In a significant turn of events, artificial intelligence (AI) major OpenAI announced on May 05 that the company will maintain its nonprofit control of its business operations despite plans to create a public benefit corporation (PBC). This decision likely constrains CEO Sam Altman's authority over the ChatGPT maker.

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In a letter to the employees, Altman said, “We made the decision for the nonprofit to retain control of OpenAI after hearing from civic leaders and engaging in constructive dialogue with the offices of the Attorney General of Delaware and the Attorney General of California.”

“Our mission is to ensure that artificial general intelligence (AGI) benefits all of humanity,” the letter said. “We are committed to this path of democratic AI. We want to put incredible tools in the hands of everyone,” it added.

OpenAI had earlier proposed restructuring its operations to increase its for-profit status, a move that had raised concerns about the company’s commitment to its original mission of developing artificial general intelligence for the benefit of humanity. However, following mounting pressure and legal challenges, including a lawsuit filed by Elon Musk, OpenAI has altered its approach, with the nonprofit parent organisation now set to remain in charge.

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The new structure

CNBC reported that in a video call with reporters, OpenAI’s board chairman Bret Taylor said, “With the structure we’re contemplating, the not-for-profit will remain in control of OpenAI”. 

“We will be converting the limited liability company that is a subsidiary of that nonprofit to a public benefit corporation. By doing so, it will change the equity structure of that company so that employees, investors and the not-for-profit can own equity in that PBC,” he added.

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Taylor said OpenAI had commissioned outside financial advisors to consult on the recapitalisation. He declined to share how much of a stake the nonprofit would have in the company, though it will be a majority.

Under the new structure, OpenAI’s nonprofit board will maintain governance over the company, with the same directors likely serving on both the nonprofit and the PBC boards. Taylor reassured reporters that the company's mission will remain its top priority, and the nonprofit board's fiduciary duty will be strictly bound to that mission.

Backlash on the for-profit plan

OpenAI began as a nonprofit, but Altman has been proposing changes to the firm’s structure since his brief yet controversial ouster from the AI research lab in November 2023. Tesla CEO Elon Musk, who was also a co-founder of OpenAI, has also criticised the company and filed a lawsuit blocking the plan, accusing Altman of prioritising growth over the lab’s original mission of creating technology for the benefit of humanity.

In December, Altman announced plans to revamp OpenAI’s structure to become a public benefit company. The move raised concerns about whether OpenAI would allocate enough funds to its nonprofit arm and whether it would lead to greater corporate influence.

The plan drew sharp criticism from former OpenAI employees and AI experts. Some expressed concerns that transitioning to a for-profit structure would undermine OpenAI’s core mission and reduce accountability, particularly as the company works toward creating AGI. A letter sent to attorneys general in California and Delaware last month warned that removing nonprofit oversight could "subvert OpenAI’s charitable purpose" and create significant governance risks.

OpenAI’s hybrid structure has included a capped-profit limited partnership that was created in 2019. The original nonprofit is the controlling shareholder and would have been spun out as an independent entity if OpenAI had succeeded in its efforts. With that change no longer taking place, OpenAI’s investors receive convertible notes that will turn into equity.

Growth path

As OpenAI charts its new path, it continues to draw attention in the world of AI technology. OpenAI has agreed to acquire AI-based coding tool Windsurf, an AI coding assistant for developers and enterprises, for around $3 billion, according to a Bloomberg report. The acquisition of Windsurf is currently not closed, and if completed would be the largest ever by the ChatGPT maker.

The acquisition would bolster its position in the competitive AI landscape, positioning OpenAI against rivals such as Anthropic and Microsoft’s GitHub.

Despite facing ongoing legal disputes with Elon Musk, OpenAI’s market value remains robust, estimated at $300 billion, with 400 million weekly users of its flagship product, ChatGPT. These recent developments reflect the company's ongoing efforts to balance rapid growth with its core mission, even as it navigates an increasingly complex regulatory landscape.

(With inputs from agencies)