From https://openai.com/our-structure
- First, 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.
-Second, because the board is still the board 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.
-Third, the board remains majority independent. Independent directors do not hold equity in OpenAI. Even OpenAI’s CEO, Sam Altman, does not hold equity directly. His only interest is indirectly through a Y Combinator investment fund that made a small investment in OpenAI before he was full-time.
-Fourth, profit allocated to investors and employees, including Microsoft, is capped. All residual value created above and beyond the cap will be returned to the Nonprofit for the benefit of humanity.
-Fifth, the board determines when we've attained AGI. Again, by AGI we mean a highly autonomous system that outperforms humans at most economically valuable work. Such a system is excluded from IP licenses and other commercial terms with Microsoft, which only apply to pre-AGI technology.
OpenAI is a charity nonprofit, in fact.
> Microsoft's investment is in OpenAI Global, LLC, a for-profit company.
OpenAI Global LLC is a subsidiary two levels down from OpenAI, which is expressly (by the operating agreement that is the LLC's foundational document) subordinated to OpenAI’s charitable purpose, and which is completely controlled (despite the charity's indirect and less-than-complete ownership) by OpenAI GP LLC, a wholly owned subsidiary of the charity, on behalf of the OpenAI charity.
And, particularly, the OpenAI board is. as the excerpts you quote in your post expressly state, the board of the nonprofit that is the top of the structure. It controls everything underneath because each of the subordinate organizations foundational documents give it (well, for the two entities with outside invesment, OpenAI GP LLC, the charity's wholly-owned and -controlled subsidiary) complete control.
Im not criticizing. Big fan of avoiding being taxed to fund wars....but its just funny to me it seems like theyre sort of having their cake and eating it too with this kind of structure.
Good for them.
also infamously they fundraised as a nonprofit, but retracted to admit they needed a for profit structure to thrive, which Elon is miffed about and Sam has defended explicitly
There's been a lot of news lately, but unless I've missed something, even with the tentative agreement of a new board for the charity nonprofit, they are and plan to remain a charity nonprofit with the same nominal mission.
> also infamously they fundraised as a nonprofit, but retracted to admit they needed a for profit structure to thrive
No, they admitted they needed to sell products rather than merely take donations to survive, and needed to be able to return profits from doing that to investors to scale up enough to do that, so they formed a for-profit subsidiary with its own for-profit subsidiary, both controlled by another subsidiary, all subordinated to the charity nonprofit, to do that.
Once the temporary board has selected a permanent board, give it a couple of months and then get back to us. They will almost certainly choose to spin the for-profit subsidiary off as an independent company. Probably with some contractual arrangement where they commit x funding to the non-profit in exchange for IP licensing. Which is the way they should have structured this back in 2019.
Personally I'm nowhere near 95% confident that will happen. I'd say I'm about 75% confident it won't. So I wouldn't be utterly shocked, but I would be quite surprised.