They are utterly delusional if they think they will be board members of OpenAI in the future unless they plan to ride it down the drain and if they do that they are in very, very hot water.
Good question. Potentially: Liability based on their decisions. If it turns out those were not ultimately motivated by actual concern for the good of the company then they have a lot of problems.
> If it turns out those were not ultimately motivated by actual concern for the good of the company then they have a lot of problems.
The boards duty is to to the charitable mission, not any other concept of the “good of the company”, and other than the government if they are doing something like pursuing their own private profit interest or acting as an agent for someone elses or some other specific public wrongs, the people able to make a claim are pretty narrow, because OpenAI isn't membership-based charity in which there are members to whom the board is accountable for pursuit of the mission.
People keep acting like the parent organization here is a normal corporation, and its not, and even the for-profit subsidiary had an operating agreement subordinating other interests to the charitable mission of the parent organization.
I don't think you can wave away your duty of care to close to a thousand people based on the 'charitable mission' and I suspect that destruction of the company (even if the board claims that is in line with the company mission) passes that bar.
I could be wrong but it makes very little sense. Such decisions should at a minimum be accompanied by lengthy deliberations and some very solid case building. The non-profit nature of the parent is not a carte-blanche to act as you please.
Board members are supposed to exercise diligence and prudence in their decisions. They are supposed to take into account all of the results of their actions and they are supposed to ensure that there are no conflicts of interest where their decisions benefit them outside of their role as board members (if there are they should abstain from that particular vote, assuming they want to be on the board in the first place with a potential or actual conflict of interest). Board members are ultimately accountable to the court in the jurisdiction where the company is legally established.
The thing that doesn't exist is a board that is unaccountable for their actions and if there are a thousand people downstream from your decisions that diligence and prudence translates into a duty of care and if you waltz all over that you open yourself up to liability.
It's not that you can't do it, it's that you need to show your homework in case you get challenged and if you didn't do your homework there is the potential for backlash.
Note that the board has pointedly refused to go on the record as to why they fired Altman and that by itself is a very large indicator that they did this with insufficient forethought because if they had there would be an iron clad case to protect the board from the fall out of their decision.
> Board members are supposed to exercise diligence and prudence in their decisions.
Yes, and if they fail to do so in regards to the things they are legally obligated to care for, like the charitable mission, people who have a legally-cognizable interest in the thing they failed to pursue with diligence and prudence have a claim.
But whose legally cognizable interest (and what specific such interest) do you think is at issue here?
> The thing that doesn't exist is a board that is unaccountable for their actions
Sure, there are specific parties who have specific legally cognizable interests and can hold the board accountable via legal process for alleged failures to meet obligations in regard to those specific interests.
I’m asking you to identify the specific legally-cognizable interest you believe is at issue here, the party who has that interest, and your basis for believing that it is a legally-cognizable interest of that party against the board.
We're going around in circles I think but to me it is evident that a somewhat competent board that intends to fire the CEO of the company they are supposed to be governing will have a handy set of items ready: a valid reason, minutes of the meeting where all of this was decided where they gravely discuss all of the evidence and reluctantly decide to have to fire the CEO (handkerchiefs are passed around at this point, a moment of silence is observed), the 'green light' from legal as to whether that reason constitutes sufficient grounds for the dismissal. Those are pre-requisites.
> Yes, and if they fail to do so in regards to the things they are legally obligated to care for, like the charitable mission, people who have a legally-cognizable interest in the thing they failed to pursue with diligence and prudence have a claim.
I fail to see the correlation between 'blowing up the entity' by a set of ill advised moves and 'taking care of the charitable mission'.
The charitable mission is not a legal entity and so it will never sue, but it isn't a get-out-of-jail-free card for a board that wants to decide whatever it is that they've set their mind to.
> But whose legally cognizable interest (and what specific such interest) do you think is at issue here?
For one: Microsoft has a substantial but still minority stake in the for-profit, there are certain expectations attached to that and the same goes for all of the employees both of the for-profit and the non-profit whose total compensation was tied to the stock of OpenAI, the for profit. All of these people have seen their interests be substantially harmed by the board's actions and the board would have had to balance that damage with the weight of the positive effect on the 'charitable mission' in order to be able to argue that they did the right thing here. That's not happening, as far as I can see it, in fact the board has gone into turtle mode and refuses to engage meaningfully, two days later they did it again and fired another CEO (presumably this is still in line with protecting the charitable mission?).
> Sure, there are specific parties who have specific legally cognizable interests and can hold the board accountable via legal process for alleged failures to meet obligations in regard to those specific interests.
