profit. OpenAI’s stated mission is to safely build artificial intelligence that is “generally smarter than humans.” Debates have swirled around that goal and whether it conflicts with the company’s increasing commercial success. “What was revealed with this board structure is they just idealistically thought, well, we’re aligned, and we all want the same thing. And it won’t become a problem because we’re going to stay aligned,” said Sarah Kreps, director of Cornell University’s Tech Policy Institute. As AI technology accelerated in the last year because of new investment coming in, “I think that’s where these issues erupted.” The board has refused to give specific reasons that it fired Altman, who was quickly hired Monday by Microsoft Corp., which has invested billions in OpenAI. Microsoft also hired OpenAI President Greg Brockman, who resigned in protest after Altman was fired, along with at least three others.