“Inside OpenAI’s Weird Governance Structure: Why Investors Had No Say in Sam Altman’s Sacking”, 2023-11-21 ():
…The firm was founded as a non-profit in 2015 by Sam Altman and a group of Silicon Valley investors and entrepreneurs including Elon Musk, the mercurial billionaire behind Tesla, Twitter, and SpaceX. The group collectively pledged $1bn towards OpenAI’s goal of building artificial general intelligence (AGI), as AI experts refer to a program that outperforms humans on most intellectual tasks.
After a few years OpenAI realised that in order to attain its goal, it needed cash to pay for expensive computing capacity and top-notch talent—not least because it claims that just $130m or so of the original $1bn pledge materialized. So in 2019 it created a for-profit subsidiary. Profits for investors in this venture were capped at 100× their investment (though thanks to a rule change this cap will rise by 20% a year starting in 2025). Any profits above the cap flow to the parent non-profit. The company also reserves the right to reinvest all profits back into the firm until its goal of creating AGI is achieved. And once it is attained, the resulting AGI is not meant to generate a financial return; OpenAI’s licensing terms with Microsoft, for example, cover only “pre-AGI” technology.
The determination of if and when AGI has been attained is down to OpenAI’s board of directors. Unlike at most startups, or indeed most companies, investors do not get a seat. Instead of representing OpenAI’s financial backers, the organization’s charter tasks directors with representing the interests of “humanity”.
…The firm’s bylaws from January 2016 give its board members wide-ranging powers, including the right to add or remove board members, if a majority concur. The earliest tax filings from the same year show 3 directors: Mr Altman, Mr Musk and Chris Clark, an OpenAI employee. It is unclear how they were chosen, but thanks to the bylaws they could henceforth appoint others. By 2017 the original trio were joined by Mr Brockman and Holden Karnofsky, chief executive of Open Philanthropy, a charity. Two years later the board had 8 members, though by then Mr Musk had stepped down because of a feud with Mr Altman over the direction OpenAI was taking. Last year it was down to 6. Throughout, it was answerable only to itself.