• AutoTL;DRB
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    53 months ago

    This is the best summary I could come up with:


    Investors worry that they could lose hundreds of millions of dollars they invested in OpenAI, a crown jewel in some of their portfolios, with the potential collapse of the hottest startup in the rapidly growing generative AI sector.

    As a result, employees have more leverage in pressuring the board than the venture capitalists who helped fund the company, said Minor Myers, a law professor at the University of Connecticut.

    That is a feature, not a bug of OpenAI’s structure, which started out as a nonprofit but added a for-profit subsidiary in 2019 to raise capital.

    Keeping control of operations let the nonprofit preserve its “core mission, governance, and oversight,” according to the company’s website.

    But those obligations, such as the duty to exercise care and avoid self-dealing, leave a lot of leeway for leadership decisions, experts said.

    Those obligations can be further narrowed in a corporate structure such as OpenAI, which used a limited liability company as its operating arm, potentially further insulating the nonprofit’s directors from investors, said Paul Weitzel, a law professor at the University of Nebraska.


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