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Alternative Strategies for OpenAI’s Corporate Structure
Established in 2015 as a nonprofit organization, OpenAI introduced a “capped profit” model in 2019 to ensure sustainable funding while limiting profit distributions. This structure means that any profits exceeding a predetermined cap are redirected back to the nonprofit, maintaining its altruistic mission.
However, OpenAI is on the verge of transitioning to a for-profit public benefit corporation in the coming year. In this new framework, the nonprofit arm will retain equity in the for-profit division, allowing OpenAI to continue its commitment to philanthropic efforts in crucial areas such as healthcare, education, and scientific research.
Elon Musk, a co-founder of OpenAI, has voiced his concerns regarding this significant shift by requesting a federal court to halt the conversion from nonprofit to for-profit status. According to a report from the Financial Times, the introduction of new voting rights for the nonprofit branch could potentially alleviate Musk’s concerns about the organization’s evolving focus.
The Financial Times suggests that implementing “special voting rights” could empower the nonprofit arm to maintain influence and oversight, addressing Musk’s argument that OpenAI has drifted from its foundational goal of developing AI technologies that benefit humanity.
Additionally, OpenAI might contemplate using a poison pill strategy or a shareholder rights plan. Such measures would enable existing shareholders to purchase additional shares at a reduced price to thwart hostile takeover attempts. The Financial Times notes that while this approach is under consideration by OpenAI’s board, its actual implementation remains uncertain.
In a similar context, Twitter’s board enacted a poison pill policy in April 2022 to safeguard against Musk’s unsolicited $43 billion acquisition offer. Nevertheless, the board subsequently reversed this decision ten days later, ultimately agreeing to a $44 billion buyout from Musk.
Source
arstechnica.com