OpenAI Restructures to For-Profit Benefit Corporation

By Krystal Hu and Kenrick Cai

SAN FRANCISCO (Reuters) – ChatGPT-maker OpenAI is working on a plan to restructure its core business into a for-profit benefit corporation that will no longer be controlled by its non-profit board, sources told Reuters. This change aims to make the company more appealing to investors.

The OpenAI non-profit will continue to exist and own a minority stake in the for-profit entity. This restructuring may influence how the company oversees AI risks under the new governance model.

CEO Sam Altman will receive equity for the first time in the for-profit company, potentially increasing its value to $150 billion after restructuring. This also involves removing the cap on investor returns.

An OpenAI spokesperson stated, “We remain focused on building AI that benefits everyone, and we’re working with our board to ensure we succeed in our mission. The non-profit is core to our mission and will continue to exist.”

The proposed corporate structure, first reported by Reuters, indicates significant governance changes at this pivotal AI company. Details are still being finalized with lawyers and shareholders, and a timeline for completion is unclear.

This restructuring coincides with recent leadership changes, including the sudden departure of CTO Mira Murati and a leave of absence by president Greg Brockman.

Founded in 2015 as a non-profit AI research organization, OpenAI introduced its for-profit subsidiary, OpenAI LP, in 2019, securing investments from Microsoft (NASDAQ:MSFT) to support its research efforts.

OpenAI gained massive attention with the launch of ChatGPT in late 2022, a generative AI application that quickly reached 200 million weekly active users, spurring a global investment race in AI.

With ChatGPT’s success, the company’s valuation has soared from $14 billion in 2021 to $150 billion in the new convertible debt round, attracting investors like Thrive Capital and Apple (NASDAQ:AAPL).

AI SAFETY

OpenAI’s unique structure, which grants control of the for-profit subsidiary to the OpenAI non-profit, was originally designed to ensure the mission of creating “safe AGI that is broadly beneficial,” referring to artificial general intelligence at or exceeding human intelligence.

This control structure was highlighted during a significant boardroom crisis last November, where members removed Altman due to communication issues and a breakdown of trust. He was reinstated after five days following strong support from employees and investors.

The board has since been refreshed, now chaired by Bret Taylor, former co-CEO of Salesforce (NYSE:CRM) who leads his own AI startup. All corporate changes require approval from the nine-person non-profit board.

Removing non-profit control may allow OpenAI to operate more like a typical startup, a move generally favored by its investors. However, this could raise concerns among the AI safety community regarding sufficient governance to ensure accountability in pursuing AGI, especially as it dissolved the superalignment team responsible for long-term AI risks earlier this year.

It remains unclear how much equity Altman will gain. He has stated before that he chose not to take an equity stake because the board required a majority of disinterested directors. Altman, already a billionaire from various investments, claims he does it because of his passion for the work.

The new OpenAI structure may resemble that of its major rival, Anthropic, and Elon Musk’s xAI, both registered as benefit corporations that aim to balance profit-making with social responsibility and sustainability.