Some investors in OpenAI, the creator of ChatGPT, are exploring legal recourse against the company\u2019s board, sources familiar with the matter have told the Reuters news agency, after the directors removed CEO Sam Altman and sparked a potential mass exodus of employees.<\/p>\n
Sources said investors are working with legal advisers to study their options. It was not immediately clear if these investors will sue OpenAI.<\/p>\n
<\/p>\n
Investors worry they could lose hundreds of millions of dollars they invested in OpenAI, a crown jewel in some of their portfolios, with the potential collapse of the hottest startup in the rapidly growing generative AI sector.<\/p>\n
OpenAI did not respond to a request for comment.<\/p>\n
Microsoft owns 49 percent of the for-profit operating company, according to sources familiar with the matter. Other investors and employees control 49 percent, with 2 percent owned by OpenAI\u2019s nonprofit parent, according to Semafor.<\/p>\n
OpenAI\u2019s board fired Altman on Friday after a \u201cbreakdown of communications\u201d, according to an internal memo seen by Reuters.<\/p>\n
By Monday, most of OpenAI\u2019s more than 700 employees\u00a0threatened to resign\u00a0unless the company replaced the board.<\/p>\n
Venture capital investors usually hold board seats or voting power in their portfolio companies but OpenAI is controlled by its nonprofit parent company OpenAI Nonprofit, which according to OpenAI\u2019s website was created to benefit \u201chumanity, not OpenAI investors\u201d.<\/p>\n
<\/p>\n
As a result, employees have more leverage in pressuring the board than the venture capitalists who helped fund the company, said Minor Myers, a law professor at the University of Connecticut.<\/p>\n
\u201cThere is nobody exactly who is in the seat of an injured investor,\u201d he said.<\/p>\n
<\/p>\n
That is a feature, not a bug of OpenAI\u2019s structure, which started out as a nonprofit but added a for-profit subsidiary in 2019 to raise capital. Keeping control of operations lets the nonprofit preserve its \u201ccore mission, governance, and oversight,\u201d according to the company\u2019s website.<\/p>\n
Nonprofit boards have legal obligations to the organisations they oversee. But those obligations, such as the duty to exercise care and avoid self-dealing, leave a lot of leeway for leadership decisions, experts said.<\/p>\n
Those obligations can be further narrowed in a corporate structure such as OpenAI, which used a limited liability company as its operating arm, potentially further insulating the nonprofit\u2019s directors from investors, said Paul Weitzel, a law professor at the University of Nebraska.<\/p>\n
<\/p>\n
Even if investors found a way to sue, Weitzel said they would have a \u201cweak case\u201d. Companies have broad latitude under the law to make business decisions, even ones that backfire.<\/p>\n
\u201cYou can fire visionary founders,\u201d Weitzel said.<\/p>\n
Apple famously fired Steve Jobs in the 1980s, before bringing him back about a decade later.<\/p>\n","protected":false},"excerpt":{"rendered":"
Some investors in OpenAI, the creator of ChatGPT, are exploring legal recourse against the company\u2019s board, sources familiar with the matter have told the Reuters news agency, after the directors removed CEO Sam Altman and sparked a potential mass exodus of employees. Sources said investors are working with legal advisers to study their options. It […]<\/p>\n","protected":false},"author":1,"featured_media":51,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_analytify_skip_tracking":false,"footnotes":""},"categories":[4],"tags":[],"class_list":["post-50","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economy"],"_links":{"self":[{"href":"https:\/\/alnasnews.com.jo\/en\/index.php?rest_route=\/wp\/v2\/posts\/50","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/alnasnews.com.jo\/en\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/alnasnews.com.jo\/en\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/alnasnews.com.jo\/en\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/alnasnews.com.jo\/en\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=50"}],"version-history":[{"count":1,"href":"https:\/\/alnasnews.com.jo\/en\/index.php?rest_route=\/wp\/v2\/posts\/50\/revisions"}],"predecessor-version":[{"id":52,"href":"https:\/\/alnasnews.com.jo\/en\/index.php?rest_route=\/wp\/v2\/posts\/50\/revisions\/52"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/alnasnews.com.jo\/en\/index.php?rest_route=\/wp\/v2\/media\/51"}],"wp:attachment":[{"href":"https:\/\/alnasnews.com.jo\/en\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=50"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/alnasnews.com.jo\/en\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=50"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/alnasnews.com.jo\/en\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=50"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}