Exclusive: OpenAI investors considering suing the board after CEO's abrupt firing -sources
Exclusive: OpenAI investors considering suing the board after CEO's abrupt firing -sources
Some investors in OpenAI, makers of ChatGPT, are exploring legal recourse against the company's board, sources familiar with the matter told Reuters on Monday, after the directors ousted CEO Sam Altman and sparked a potential mass exodus of employees.
They considered it, consulted a lawyer, and then stopped considering it, because what the board did was stupid (INCREDIBLY stupid) but it wasn't illegal.
From what I know of the US justice system something being illegal doesn't really matter in civil court. It could probably be argued that the board didn't do what was best for the investors, which is what they exist to do. Instead they potentially cost the investors millions of dollars.
It could probably be argued that the board didn’t do what was best for the investors, which is what they exist to do.
Incorrect. OpenAI LLC (the traded company) does not have a board of directors. The board of directors actually belong to the parent company, simply "OpenAI", which is a nonprofit organization -- the only thing that they're beholden to is the OpenAI company charter.
Here's a simplified breakdown:
Board of Directors =[controls]=> OpenAI (non-profit) =[controls]=> OpenAI LLC =[employs]=> OpenAI CEO
OpenAI LLC is obligated to act in the best financial interest of their shareholders, but OpenAI LLC does not actually have control over who sits in the CEO chair. That power goes to the non-profit "OpenAI" parent company -- a company beholden to their board, not shareholders.
WOAH buddy. That's the American Way™. Are you saying that 'at-will' employment is not a good thing??
At big companies there is genuinely a process and conditions that must be met for random(random like in RAM not random like a dice) firing.
This is the best summary I could come up with:
Investors worry that they could lose hundreds of millions of dollars they invested in OpenAI, a crown jewel in some of their portfolios, with the potential collapse of the hottest startup in the rapidly growing generative AI sector.
As a result, employees have more leverage in pressuring the board than the venture capitalists who helped fund the company, said Minor Myers, a law professor at the University of Connecticut.
That is a feature, not a bug of OpenAI's structure, which started out as a nonprofit but added a for-profit subsidiary in 2019 to raise capital.
Keeping control of operations let the nonprofit preserve its "core mission, governance, and oversight," according to the company's website.
But those obligations, such as the duty to exercise care and avoid self-dealing, leave a lot of leeway for leadership decisions, experts said.
Those obligations can be further narrowed in a corporate structure such as OpenAI, which used a limited liability company as its operating arm, potentially further insulating the nonprofit's directors from investors, said Paul Weitzel, a law professor at the University of Nebraska.
The original article contains 441 words, the summary contains 179 words. Saved 59%. I'm a bot and I'm open source!
I was wondering, too, what's going to happen to the billions that M$ (and others) have sponsored.
It is serious money in the hands of - as we learned now - "incompetent and ill-meaning" board inmates.
I don't get people who say things like this. The board in question isn't part of the "for profit" part of OpenAI - they don't have any obligations at all to make the company profitable or to protect the investors money. They're the board of a non-profit who spun of a part of the company explicitly for the purpose of raising money without being accountable to investors.
Microsoft and all the other investors knew that before they gave them their money.
The board is very very stubborn because they apparently would rather see OpenAI shutdown rather than let Altman run it, but they're not ill meaning. They're following their corporate charter.
but they're not ill meaning.
I don't know that. I've been quoting from the letter from nearly all their employees that we all could read here.
How do you know better? :-)
If all goes well, Microsoft will essentially get all the brains from OpenAI for $0 while still maintaining their investment in OpenAI, which means when OpenAI folds Microsoft can probably grab all their data (source code, model weights, training data, etc).