OpenAI Reverses Decision to Eliminate Controls for Nonprofits

On Monday, OpenAI announced its transition into a public benefits company, enabling the nonprofit overseer of OpenAI to retain significant influence over the organization.

The nonprofit will stand as OpenAI’s primary shareholder.

OpenAI’s CEO Sam Altman, along with several other Silicon Valley figures, co-founded various organizations in late 2015, including Elon Musk. In 2018, following Musk’s departure from internal disputes, Altman associated OpenAI with a commercial entity to secure the funding necessary for advancing AI technologies.

Nevertheless, the nonprofit leadership was aware that the unconventional model could be seen as a hindrance to the company’s progress. Last year, Altman and his team initiated plans to shift authority from the nonprofit to OpenAI’s investors.

However, the organization’s intentions were thwarted, and the nonprofit continues to maintain control. This outcome was seen as a win for OpenAI’s critics, including Musk, who accused the company of prioritizing profits over its initial commitment to developing a safe AI system.

Public benefit corporations are frequently characterized as entities created to generate public and social value, allowing outside investors to engage similarly to traditional investments.

At a press conference, Altman expressed satisfaction with the nonprofit’s decision to uphold control, stating that the new structure “provides us with a clearer framework to fulfill our company’s aspirations.”

OpenAI mentioned it is still in discussions regarding the nonprofit’s equity in the new organization, with the nonprofit responsible for appointing board members for the new company.

Recently, the Japanese conglomerate SoftBank spearheaded a $40 billion funding round in OpenAI, which has been valued at $300 billion. If the restructuring isn’t finalized by year-end, SoftBank retains the option to reduce its overall investment to $20 billion, according to sources familiar with the latest funding developments.

This is an evolving story. Please check back for updates.