This November many of us watched chaos unfold at OpenAI, where chief executive and co-founder, Sam Altman, was ousted and reinstated within a span of five days. Though many details of how exactly this saga unfolded remain private, the drama had immediate public consequences for the company, its leadership, and its investors: 700 employees of OpenAI threatened to quit and begin work at a newly announced Microsoft subsidiary run by Altman unless he was reinstated; several board members responsible for the decision to remove Altman resigned following what some dubbed their “failed coup;” and Microsoft (who own a reported 49% stake in the company) saw its stock price dramatically yo-yo after Altman’s departure and eventual return.
Many have noted OpenAI’s unusual corporate structure as a contributing factor to the recent discord – they have a nonprofit parent company whose board of directors oversee its for-profit subsidiary. In fact, at the time of the ousting, Microsoft, Open AI’s largest investor, had no voting power or board seats, meaning this collective action was taken by board members with no financial stake in the company. For some, this stand-off between the board and the CEO was seen as an inevitable clashing, especially given the very different priorities between OpenAI’s nonprofit and for-profit entities.
Many believe the Altman ouster was tied to board member concerns around inadequate safety mechanisms at OpenAI (some were quoted in a statement explaining that Altman "was not consistently candid in his communications with the board, hindering its ability to exercise its responsibilities.") While what comes next for OpenAI continues to unfold, the November upheaval has generated spirited conversations and some key insights around the broader topic of corporate governance and leadership in the emerging field of AI.
Certainly, the disruptive potential of AI, and the sometimes competing interests of profit and safety, mean governments and other regulatory bodies will need to create better strategies for overseeing this complex technology, and organizations should be working now to create new, creative corporate governance structures that can help balance the power between investors and executives to address the most serious safety issues presented by AI.
Additionally, the importance of a strong commitment to open, transparent communication both internally (with team members) and externally (with the public) can’t be understated. Boards operating in good faith must be careful to make informed decisions that consider the broadest levels of impact. Firing Altman exposed the board to potential legal action, with claims that they acted rashly and without conducting sufficient due diligence, possibly failing to meet several of their fiduciary and legal responsibilities to stakeholders – specifically the duties of loyalty and care.
Startups forming a board of directors should be sure to take note. Setting up a board of directors early in a startup’s lifecycle can offer a bevy of advantages: helping avoid unnecessary risk, overseeing critical company objectives like picking leadership, hiring and firing senior management, allocating capital, and making other fundraising and major financial decisions. And for members of the executive board and other governing bodies, directors and officers (D&O) insurance may be a liability policy worth investigating, as it offers protections for individuals from personal losses in the event of a lawsuit. Still, board members should take care to always act in good faith, making sure to maintain the rules, processes, and policies that have been established – doing so will build trust, transparency and can help achieve crucial alignment and balance within an organization.