OpenAI Investors Consider Suing Board After CEO’s Abrupt Firing: Reports

by Business 21 November 2023

OpenAI Investors Consider Suing Board After CEO's Abrupt Firing

Some of the investors in OpenAI, the company that made ChatGPT, are sightseeing legal resources against the board of the company, as per the sources who reported the same on Monday after the board had exiled CEO Sam Altman and sparked a potential mass departure of employees.

Sources had said that the investors have been working with the legal advisors to go through their options. It was, however, not immediately transparent if these investors will be suing OpenAI.

Investors have been worrying that the hundreds of millions that they had invested in OpenAI, which is a crowning jewel in some of their portfolios, may suffer a catastrophic loss as a result of what may appear to be a potential collapse of the biggest AI startup in the fast-growing generative AI industry.

By Monday, more than 700 employees in OpenAI had threatened a resignation unless the company replaces the board.

The board of OpenAI had fired Altman on Friday after a “breakdown of communications,” as per an internal memo that was seen by Reuters.

What made the case even more unusual for the VC investors, who generally have board seats or voting rights in their portfolios, is OpenAI being controlled by the non-profit parent company named OpenAi Nonprofit, which was developed to benefit “humanity, not OpenAI investors.” As a result, the employees have a lot more leverage in comparison to the venture capitalists who have helped to pay their salaries, said a law professor at the University of Connecticut, Minor Myers.Microsoft has its right over 49% of the company, while the other investors and employees have control over 49%, while the OpenAi’s nonprofit parent only owns 2%.

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