OpenAI aims to become public benefit corp.

OpenAI thinks it has found a way to make its transformation from non-profit to for-profit a little more palatable: make the for-profit part a Delaware Public Benefit Corporation, while quietly limiting the ability of the non-profit board to oversee commercial operations.

It outlined its plans in a blog post on Friday, saying that giving the for-profit arm more freedom, albeit as a public benefit corporation, “would result in one of the best resourced non-profits in history.”

The blog post — unsigned, and attributed only to “OpenAI” — said that under the current structure, the board’s main function is to control the for-profit arm, while under the new structure it will pursue charitable initiatives in sectors such as health care, education, and science while leaving management of the commercial operations to the public benefit corporation.

“As we enter 2025, we will have to become more than a lab and a startup — we have to become an enduring company,” the blog post said. 

OpenAI’s goal, when it was founded as a non-profit company (the “lab”) in 2015, was 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.” It began life with promises of $1 billion in donations in cash or kind from individual and corporate donors — including Elon Musk, Peter Thiel, Sam Altman, Greg Brockman, Amazon Web Services, Infosys, and YC Research — although it has received less than $140 million of that in cash, and upwards of $100 million in compute credits and discounts from hyperscalers, according to its website.

In 2019, realizing that the computing capacity necessary to build an artificial generation intelligence would cost closer to $10 billion, OpenAI created a for-profit business (the “startup”) under its control, capping investors’ share of profits and keeping the rest to fund its research.

As it became clear that OpenAI’s generative AI technology could be immensely profitable, the pressure from shareholders and would-be shareholders has grown to lift that profit cap and open the company up to more investment. It has been trying to allay concerns about what this means for its revised mission to “ensure that artificial general intelligence benefits all of humanity” — while at the same time pushing OpenAI investors to stifle AI innovation elsewhere.

Over the last year, this has led to tensions within the management team, prompting a number of key staff to leave and create their own generative AI companies, many of them citing a desire to place more emphasis on the safety of their designs than on profit.

Structuring OpenAI’s for-profit activities as a public benefit corporation under Delaware state law is what the board hopes will make it “an enduring company,” it Friday’s blog post said.

In Delaware, public benefit corporations must be managed in a way that balances the interests of stockholders and stakeholders with the realization of specific public benefits defined in its certificate of incorporation. Those benefits can be artistic, charitable, cultural, economic, educational, environmental, literary, medical, religious, scientific, or technological, and favor one or more categories of persons, communities, or interests.

How exactly OpenAI defines the public benefit or benefits to be pursued by its for-profit arm, could help determine the idea’s reception.

Some, though, are against the changes at any price. Musk — who OpenAI said donated less than one-third of its initial funding — and Facebook founder Mark Zuckerberg have both sought to block OpenAI’s move to become a for-profit.

Source:: Computer World