I do not believe it is possible for them to have thought this through. I believe they'll have read the governing documents, and even had some good lawyers read them, but no governance structure is totally unambiguous.
Something I'm immensely curious about is whether they even considered that their opposition might look for ways to make them _criminally_ liable.
And, incidentally, if there is a criminal angle that's probably the only place you might possibly find it and it would take the SEC to bring suit: they'd have to prove that one or more of the board members profited from this move privately or that someone in their close circle profited from it. Hm. So maybe there is such an angle after all. Even threatening that might be enough to get them to fold, if any of them or their extended family sold any Microsoft stock prior to the announcement they'd be fairly easy to intimidate.
Don't you think the board must have sought legal counsel before acting? It is more likely than not that they checked with a lawyer whether what they were doing is within their legal rights.
I don't think OpenAI board has any responsibility to care for Microsoft's stock price. Such arguments won't hold water in a court of law. And I don't think the power of Microsoft's legal department would matter when there's no legal basis.
My curiosity stems from whether the board was involved in signing the contract for Microsoft's investment in the for-profit entity, and where the state might set the bar for fraud or similar crimes. How was the vote organized? Did any of them put anything in writing suggesting they did not intend to honor all of the terms of the agreement? Did the manner in which they conducted this business rise the level of being criminally negligent in their fiduciary duty?
I feel like there are a lot of exciting possibilities for criminality here that have little to do with the vote itself.
... and also +1 to your whole last paragraph.
> I don't think OpenAI board has any responsibility to care for Microsoft's stock price.
They control an entity that accepted $10B from Microsoft. Someone signed that term sheet.
> Someone signed that term sheet.
Do you think that the term sheet holds OpenAI liable for changes in Microsoft's stock price?
> Do you think that the term sheet holds OpenAI liable for changes in Microsoft's stock price?
There’s nothing binding on a term sheet.
They probably should have, but they may have not.
> It is more likely than not that they checked with a lawyer whether what they were doing is within their legal rights.
It is. But having the legal rights to do something and having it stand unopposed are two different things and when one of the affected parties is the proverbial 900 pound Gorilla you tread more than carefully and if you do not you can expect some backlash. Possibly a lot of backlash.
> I don't think OpenAI board has any responsibility to care for Microsoft's stock price.
Not formally, no. But that isn't what matters.
> Such arguments won't hold water in a court of law.
I'll withhold comment on that until I've seen the ruling. But what does and does not hold water in a court of law unless a case is extremely clear cut isn't something to bet on. Plenty of court cases that have been won because someone managed to convince a judge of something that you and I may think should not have happened.
> And I don't think the power of Microsoft's legal department would matter when there's no legal basis.
The idea here is that Microsofts - immense - legal department has the resources to test your case to destruction if it isn't iron-clad. And it may well not be. Regardless, suing the board members individually is probably threat enough to get them to back down instantly.
We had the whole thing - including the JV - reversed in court in spite of them having the legal right to do all this. The reason: the judge was sympathetic to the argument that apparently the JV was a sham created just to gain access to our code. Counterparty was admonished, a notary public that had failed their duty to act as an independent got the most thorough ear washing that I've ever seen in a court and we got awarded damages + legal fees.
What is legal, what you can do and what will stand up are not always the same thing. Intent matters. And what also really matters is what OpenAI's bylaws really say and to what extent the non-profit's board members exercised their duty to protect the interests of the parties who weren't consulted and who did not get to vote. This so called duty of care - here in NL, not sure what the American term is - can weigh quite heavily.
The confidentiality part and the 'no shop' part of a terms sheet are definitely binding and if you break those terms you'll be liable for damages.