- OpenAI is considering granting special voting rights to its nonprofit amid its transition to a for-profit company. By giving the board special voting rights, the company would be able to address criticism it had moved away from its mission of creating AI for the benefit of humanity.
OpenAI execs are reportedly considering granting the company's non-profit board more powers in the wake of an unsolicited takeover bid from Elon Musk.
According to the Financial Times, the AI company is exploring a plan that would give the non-profit board special voting rights, a move that could preserve some of its powers after the company converts into a more traditional for-profit.
At present, OpenAI operates as a kind of nonprofit-corporate hybrid, with both the capped-profit arm and the original nonprofit side of the company controlled by a nonprofit board.
Company leaders are reportedly considering a range of new governance options, but maintaining some of the board's powers may help it fend off hostile-takeover bids and overrule other investors.
OpenAI's board officially rejected a Musk-led group of investors' bid for the company's nonprofit assets on Friday, but the $97.4 billion offer has complicated the question of how the company should value its nonprofit assets and how big a role it should play within the new corporate structure.
The question had already been plaguing the company amid its transition into a for-profit organization, with Altman reportedly suggesting paying around half of what Musk offered.
Unlike a for-profit board, OpenAI’s nonprofit board has no fiduciary responsibility to take the best price. Their only responsibility is to OpenAI’s charter and the founding mission to ensure AGI benefits all of humanity, which makes it easier to reject any bids they feel wouldn't help the company.
Representatives for OpenAI and lawyers for Musk did not immediately respond to a request for comment from Fortune.
OpenAI's corporate overhaul
OpenAI is in the middle of trying to overhaul this corporate structure to grant the for-profit arm more power to raise funds—something Musk has taken issue with.
The proposed plans involve spinning out the nonprofit, which will hire a leadership team and staff for charitable initiatives in sectors such as health care and education while transforming the for-profit arm into a public benefit corporation that will run and control OpenAI’s operations and business.
Under the proposed structure the for-profit side of the company will be free to court investors and raise funds, something it says it needs more freedom to do to compete effectively with companies like Google.
However, the company’s for-profit ambitions have been a particularly sore spot for Musk. The billionaire is a cofounder and early investor in OpenAI and has continually attempted to halt its conversion into a for-profit entity.
Musk has complained that he was initially approached about funding a nonprofit focused on developing AI to benefit humanity, but it is now focused on generating profit. By giving the board special voting rights, the company would also be able to address criticism it had moved away from its original mission of creating powerful AI for the benefit of humanity.
OpenAI has promised to complete the subsidiary’s transition into a traditional for-profit company by late 2026 as part of a funding round in October that valued the company at $157 billion.
