OpenAI has scaled back a significant restructuring plan, with its nonprofit parent maintaining control in a move that is likely to curb CEO Sam Altman’s authority over the pioneering maker of ChatGPT.
The announcement follows a wave of criticism and legal challenges, including a high-profile lawsuit filed by rival and co-founder Elon Musk, who has accused OpenAI of deviating from its founding mission to develop artificial intelligence for the benefit of humanity.
“OpenAI was founded as a non-profit, is today a non-profit that oversees and controls the for-profit, and going forward will remain a non-profit that oversees and controls the for-profit. That will not change,” Altman stated in a blog post on Monday.
OpenAI had outlined plans in December to convert its for-profit arm into a public benefit corporation (PBC), a structure designed to balance shareholder returns with social objectives, unlike nonprofits, which are solely focused on public good. Under that proposal, the nonprofit parent would have been a significant shareholder in the PBC but would have ceded control over the startup.
On Monday, OpenAI announced that the nonprofit parent would continue to control the PBC and become a major shareholder within it. The company will proceed with plans to modify the structure of its for-profit arm to enable greater capital raising to keep pace in the competitive AI landscape.
The move towards becoming fully for-profit was intended to help OpenAI secure more funding and ease restrictions associated with its nonprofit parent. However, it raised concerns about whether the company would fairly allocate assets to the nonprofit and how it would reconcile profit-making with its mission to develop AI for the public good.
“We made the decision for the nonprofit to stay in control after hearing from civic leaders and having discussions with the offices of the Attorneys General of California and Delaware,” Bret Taylor, chairman of OpenAI’s board, explained in a blog post, adding that the new announcement meant the startup would continue to have a structure “extremely close” to the current one.
Altman described the move as a compromise “that (works) well enough for investors that they’re happy to continue to fund us to a degree we think we will need.” He mentioned that OpenAI would collaborate with major backer Microsoft regulators and newly appointed nonprofit commissioners to finalize the updated plan and determine the equity stake in the for-profit business each party would receive.
“We believe this is well over the bar of what we need to be able to fundraise,” Altman asserted, noting that there were “no changes to any existing investor relationships” and that the company would still pursue the earlier plan to remove caps on investor profits.
Nevertheless, questions persist regarding the precise changes being made and the extent of control the nonprofit will wield under the newly proposed plan, which lacks specific details. Currently, OpenAI’s nonprofit fully owns the for-profit entity, and the nonprofit board’s mission is to ensure that “artificial general intelligence benefits all of humanity,” rather than solely maximizing shareholder value.
“We’re glad that OpenAI is listening to concerns from civil society leaders … but crucial questions remain,” commented Page Hedley, OpenAI’s former policy and ethics adviser, and lead organizer of the group Not For Private Gain.
“Will OpenAI’s commercial goals continue to be legally subordinate to its charitable mission? Who will own the technology that OpenAI develops? The 2019 restructuring announcement made the primacy of the mission very clear, but so far, these statements have not,” she stated. She added her concern that in the PBC structure, the board would be obligated to prioritize maximizing shareholder value.
Musk Suit to Proceed
As the expensive pursuit of artificial general intelligence, or AI that surpasses human intelligence, intensifies, OpenAI has been exploring structural changes to attract further investment.
In March, it announced plans to raise up to $40 billion in a new funding round led by SoftBank Group at a $300 billion valuation. This round was contingent on the AI firm transitioning to for-profit status by the end of the year, a structure that gained attention in November 2023 during a significant boardroom conflict in Silicon Valley, where members of the nonprofit board briefly ousted Altman over a breakdown in communication and loss of trust. He was reinstated after five days following strong support from employees and investors.
Altman indicated that OpenAI would still be able to secure funding from the Japanese tech investor following Monday’s decision.
SoftBank did not immediately respond to a request for comment, while Microsoft declined to comment.
The announcement also comes amidst a contentious legal battle initiated by OpenAI co-founder Elon Musk, which seeks to block OpenAI’s shift away from nonprofit control, among other claims. A jury trial had been scheduled for March 2026.
Musk’s lawyer stated that there was no plan to drop the lawsuit against OpenAI.
“The announcement obscures critical details about the supposed ‘non-profit control’ arrangement, and particularly the sharply reduced ownership stake the non-profit will receive in Altman’s for-profit enterprise, where the non-profit currently holds majority equity.”
A consortium led by Musk had also made an unsolicited $97.4 billion bid for OpenAI earlier this year, which was swiftly rejected by Altman with a “no thank you.”
