Artificial Intelligence, Leadership, Managing

OpenAI’s weird board structure made it easy to fire Sam Altman [Updated]

Tegan Jones
November 20, 2023
sam altman openai

Image: Sam Altman, X

Over the past few days the tech world has been munching on figurative popcorn as it has watched the drama unfold over at OpenAI. Over the weekend, co-founder Sam Altman was fired as CEO of the company. This set off a chain reaction of responses from employees and investors (including Microsoft) who claimed not to have been informed of the decision until it happened.

What ensued was a weekend of whiplash as motives were called into question, new information came to light and the possibility of reinstatement was dangled.

And it’s happened! As of Wednesday afternoon both OpenAI and Sam Altman confirmed his return as CEO alongside a new board. More details below.

TLDR: What happened to Sam Altman?

This all went down over the weekend in Australia, and there’s been so many twists and turns that it’s been hard to keep up. So here’s a handy timeline of what has taken place so far.

This is still a developing story and we have been updating as new information comes to light (and there’s been a lot).

Please note that this timeline refers to dates in the USA:

November 16:

  • Mira Murati, OpenAI’s CTO, was allegedly told that Sam Altman would be removed as CEO the following day.
  • OpenAI’s co-founder and chief scientist, Ilya Sutskever, allegedly texted Altman to schedule a call on Friday.

November 17:

  • Sam Altman was fired via a Google Meet call with the board — minus Greg Brockman, president and co-founder of OpenAI — around noon on Friday.
  • Brockman was removed as chairman of the board roughly half an hour later but was told it was important that he retained his role as president. According to Brockman, OpenAI published its blog post about the incident shortly thereafter.

“As you saw at Microsoft Ignite this week, we’re continuing to rapidly innovate for this era of AI, with over 100 announcements across the full tech stack from AI systems, models, and tools in Azure, to Copilot. Most importantly, we’re committed to delivering all of this to our customers while building for the future. We have a long-term agreement with OpenAI with full access to everything we need to deliver on our innovation agenda and an exciting product roadmap; and remain committed to our partnership, and to Mira and the team. Together, we will continue to deliver the meaningful benefits of this technology to the world.”

  • Greg Brockman and senior OpenAI researchers Jakub Pachocki (director of research) and Aleksander Madry (head of preparedness) quit.

November 18

  • Axios obtained an internal memo from OpenAI that revealed that the management team was surprised by the turn of events and that it was speaking with the board to understand the reasons for the decision. According to the memo, written by penAI COO Brad Lightcap, “the board’s decision was not made in response to malfeasance or anything related to our financial, business, safety, or security/privacy practices. This was a breakdown in communication between Sam and the board … We still share your concerns about how the process has been handled, are working to resolve the situation, and will provide updates as we’re able”.
  • According to The Verge, the board had agreed to resign in principle after staffers had threatened to resign if Altman and Brockman weren’t reinstated. However, the board apparently missed the deadline given by staffers and Altman allegedly was saying there would need to be “significant” changes in governance for him to return.
  • Investors are also said to be “furious” around the firing, particularly finding out about it after it happened. This includes Microsoft CEO, Satya Nadella (who has allegedly thrown support behind Altman) and VC investors such as Khosla Ventures. According to reports, some VCs have considered a lawsuit against the board.

November 19

  • At the time of writing, Sam Altman is confirmed to be on-site at OpenAI. Sources state this is to discuss his reappointment as CEO. Altman has also remained vague about what’s going on, but took the time to shitpost over on X, formerly Twitter:

  • According to Bloomberg, Murati and Lightcap are attempting to get the board to reinstate Altman. Its report states that the board is resisting and is still yet to resign. Apparently, potential candidates are being vetted, including the co-CEO of Salesforce, Bret Taylor.

Update 4.45pm:

According to reports, Sam Altman is not coming back as CEO of OpenAI at present. In a weird twist of events, the former CEO of Twitch — Emmett Shear — will replace Mira Murati as interim CEO. This swap may have happened due to Murati being publicly in support of Altman.

We’ll let you know if and when this story gets wilder.

Update 7.11pm

Satya Nadella has confirmed on X, formerly Twitter, that Sam Altman and Greg Brockman are joining Microsoft “to lead a new advanced AI research team”.

