OpenAI is ditching a controversial plan to become a for-profit company, CEO Sam Altman revealed on Monday – a surprise move that came after the artificial-intelligence juggernaut faced fierce pushback from ex-employees, state officials and Elon Musk.
The ChatGPT maker had earlier signaled plans to create a public benefit corporation that would have made it easier to raise cash. Instead, its nonprofit board will oversee a for-profit LLC that will restructure as a public benefit corporation “that has to consider the interests of both shareholders and the mission.”
Altman said OpenAI came to 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.
“We look forward to advancing the details of this plan in continued conversation with them, Microsoft, and our newly appointed nonprofit commissioners,” Altman added.
Aside from steering the company’s direction, the nonprofit will become a “big shareholder” in the for-profit corporation. The restructuring will mean that employees – including potentially Altman himself – as well as investors and others will be able to hold shares in OpenAI’s for-profit subsidiary.
OpenAI is incorporated in Delaware and headquartered in San Francisco, California — putting both states in a position to weigh in on its plans.
Delaware Attorney General Kathy Jennings confirmed in a statement that she had raised concerns about OpenAI’s original plans to become a for-profit.
“I am encouraged by today’s announcement that the Company is seeking to address my concerns with that reorganization by proposing instead a plan in which the Delaware non-profit entity retains control over the new for-profit entity,” Jennings said.
“Now that the Company has a new plan, I intend to review it for compliance with Delaware law by ensuring that it accords with OpenAI’s charitable purpose and that the non-profit entity retains appropriate control over the for-profit entity,” she added.
The California attorney general’s office did not immediately return a request for comment.
Last month, a group that included ex-employees, Nobel Laureates like “Godfather of AI” Geoffrey Hinton, law professors and watchdog organizations like the Tech Oversight Project had asked both states to block OpenAI’s for-profit plans.
“The restructuring would remove nonprofit control and eliminate critical governance safeguards,” the group said in a letter posted online and submitted to OpenAI’s board.
The move also has implications for the heated legal battle between Altman-led OpenAI and billionaire Elon Musk, who had been trying to stop OpenAI from becoming a for-profit company.
Musk had accused OpenAI of abandoning its non-profit mission to build safe artificial intelligence to benefit humanity while transforming from a “tax-exempt charity to a $157 billion for-profit, market-paralyzing gorgon.” The lawsuit also names key investor Microsoft, billionaire Reid Hoffman and others as co-defendants.
In March, a federal judge shot down Musk’s request for an injunction blocking OpenAI from restructuring to a for-profit – but said she could expedite a trial as early as this fall to consider other claims.
Earlier this year, Musk made an unsolicited $97.4 billion offer to buy OpenAI, which was quickly rejected by Altman and his fellow board members.
OpenAI’s restructuring bid took shape after Altman was briefly ousted from the company in late 2023 after a dispute with the previous version of its nonprofit board. Altman later returned as part of an agreement that saw most of the old board depart.
Investors had pushed for OpenAI to restructure in part because it would allow the company to incentivize Altman, who had not received compensation in the past, and to raise money in the future as it pursues artificial general intelligence – or AI with human-level or greater ability.
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