Works for me.
> I’m asking you to identify the specific legally-cognizable interest you believe is at issue here, the party who has that interest, and your basis for believing that it is a legally-cognizable interest of that party against the board.
See above, if that's not sufficient then I'm out of ideas.
> We're going around in circles I think but to me it is evident that a somewhat competent board that intends to fire the CEO of the company they are supposed to be governing will have a handy set of items ready: a valid reason, minutes of the meeting where all of this was decided, the 'green light' from legal as to whether that reason constitutes sufficient grounds for the dismissal. Those are pre-requisites.
I think the difference here is that I am fine with your belief that this is what a competent board should have, but I don't think this opinion is the same as actually establishing a legal duty.
> The charitable mission is not a legal entity and so it will never sue, but it isn't a get-out-of-jail-free card for a board that wants to decide whatever it is that they've set their mind to.
The charitable mission is the legal basis for the existence of the corporation and its charity status, and the basis for legal duties and obligations on which both the government (in some cases), and other interested parties (donors,
and, for orgs that have them, members) can sue.
> For one: Microsoft has a substantial but still minority stake in the for-profit, there are certain expectations attached to that and the same goes for all of the employees both of the for-profit and the non-profit whose total compensation was tied to the stock of OpenAI, the for profit
Given the public information concerbing the terms of the operating agreement (the legal basis for the existence and operation of the LLC), unless one of those parties has a non-public agreement with radically contradictory terms (which would be problematic for other reasons), I don't think there can be any case that the OpenAI, Inc., board has a legal duty to any of those parties to see to the profitability of OpenAI Global LLC.
> I think the difference here is that I am fine with your belief that this is what a competent board should have, but I don't think this opinion is the same as actually establishing a legal duty.
I don't think we'll be able to hash this out simply because too many of the pieces are missing. But if the board didn't have those items handy and they end up being incompetent then that by itself may end up as enough grounds to show they violated their duty of care. And this is not some nebulous concept, it actually has a legal definition:
I went down into this rabbit hole a few years ago when I was asked to become a board member (but not of a non-profit) and I decided that the compensation wasn't such that I felt that it offset the potential liability.
> The charitable mission is the legal basis for the existence of the corporation and its charity status, and the basis for legal duties and obligations on which both the government (in some cases), and other interested parties (donors, and, for orgs that have them, members) can sue.
Indeed. But that doesn't mean the board is free to act with abandon as long as they hold up the 'charitable mission' banner, they still have to act as good board members and that comes with a whole slew of luggage.
> Given the public information concerning the terms of the operating agreement (the legal basis for the existence and operation of the LLC), unless one of those parties has a non-public agreement with radically contradictory terms (which would be problematic for other reasons), I don't think there can be any case that the OpenAI, Inc., board has a legal duty to any of those parties to see to the profitability of OpenAI Global LLC.
It is very well possible that the construct as used by OpenAI is so well crafted that it insulates board members perfectly from the fall-out of whatever they decide, but I find that hard to imagine. Typically everything down stream from the thing you govern (note that they retain a 51% stake and that that alone may be enough to show that they are in control to the point that they can not disclaim anything) is subject to the duties and responsibilities that board members usually have.
It's pretty standard to get DAO insurance which covers errors, omissions, and negligence, as a board member.
At any rate, we don't know that the board doesn't have those minutes. I see no reason to assume they've failed duty of care.
And being a non-profit does, in fact, give the board sole right to so much as dissolve the entire company and donate the proceeds to Anthropic if they decide in five minute zoom call, of their own discretion, that doing so aligns best with mission statement in its charter.
DAO insurance doesn't cover malice and purposeful destruction.
If the minutes exist I'm sure they'll be leaked, if they don't they're in trouble. ANd if you don't see any reason to assume they've failed their duty of care that is fine by me but I think the last few days alone pretty much confirm that they did not.
It’s not a company - which is why they’re able to do this. We’ve just learned, again, that nonprofits can’t make these kinds of decisions because the checks and balances that investors and a profit motive create don’t exist.
That doesn't matter. Even the members of the board of a non-profit are liable for all of the fall-out from their decisions if those decisions end up not being defensible. That's pretty much written in stone and one of the reasons why you should never accept a board seat out of your competence.
> about 700 employees seem to think their livelihood matters and that the board didn't exercise their duty of care towards them
It is difficult to see how such a duty would arise. OpenAI is a non-profit. The company's duty was to the non-profit. The non-profit doesn't have one to the company's employees; its job was literally to check them.
