Corporate turmoil at OpenAI

There is an interesting storm raging at the OpenAI, the creator of ChatGPT. Its governing board had sacked CEO Sam Altman, the face of OpenAI. Microsoft holds 49 per cent of the for-profit operating company – the parent company of OpenAI is a non-profit venture and they form the board and not the venture capitalists who put in the funds, including Microsoft, who usually constitute the board.

After he had been sacked at OpenAI, Microsoft’s Satya Nadella hired Altman as the chief technology officer. And this could mean, Microsoft could pull out of OpenAI. It is this fear that major funders would pull out that is worrying the investors. But legal experts say that investors will not have much of leeway because of the structure of the company.

And the founders have laid down that OpenAI is meant for the good of humanity and not for the OpenAI investors. Apparently, even if the decision of the founders and that of the board were to hurt the prospects of the company, there is not much that the investors can do. It is being recalled as Steve Jobs, the founder of Apple, was thrown out by the board, and he was called back a decade later.

The other attack is coming from the 700 employees of OpenAI, who are protesting Altman’s sacking and they are threatening to quit. This could prove to be more effective because the workers in a company like OpenAI are not just hired hands but the brains of the company. They are the creative contributors to new apps like ChatGPT.

If they leave, an AI company could collapse. Of course, the founders have the option of creating a new workforce and get another set of people who can create new apps in the AI field. It is a new kind of battle in the tech sphere. In the earlier industrial era, the worker did not have much clout in impacting the financial viability of the company.

The only power that the workers had was through their unions. But the unions usually battled for better wages and working conditions. They could not have gone on strike because their favourite manager was sacked. But the power of the workforce in a tech company is of a different kind. What is being witnessed at OpenAI is a new battle between the tech workforce and the founders. It is to be seen to what extent the employees can exercise veto at OpenAI by threatening to quit. Will they be able to force the hand of the founders with their non-profit principle?

In retrospect, it looks like that Altman had monetised ChatGPT, and he had increased the funding of the company from $29 billion to $80 billion. And as the CEO representing the company to the outside world, he deposed before the US Congress urging regulation of AI and its apps like ChatGPT. He has committed the company as a large for-profit business venture overnight, and he had also invited the government to have an oversight.

It can only be speculated whether these two moves of Altman disturbed the founders. Perhaps they would not have wanted the monetisation of ChatGPT and other future products of AI. It looks like that Altman moved away from the basic vision of the founders.

It is also possible that the idealistic founders of OpenAI Not For Profit would not want their products to be caught in the bureaucratic dragnet of regulation. What is intriguing is that the founders have not spelt out their stand and views about the sacking of Altman, and what they intend to do with the developments that followed. They have not reacted to the attempts of the investors to seek legal remedies, nor to the threat of the workers that they will quit. Quite possibly they are weighing their options.

The situation is at an interesting stage, where the next steps of all those involved -- whether Microsoft would pull out its funding, whether the investors will file a case against OpenAI, and whether the workers will carry out the threat and quit. And this could set a new precedent as to how corporations, especially the tech ones involving AI, will function.