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Nov 22, 2023
Why doesn’t Microsoft have seat on OpenAI board despite massive investment?
Maria Ruocco
Our team at Editby is concerned with artificial intelligence, and we have been wondering what has been going on in recent hours within OpenAI.
To understand why Microsoft does not have a seat on the board, we need to clarify what the structure of OpenAI is.
OpenAI non-profit: from 2015 to 2019
OpenAI nonprofit was founded in late 2015 with the goal of building safe and beneficial artificial general intelligence for the benefit of humanity.
OpenAI is a non-profit artificial intelligence research company. Our goal is to advance digital intelligence in the way that is most likely to benefit humanity as a whole, unconstrained by a need to generate financial return. Since our research is free from financial obligations, we can better focus on a positive human impact.
This is the description of openAI made by the first document uploaded to the www.openai.com domain with nine signs from founders and donor companies. Among them Sam Altman, Elon Musk, and Peter Thiel, Amazon and Y-Combinator, the world's leading startup accelerator.
At this point the roles within the team were as follows:
Co-chairs: Sam Altman and Elon Musk.
CTO: Greg Brockman, formerly the CTO of Stripe
Research director: Ilya Sutskever
Research engineers and scientists: Trevor Blackwell, Vicki Cheung, Andrej Karpathy, Durk Kingma, John Schulman, Pamela Vagata, and Wojciech Zaremba.
Group advisors: Pieter Abbeel, Yoshua Bengio, Alan Kay, Sergey Levine, and Vishal Sikka.
In 2018, Elon Musk resigns from the board citing potential conflict of interest with Tesla's AI business arm, but remains a donor to it.
OpenAI’s Nonprofit received approximately $130.5 million in total donations, which funded the Nonprofit’s operations and its initial exploratory work in deep learning, safety, and alignment.
It became increasingly apparent that donations alone would not keep pace with the escalating costs of computational power and talent needed to advance core research, putting our mission at risk. Consequently, the OpenAI team devised a structure to preserve the core mission, governance, and oversight of Nonprofit while enabling us to raise capital for our mission.
OpenAI Crapped Profit & OpenAI Non Profit: from 2019
In this way, OpenAI created a for-profit subsidiary in 2019 to attract more resources for its ambitious AI research.
This move attracted significant funding, most notably from Microsoft. However, the non-profit board retained control through legal provisions. Newly appointed independent board members such as Shivon Zilis and Will Hurd were tasked with overseeing this unique structure.
In 2023, OpenAI’s board saw several departures, including Hoffman, Zilis, and Hurd, due to conflicts of interest and other commitments. This left the board with only six directors, evenly split between insiders and independent members.
The bylaws allowed decisions to be made by a majority without prior notice, giving power to the remaining small group:
OpenAI is governed by the board of the OpenAI Nonprofit, comprised of OpenAI Global, LLC employees Greg Brockman (Chairman & President), Ilya Sutskever (Chief Scientist), and Sam Altman (CEO), and non-employees Adam D’Angelo, Tasha McCauley, Helen Toner.
The original partnership structure between the non-profit organization and the capped-profit subsidiary was designed to support OpenAI’s mission of developing safe and beneficial artificial general intelligence (AGI) for the benefit of humanity.
Microsoft's Lack of Board Representation
Despite investing $1 billion in OpenAI in 2019, Microsoft does not hold a seat on OpenAI's board.
This absence raises critical questions about the governance of AI research companies and the influence exerted by major tech investors.
The recent upheaval following OpenAI's dismissal of CEO Sam Altman only intensifies these concerns.
With reports surfacing that Microsoft may seek board involvement, the dynamics within OpenAI could shift significantly, impacting both its independence and future direction.
There are several potential reasons for this surprising absence:
Avoiding conflicts of interest, as Microsoft competes in AI
Letting OpenAI maintain independence from corporate influence
Investment terms not requiring a board seat for Microsoft
Regardless of the specific rationale, Microsoft's lack of board representation is unique for such a major tech investor, underscoring OpenAI's commitment to independence.
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Maria Ruocco