To check them does not overlap with 'to destroy them at the first opportunity'. There is no way that this board decision - which now is only supported by three of the original nine board members - is going to survive absent a very clear and unambiguous reason that shows that their only remedy was to fire the CEO. This sort of thing you don't do by your gut feeling, you go by the book.
> no way that this board decision...is going to survive absent a very clear and unambiguous reason that shows that their only remedy was to fire the CEO
The simplest explanation is Altman said he wasn't going to do something and then did it. At that point, even a corporate board would have cause for termination. Of course, the devil is in the details, and I doubt we'll have any of them this week. But more incredulous than the board's decision is the claim that it owes any duty to its for-profit subsidiary's employees, who aren't even shareholders, but some profit-sharing paper's holders.
True, but then the board would have been able to get rid of the controversy on the spot by spelling out their reasoning. Nobody would fault them. But that didn't happen, and even one of the people that voted for Altmans' removal has backtracked. So this is all extremely murky and suspicious.
If they had a valid reason they should spell it out. But my guess is that reason, assuming it exists, will just open them up to more liability and that is why it isn't given.
> But more incredulous than the board's decision is the claim that it owes any duty to its for-profit subsidiary's employees, who aren't even shareholders, but some profit-sharing paper's holders.
Technically they took over the second they fired Altman so they have no way to pretend they have no responsibility. Shareholders and employees of the for-profit were all directly affected by this decision, the insulating properties of a non-profit are not such that you can just do whatever you want and get away with it.
> the board would have been able to get rid of the controversy on the spot by spelling out their reasoning
I don't think they have an obligation to do this publicly.
> even one of the people that voted for Altmans' removal has backtracked
I don't have a great explanation for this part of it.
> Shareholders and employees of the for-profit were all directly affected by this decision, the insulating properties of a non-profit are not such that you can just do whatever you want and get away with it
We don't know. This is truly novel structure and law. That said, the board does have virtually carte blanche if Altman lied or if they felt he was going to end humanity or whatever. Literally the only thing that could go for the employees is if there are, like, text messages between board members conspiring to tank the value of the company for shits and giggles.
Capriciousness and board membership are not compatible. The firing of a CEO of a massively successful company is something that requires deliberation and forethought, you don't do that just because you have a bad hairday. So their reasons matter a lot.
What I think is happening is that the reason they had sucks, that the documents they have create more liability and that they have a real problem in that one of the gang of four is now a defector so there is a fair chance this will all come out. It would not surprise me if the remaining board members end up in court if Altman decides to fight his dismissal, which he - just as surprising - so far has not done.
So there is enough of a mess to go around for everybody but what stands out to me is that I don't see anything from the board that would suggest that they acted with the kind of forethought and diligence required of a board. And that alone might be enough to get them into trouble: you don't sit on a board because you're going off half-cocked, you sit on a board because you're a responsible individual that tries to weigh the various interests and outcomes and you pick the one that makes the most sense to you and you are willing to defend that decision.
So far they seem to believe they are beyond accountability. That - unfortunately for them - isn't the case but it may well be they escape the dance because nobody feels like suing them. But I would not be surprised at all if that happened and if it does I hope they have their house in order, board liability is a thing.
> which he - just as surprising - so far has not done
There were so many conflicts of interests at that firm, I'm not unsurprised by it, either.
> I don't see anything from the board that would suggest that they acted with the kind of forethought and diligence required of a board
We don't know the back-and-forth that led up to this. That's why I'm curious about how quiet one side has been, while the other seemingly launched a coast-to-coast PR campaign. If there had been ongoing negotiations between Altman and others, and then Altman sprung a surprise that went against that agreement entirely, decisive action isn't unreasonable. (Particularly when they literally don't have to consider shareholder value, seemingly by design.)
> they seem to believe they are beyond accountability
Does OpenAI still have donors? Trustees?
I suppose I'm having trouble getting outraged over this. Nobody was duped. The horrendous complexity of the organization was panned from the beginning. Employees and investors just sort of ignored that there was this magic committee at the top of every org chart that reported to "humanity" or whatever.
Agreed, there are a ton of people that should have exercised more caution and care. But it is first and foremost the board's actions that have brought OpenAI to the edge of the abyss and that wasn't on the table a month ago. That that can have consequences for the parties that caused it seems to me to be above question, after all, you don't become board members of a non-profit governing an entity worth billions just to piss it all down the drain and pretend that was just fine.
