OpenAI’s consideration of granting special voting rights to protect against hostile takeovers reflects a proactive stance in preserving the company’s ethical values. This move could spark a broader conversation in the tech industry, encouraging other companies to adopt similar strategies to maintain control as they transition to traditional for-profit models.
Backed by Microsoft, OpenAI is exploring the possibility of giving its nonprofit board special voting rights to safeguard the authority of its directors, particularly as it faces an unsolicited takeover attempt by co-founder Elon Musk. According to a report from the Financial Times on Tuesday, CEO Sam Altman and board members are assessing new governance measures as the company prepares to shift from its nonprofit origins to a for-profit structure.
According to the report, the proposal would allow the nonprofit board to overrule major investors, including backers like Microsoft and SoftBank, ensuring that OpenAI’s leadership retains decision-making authority. The proposal is a response to an offer made by Musk’s consortium to acquire the company for $97 billion, which OpenAI rejected.
While the proposal may seem counterproductive, it is essential that OpenAI protects itself against predatory investment and ensures that it can remain focused on its mission as it seeks to become more profitable. If the board of a for-profit entity is not given the power to safeguard its independence, it will be compelled to sacrifice ethical grounding for profit growth.
This is not a new idea. Public benefit corporations, or PBCs, have emerged to embrace the idea that a company can be both for-profit and socially responsible. The Delaware-based company form allows companies to pursue profit and social impact goals while maintaining a cohesive corporate structure. It also provides governance that reflects that multiple stakeholders need to be addressed beyond shareholders, and it encourages board decision-making to include all identified stakeholder interests.
However, this is not an appropriate solution for a for-profit company looking to expand into the lucrative field of artificial intelligence. To grow as large as it needs to be to make an impact, it will need to raise capital, and that capital comes with the requirement that investors have a say in how decisions are made.
The complexities of for-profit company law and governance have already caused problems. For example, when Microsoft bought a stake in Baidu in 2015, it became an investor-owned company. It was expected to follow the same corporate governance practices as other publicly traded firms. However, those guidelines were violated by the Chinese internet giant’s board, which reportedly appointed high-profile employees to key positions in violation of its fiduciary duties. The conflict eventually sparked a boardroom coup and saw many senior executives depart. That is a risk that OpenAI’s board cannot afford to run into again. The latest controversy around the proposed changes to governance could be a precursor to a more significant battle over the future of AI.