Nadella also said that Microsoft will continue to work with OpenAI.

Altman retweeted the post several minutes later, stating “the mission continues”.

Update: November 21:

The drama is still continuing with some overnight developments.

  • Ilya Sutskever has flipped on the board and took to X, admitting that he regrets his part in the board’s decision to remove Sam Altman.

  • According to The Verge, Altman and Brockman are still willing to go back to OpenAI — despite declaring their intention to join Microsoft. According to sources, the remaining board members who were responsible for Altman’s dismissal (besides Sutskever) would need to step down in order for this to happen.

  • Over 500 OpenAI employees signed a letter stating they would quit if the board didn’t resign and reinstate Altman as CEO. Sutskever’s name was on this letter.

“The process through which you terminated Sam Altman and removed Greg Brockman from the board has jeopardised all of this work and undermined our mission and company,” the letter reads.

“Your conduct has made it clear you did not have the competence to oversee OpenAI.”

  • Salesforce CEO Marc Benioff also took to X, offering any OpenAI researchers a job in the SalesForce Einstein Trusted AI research team. He said the company would provide full cash and equity on-target earnings (OTE).

Update November 22: He’s back!

  • Both OpenAI and Sam Altman took to X to confirm that the former CEO would be reinstated, alongside a new initial board. More details are still to come

“We have reached an agreement in principle for Sam Altman to return to OpenAI as CEO with a new initial board of Bret Taylor (Chair), Larry Summers, and Adam D’Angelo. We are collaborating to figure out the details. Thank you so much for your patience through this,” the company said.

  • Sam Altman retweeted the post and within minutes added his own thoughts, saying this was the best way forward for the team. He also made mention of Microsoft supporting the decision.

  • Microsoft CEO Satya Nadella also weighed in on social media:

“We are encouraged by the changes to the OpenAI board. We believe this is a first essential step on a path to more stable, well-informed, and effective governance,” Nadella said.

“Sam, Greg, and I have talked and agreed they have a key role to play along with the OAI leadership team in ensuring OAI continues to thrive and build on its mission. We look forward to building on our strong partnership and delivering the value of this next generation of AI to our customers and partners.”

Why did the board fire Sam Altman?

Shock is an understatement when it comes to the collective reaction to Sam Altman’s removal as CEO of OpenAI. And there are a few reasons for this. We’re living in an age of the rockstar startup CEO. The cult of personality matters to both customers and investors. This is especially true for strong startup ecosystems such as Silicon Valley.

In the case of Sam Altman, he’s not only become the face of OpenAI but also the poster boy for the AI revolution over the past year. The release of ChatGPT in November 2022 unleashed a global wave of interest and adoption in generative AI in particular.

Disbelief also stems from the financial success of the company, which has come to have a valuation of US$86 billion with Altman at the helm. How could the board possibly remove such a prominent, profitable leader — particularly in an age where the “founder-friendly” approach to investment has been so prominent — both in the US and Australia?

And the fact is, we don’t have a hard answer to the particular motivations, despite confirmation that the dismissal was not due to malfeasance.

The board itself has been publicly vague about it, saying it “concluded that he was not consistently candid in his communications with the board, hindering its ability to exercise its responsibilities. The board no longer has confidence in his ability to continue leading OpenAI”.

Okay, how was the OpenAI board able to fire Sam Altman

What we do know is how the OpenAI board had the power to make such a move.

OpenAI has an interesting corporate structure. It’s majority independent, which is unique for a private company. This means the board is mostly made up of outsiders and in the case of OpenAI, the directors, including Sam Altman, don’t actually hold any direct equity in the company. However, he does have some interest indirectly through a Y Combinator investment fund from when he was still president.

At the time of writing the remaining OpenAI board members are:

  • Ilya Sutskever (OpenAI’s chief scientist)
  • Adam D’Angelo (Quora CEO)
  • Tasha McCauley (former CEO of GeoSim Systems
  • Helen Toner, (director of strategy at Georgetown’s Center for Security and Emerging Technology)

This is important because although OpenAI began life as a nonprofit in 2015, it has since launched a for-profit subsidiary, enabling OpenAI to be “capable of issuing equity to raise capital… but still at the direction of the Nonprofit”.