I totally understand that you can't get outraged over it, neither am I (I've played with ChatGPT but it's nowhere near solid enough for my taste and I don't know anybody working there and don't particularly like either Altman or Microsoft). But I don't quite understand why people seem to think that because this is a non-profit (which to me always seemed to be a fig-leaf to pretend to regulators and governments that they had oversight) anything goes. Not in the world that I live in, you take your board member duties seriously or it is better if you aren't a board member at all.
The OpenAI nonprofit it not on the edge of the abyss and the board has brought it no closer to being there. If the board thinks the mission of "bringing about AGI which benefits all of humanity unrestricted by concerns of generating revenue" is not best served by productizing LLMs into revenue generating products then a mass resignation of its wholly controlled for profit subsidiary saves them the trouble and cost of a mass layoff.
The board has a massive conflict of interest in that they are also controlling all of the other entities and that alone means that they can't hide behind the purported mission of the non-profit. And even then they may well have to explain to a judge why they thought this hastily taken decision was in line with that mission. I don't see it happening.
But all of that has already been covered upthread. Multiple times.
It's all about diligence and prudence. I don't see much evidence of either and that means the employees may well have a point. Incidentally: the word 'care' was very explicitly used in the letter.
Diligience and prudence apply to the things to which they actually are obligated in the first place, which the employees’ livelihood beyond contracted pay and benefits for the time actually worked simply is not included in.
> which the employees’ livelihood beyond contracted pay and benefits for the time actually worked simply is not included in
Quite a few of those employees are also stockholders, besides that this isn't some kids game where after a few rounds you can throw your cards on the table and walk out because you feel that you've had enough of it. You join a board because you are an adult that is capable of forethought and adult behavior.
I don't quite get why this is even controversial, there isn't a board that I'm familiar with, including non-profits that would be so incredibly callous towards everybody affected by their actions with the expectation that they would get away with it. Being a board member isn't some kind of magic invulnerability cloak, and even non-profits have employees, donors and benificaries who all have standing regarding decisions affecting their stakeholdership.
> Quite a few of those employees are also stockholders
None of them are stockholders, because (except for the nonprofit, which can't have stockholders even as a corporation) none of the OpenAI entities are corporations.
Some of them have profit-sharing interests and/or (maybe) memberships in the LLC or some similar in interest in the holding company above LLC; the LLC operating agreement (similar function to a corporate charter) expressly notes that investments should be treated as donations and that the Board may not seek to return a profit; the holding companies details are less public, but it would be strange if it didn't have the same kind of thing since the only thing it exists is to hold a controlling interest in the LLC, and the only way it would make any profit is from profits returned by the LLC.
Now it may be that I got this completely wrong but it looks to me as though there is an ownership relationship (implying stock is involved) between the entity labelled 'Employees and other investors' and the holding company.
> Hm, ok, I was under the distinct impression that some of the early employees of OpenAI were stock holders in the entity in the middle.
That's the entity I discuss in GP as “the holding company above the LLC”.
I'm reasonably certain it is OpenAI LP, a limited partnership (but it is odd that its the one organization not identified in the document—the name of the entity used by OpenAI to control it, and separate information about OpenAI LP being created and existing as part of the for-profit structure fairly strongly indicates that it is the holding company), so the relationship would either be some kind of contractual profit sharing or a limited partnership, not a stockholder relationship. But, again while the information about it is less publicized than the LLC, it seems improbable that they would structure the operating agreement of the LLC so that it may not be managed for profit, but not provide the same in the holding company that's only possible source of profit is the LLC underneath it.
No way to be sure without seeing the paperwork but that word 'owner' is a strong tell that this is stock, not just a profit share (note the direction of the arrow, but even if it is just a profit share that profit share still is a function of the stock held by the entity and if that stock loses its value because the underlying company is destroyed then so do the profits). So with that as a base I hope you can understand why I think the fiduciary duties of the board extend to the employees affected by their decisions because it directly impacts the value of the stock held in that company to which they - and the other investors mentioned - hold (possibly indirect) title.
These arrangements are pretty common in fact (though not the non-profit bit, just the separate entity for smaller shareholders and investors), and the other stand out is that they label the other party in there as 'investors', not 'donors' or some other party to which you are not required to answer.
So to me it is far from clear cut that they only have the mission of the non profit to guide themselves by and they set themselves up for that by wanting too much control (also over all of the other entities). Control is good when you want to have your way, but too many hats on your head with too many different labels can constrain you or open you up to liability or conflicts of interest. It's one of the reasons why I try to limit my engagement with various companies to a single role.
