OpenAI has shelved its contentious intention to become a for-profit firm under rising pressure from opponents. It will continue to be governed by its original nonprofit board, according to CEO Sam Altman.
“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,” Altman wrote in an official OpenAI blog post announcing the latest restructuring decision.
Since his brief but contentious dismissal from the renowned AI research lab in November 2023—a move that rocked Silicon Valley—Altman has been suggesting revisions to OpenAI’s organizational structure, which started off as a nonprofit. Elon Musk, a co-founder of OpenAI and the CEO of Tesla, has previously criticized the firm and even sued to halt the plan, claiming Altman put expansion ahead of the lab’s initial goal of developing technology for the sake of humanity. Musk is currently in charge of xAI, OpenAI.
Altman revealed intentions in December to restructure it into a public benefit organization. The decision at the time sparked questions about whether it would provide its nonprofit arm enough funding and whether it would result in more corporate power. However, as part of the most recent governance model, the nonprofit parent will continue to keep a significant stake in the public benefit company and maintain control over it.
“The nonprofit will control and also be a large shareholder of the PBC, giving the nonprofit better resources to support many benefits,” the announcement said.
Last September, OpenAI first attempted to reorganize its main operations into a for-profit benefit corporation, which would be independent of its nonprofit board.
If the suggested modifications had been implemented, OpenAI would have been more appealing to investors and the lab’s organizational structure would have been more in line with that of a conventional business. That approach would have marked a dramatic shift from Altman’s previous position of forgoing stock in accordance with OpenAI’s humanitarian objective by giving him shares for the first time, allegedly about 7 percent.
It’s unclear if investors in particular will be placated by OpenAI’s new reorganization plan. SoftBank, a Japanese giant, gave $30 billion directly to OpenAI in March, securing $40 billion in investment. But there was a twist to the fresh funding infusion: if OpenAI didn’t reorganize into a completely for-profit company by the end of 2025, SoftBank would cut its contribution by $20 billion.
In a recent fundraising round spearheaded by SoftBank, Microsoft-backed OpenAI was valued at $300 billion.
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