A group of AI heavyweights and ex-OpenAI staffers are urging the attorneys general of California and Delaware to block the ChatGPT shop’s latest restructuring into a for-profit corporation.
Nobel laureate and neural-network maven Geoffrey Hinton; UC Berkeley’s Stuart Russell; Hugging Face’s Margaret Mitchell; and 10 former OpenAI employees are among the signatories on an open letter asking the AGs to intervene before OpenAI’s nonprofit shell gives up the wheel entirely. Essentially, they’re arguing that the development of artificial general intelligence (AGI) is too important to leave up to a private company with a profit motive, and must be preserved for the public interest instead.
At issue is the plan to convert OpenAI’s for-profit arm into a Delaware public benefit corporation (PBC) and give it full control over the company’s operations and business, leaving the non-profit portion to manage charitable initiatives in certain sectors like healthcare, education, and science. The signatories argue this would dismantle the governance safeguards that once set OpenAI apart, like capped investor returns, an independent board, and a fiduciary duty to prioritize the public interest over financial gain.
“OpenAI has a bespoke legal structure based on nonprofit control,” the letter states. “This structure is designed to harness market forces without allowing those forces to overwhelm its charitable purpose.”
While the group echoes some of the concerns raised by departed co-founder Elon Musk – who is currently suing OpenAI to block the restructure – they’re playing a different card: A formal appeal to regulators to protect the public.
“As the primary regulators of OpenAI, you currently have the power to protect OpenAI’s charitable purpose on behalf of its beneficiaries, safeguarding the public interest at a potentially pivotal moment in the development of this technology,” the letter pleads to California AG Rob Bonta and/or Delaware AG Kathleen Jennings. “Under OpenAI’s proposed restructuring, that would no longer be the case.”
We urge you to protect OpenAI’s charitable purpose by preserving the core governance safeguards that OpenAI and Mr. Altman have repeatedly claimed are important to its mission
“Do not allow the restructuring to proceed as planned,” the authors demanded, point blank. “We urge you to protect OpenAI’s charitable purpose by preserving the core governance safeguards that OpenAI and Mr. Altman have repeatedly claimed are important to its mission.”
The arguments in the letter will sound familiar to anyone who’s followed the saga of the company, which Sam Altman and a coterie of other luminaries, including Musk, founded in 2015. At launch, OpenAI pitched itself as a nonprofit org against the likes of Google DeepMind, committed to developing AGI for the benefit of all humanity.
That changed in 2019, when it created a for-profit subsidiary OpenAI LP under the full control of its nonprofit parent. The new structure was pitched as a “capped-profit” model designed to allow investors a limited return – anything above that cap reverting to the nonprofit. The board was supposed to remain majority-independent, and any AGI developed would be owned and governed by the nonprofit.
The second restructuring proposed last year would take it a step further: Converting OpenAI LP into a Delaware PBC. This aims to help OpenAI raise funds and compete with its for-profit rivals – something that hasn’t really been a problem for the firm of late.
- Even at $200/mo, Altman admits ChatGPT Pro struggles to turn a profit
- OpenAI denies it is building ad biz model into its platform
- OpenAI reportedly considering for-profit plans, but what would that be good for?
- Musk wants to ban Apple at his companies for cosying up to OpenAI
What do the signatories want?
The signatories urge the AGs to demand answers from OpenAI, arguing that the outfit hasn’t publicly addressed key questions about its restructuring, such as whether alternative models were considered, what role investor pressure played, and whether any board members involved in the process stand to benefit personally.
They also ask the AGs to remove any directors who compromised the integrity of the nonprofit board’s decisions and ask for new oversight mechanisms to ensure the board remains independent and focused on OpenAI’s founding mission, not on maximizing for-profit returns.
We haven’t heard from the Delaware AG’s office, and the California AG told us that it can’t comment on the matter due to an ongoing investigation. Bonta’s office did give us a clue as to what it thinks of the letter, though.
“The California Department of Justice is committed to protecting charitable assets for their intended purpose and takes this responsibility seriously,” the California AG’s office told us.
OpenAI responded to The Register with a similar explanation that it’s given us before, claiming the nonprofit isn’t being sidelined and, if anything, is actually being made stronger by the move.
Our board has been very clear: our nonprofit will be strengthened and any changes to our existing structure would be in service of ensuring the broader public can benefit from AI
“Our board has been very clear: our nonprofit will be strengthened and any changes to our existing structure would be in service of ensuring the broader public can benefit from AI,” an OpenAI spokesperson told us in an emailed statement. The for-profit arm being turned into a PBC would be similar to other AI outfits like Anthropic and xAI, the company added, while also getting in a dig at Musk by saying xAI “do not support a nonprofit.”
OpenAI also pointed out, again, that it had recently established a commission of experts to guide its “philanthropic efforts” by “maximizing impact for people and mission-driven organizations.”
None of what OpenAI has said directly addresses its own claims that, under the latest proposed restructuring, the for-profit arm would take over day-to-day operations.
As a Delaware public benefit corporationOpenAI would still be legally required to pursue a public benefit alongside profit. However, under Delaware law, the OpenAI PBC wouldn’t be required to publicly disclose progress toward that goal. It also gives PBCs broad leeway to engage in profitable ventures that don’t necessarily align with its declared public mission.
Given that Softbank recently promised to plow $40 billion into the AI behemoth, with a specific condition that OpenAI convert into a for-profit entity this year, we can imagine a strong incentive to engage in as many of these profit-making ventures as possible. (r)
