Some investors in OpenAI, makers of ChatGPT, are considering legal action against the company’s board after the ousting of CEO Sam Altman and the potential mass resignation of employees. Investors, concerned about losing their significant investments in OpenAI, are working with legal advisers to explore their options, though it is unclear if they will pursue a lawsuit. Despite Microsoft owning 49% of the company, the nonprofit parent company holds control, giving employees more leverage in pressuring the board.
The structure of OpenAI, which started as a nonprofit and added a for-profit subsidiary in 2019, allows the nonprofit to maintain control over operations, potentially insulating directors from investor lawsuits. Experts believe that even if investors sued, they would have a weak case, as companies have broad latitude to make business decisions.
OpenAI investors considering suing the board after CEO Sam Altman’s abrupt firing: Sources – Detail Points
– Some investors in OpenAI are considering legal action against the company’s board after the ousting of CEO Sam Altman.
– Investors are worried about the potential loss of hundreds of millions of dollars invested in OpenAI.
– Microsoft owns 49% of the for-profit operating company, with other investors and employees controlling 49% and 2% owned by OpenAI’s nonprofit parent.
– Altman was fired due to a “breakdown of communications,” according to an internal memo.
– Most of OpenAI’s 700 employees threatened to resign unless the board was replaced.
– OpenAI’s structure is controlled by its nonprofit parent, giving employees more leverage than venture capitalists.
– Nonprofit boards have legal obligations, but there is still a lot of leeway for leadership decisions.
– Investors may have a weak case in suing OpenAI, as companies have broad latitude to make business decisions.
What are some investors in OpenAI considering in response to the ousting of CEO Sam Altman?
Some investors in OpenAI are exploring legal recourse against the company’s board, potentially considering legal action after the directors ousted CEO Sam Altman and sparked a potential mass exodus of employees.
What are investors concerned about in relation to OpenAI?
Investors are worried 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.
What is the ownership structure of OpenAI?
Microsoft owns 49% of the for-profit operating company, other investors and employees control 49%, with 2% owned by OpenAI’s nonprofit parent, according to sources familiar with the matter. OpenAI’s board fired Altman on Friday after a “breakdown of communications,” according to an internal memo seen by Reuters.
Why do employees have more leverage in pressuring the board than venture capitalists?
As a result, employees have more leverage in pressuring the board than the venture capitalists who helped fund the company, due to the control of operations by OpenAI’s nonprofit parent.
Do investors have a strong legal case against OpenAI?
Even if investors found a way to sue, they would have a “weak case.” Companies have broad latitude under the law to make business decisions, even ones that backfire.