“The for-profit would be legally bound to pursue the Nonprofit’s mission, and carry out that mission by engaging in research, development, commercialisation and other core operations. Throughout, OpenAI’s guiding principles of safety and broad benefit would be central to its approach.”

According to OpenAI’s corporate governance, the for-profit’s equity structure would have caps limited to the maximum financial returns to both investors and employees to incentivise them to “research, develop, and deploy AGI in a way that balances commerciality with safety and sustainability, rather than focusing on pure profit-maximisation”.

The board is in charge of overseeing all of this, with the corporate governance stating that “the for-profit subsidiary is fully controlled by the OpenAI Nonprofit. We enacted this by having the Nonprofit wholly own and control a manager entity (OpenAI GP LLC) that has the power to control and govern the for-profit subsidiary”.

It also states that because the board is still that of a nonprofit “… each director must perform their fiduciary duties in furtherance of its mission—safe AGI that is broadly beneficial. While the for-profit subsidiary is permitted to make and distribute profit, it is subject to this mission. The Nonprofit’s principal beneficiary is humanity, not OpenAI investors”.

The distinct lack of equity held by Altman, the board being made up largely of outsiders and the decidedly nonprofit mission of the board made for the perfect storm of being able to oust the CEO.

The evolution of OpenAI may have something to do with it

While we still don’t have the particulars on why, there is a strong argument for the board being concerned over the for-profit actions of the company outweighing the nonprofit one that dictates its governance — the safe implementation of artificial general intelligence (AGI).

To add weight to this theory, there has been talk that Sutskever’s role in Altman’s ousting — as both a co-founder at chief scientist — could indicate problems between the research and product factions within OpenAI.

“OpenAI’s mission is to ensure that artificial general intelligence (AGI)—by which we mean highly autonomous systems that outperform humans at most economically valuable work—benefits all of humanity. We will attempt to directly build safe and beneficial AGI, but will also consider our mission fulfilled if our work aids others to achieve this outcome,” OpenAI’s charter reads.

“We commit to use any influence we obtain over AGI’s deployment to ensure it is used for the benefit of all, and to avoid enabling uses of AI or AGI that harm humanity or unduly concentrate power.”

And this isn’t the first time there have been concerns raised over the direction of OpenAI, which in 2023 has seen a slew of new paid tiers released. And there’s more of that to come off the back of OpenAI’s inaugural developer’s conference earlier this month.

Elon Musk co-founded OpenAI but left in 2018, citing a conflict of interest with some of the research being conducted by Tesla. However, Musk has also publicly said that OpenAI changed over the years.

“OpenAI was created as an open source (which is why I named it “Open” AI), non-profit company to serve as a counterweight to Google, but now it has become a closed source, maximum-profit company effectively controlled by Microsoft. Not what I intended at all,” Musk said in a tweet on February 17, 2023.

This was just one month after Musk signed a letter, along with over 1800 other signatories, that asked for a six-month pause on ‘giant’ AI experiments.

Since then Musk has launched his own AI-focused company, xAI. Its mission is “…to understand the true nature of the universe”. Earlier this month it announced its first creation — Grok — an AI “based on Hitchhikers Guide to the Galaxy”.

Hopefully, we will have more hard answers about what happened at OpenAI soon. What we do know for now is that things are still unfolding – even with Altman being reinstated – so we’ll keep you updated.

In the meantime, it’s fascinating to ponder whether the board did in fact make a mistake, or if it was doing exactly what it was put in place to do.

This piece has been updated multiple times since publication as the story continues to unfold.

ABOUT THE AUTHOR

Tegan Jones
Senior Technology Journalist
Tegan Jones is a senior technology journalist at SmartCompany. A multi-award-winning journalist, she has been reporting on technology, telecommunications and gaming for the past 10 years. She regularly appears on mainstream media channels as an expert tech commentator. Her previous roles include editor of Gizmodo Australia and global reviews editor at Finder. She has also served as a reporter and editor across Business Insider, Lifehacker and Kotaku Australia. Tegan was the co-host of one of the top technology podcasts in Australia, Queens of the Drone Age. You can find her on Twitter @Tegan_Writes.
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