OpenAI's Bold Move: Sam Altman Gains Equity as Non-Profit Control Fades

In a dramatic restructuring, OpenAI is shifting to a for-profit benefit corporation, granting CEO Sam Altman equity and diminishing non-profit board control to attract investors and potentially reach a $150 billion valuation.

OpenAI Overhauls Leadership: Sam Altman Gains Equity as Non-Profit Control Ends

Someone familiar with the situation informed Reuters that OpenAI, the manufacturer of ChatGPT, is planning to reorganize its main business into a for-profit benefit corporation, meaning that its non-profit board will no longer have influence over it. This change will make the company more appealing to investors.

Non-Profit Control Ends in Major Shake-Up

The OpenAI nonprofit will reportedly maintain its operations and maintain a small ownership position in the for-profit business. This change may also affect the way the organization handles AI risk management under its new leadership.

The for-profit business, which is attempting to eliminate the return cap for investors and may be worth $150 billion after the reorganization, will also give chief executive officer Sam Altman ownership for the first time, according to sources. In order to address sensitive topics, the sources want to remain anonymous.

Sam Altman Gains Equity Amid Reorganization

Together with our board, we are aiming to put ourselves in the best position to achieve our goal of creating AI that helps everyone. An official from OpenAI ensured that the nonprofit would remain in operation, stating that it is fundamental to their purpose.

Reuters was the first to report on the specifics of the new organizational structure, which shed light on major behind-the-scenes governance reforms taking place at a prominent AI company. According to the sources, the proposal is still being worked on, and the shareholders and lawyers are still working out the details. The timing for finishing the restructuring is also undetermined.

$150 Billion Valuation Expected After Restructure

The reorganization follows a string of executive departures at the fledgling company. Longtime chief technologist Mira Murati of OpenAI announced her resignation from the firm on Wednesday in an unusual manner. Greg Brockman, president of OpenAI, is also on leave.

With funding from Microsoft, OpenAI went from being a non-profit AI research group in 2015 to adding the for-profit OpenAI LP business as a subsidiary of its non-profit in 2019.

ChatGPT’s Explosive Growth and Investor Attention

A generative AI app called ChatGPT was launched by the company in late 2022. It could spit out responses to text queries that looked human-like. Since then, it has become one of the most rapidly growing apps ever, with over 200 million active users every week. This has started a worldwide race to invest in AI.

According to CNA, OpenAI has seen a meteoric rise in valuation, going from $14 billion in 2021 to $150 billion in the new convertible debt round that is currently being discussed. This has attracted investors like Thrive Capital and Apple.

Governance Structure Raises Questions on AI Safety

The odd organizational structure of the firm, in which the nonprofit OpenAI has complete authority over the for-profit subsidiary, was initially put in place to guarantee the goal of developing "safe AGI that is broadly beneficial," which is shorthand for artificial general intelligence that is on par with or better than human intelligence.

During one of Silicon Valley's most high-profile boardroom dramas in November, the nonprofit's board members fired Altman due to a lack of trust and communication, bringing the structure into sharp focus. Employees and investors rallied around him, and after five days, he was restored.

Leadership Changes and Investor Optimism

Bret Taylor, a former co-CEO of Salesforce who now heads his own artificial intelligence business, has now brought on more tech executives to serve as chairmen of OpenAI's board. Its nine-person nonprofit board must approve any modifications to the company.

In general, OpenAI's investors—who have invested billions into the company—welcome the idea that the loss of non-profit control could make it run more like a normal firm.

The lab has dissolved the superalignment team that focuses on the long-term hazards of AI earlier this year, which could raise worries from the AI safety community about whether there is enough governance to hold itself accountable in its pursuit of AGI.

The amount of equity that Altman will get is uncertain. The reason Altman, who is already worth a billion dollars from his many investments in startups, decided against taking a share in the company was that the board needed a majority of independent directors who had no financial interest in the business. On top of that, he claims he's making enough money and is only working there because he enjoys it.

Comparing OpenAI’s New Model to Competitors

Elon Musk's xAI and OpenAI's main competitor, Anthropic, are both registered as benefit corporations, a type of for-profit that seeks to promote sustainability and social responsibility while producing profits. OpenAI's new structure would be similar to theirs.