OpenAI’s board dismissed chief executive Sam Altman on 17 November 2023 and on the 22nd announced his return with a new board. What happened, and the corporate-governance lessons it offers.
Between Friday 17 and Wednesday 22 November 2023, OpenAI, the company behind ChatGPT, dismissed its chief executive, saw almost its entire workforce rebel and ended up announcing his return. The case cannot simply be transposed to a small or family business, but it shows clearly what happens when a company’s power, information and interests are not properly balanced.
What happened
On Friday 17 the OpenAI board announced that Sam Altman was leaving. According to its statement, an internal review had concluded that he had not been consistently candid in his communications with the board, which hindered its ability to exercise its responsibilities, and the board no longer had confidence in his ability to keep leading the company. Chief technology officer Mira Murati took over on an interim basis. Greg Brockman, co-founder and president, stepped down as chair of the board and resigned shortly afterwards.
Between 19 and 20 November, OpenAI replaced Murati with Emmett Shear, the former head of Twitch, as interim chief executive, and Microsoft’s chief executive, Satya Nadella, announced that Altman and Brockman would join Microsoft to lead a new artificial-intelligence research team. On Monday 20, more than 740 of OpenAI’s 770 employees signed a letter calling for the board’s resignation and Altman’s return, and threatening to move to Microsoft. Among the signatories was Ilya Sutskever, chief scientist and a board member, who said he regretted his part in the dismissal.
On 22 November (Tuesday night in the United States), OpenAI announced an agreement in principle for Altman to return as chief executive with a reconstituted board. The initial board has three members: Bret Taylor, former co-CEO of Salesforce, who chairs it; Larry Summers, former US Treasury Secretary; and Adam D’Angelo, chief executive of Quora, the only one who was already on the previous board. Tasha McCauley, Helen Toner and Ilya Sutskever are leaving it. OpenAI said it was still working out the details.
What is known about the reason
The board was that of the non-profit organisation that oversees OpenAI, which the company itself described as the governing body for all its activities. Formally, the reason was Altman’s lack of candour, with no further public detail. According to The New York Times, cited by NBC, the board had been arguing with him for over a year about how fast to deploy artificial intelligence safely, with Altman in favour of moving quickly.
Microsoft, which has invested billions of dollars in the company and supplies its cloud computing, said after the 22 November announcement that it was “encouraged” by the changes to the board. These are accounts attributed to third parties; the specific facts behind the dismissal have not been made public.
Corporate-governance lessons
The first is who has the power to dismiss the chief executive and to whom the board answers. A small board decides quickly, but without counterweights it can be wrong just as quickly, and OpenAI’s own structure, with a non-profit above the company, shows that the design of governing bodies matters as much as the people in them. The second is communication: a decision of this weight has to be explainable to employees, investors and partners. Here no details were given, and the reaction was immediate.
The third is dependence on key people and on a technology partner: when a workforce can leave en masse and a partner offers to take it in, the board’s formal power and real power do not coincide. The fourth is that articles of association and shareholder agreements are read before the crisis, not during it: who can remove a director, by what majority and with how much notice, and what rights shareholders or investors have.
In a family-owned or investee company, it is worth checking whether the articles and the shareholders’ agreement define those rules clearly, whether there is a succession plan for key people, and whether the board receives the information it needs. Ask your adviser how this applies to your case.
Five days were enough to remind everyone that a company’s governance is designed before it is needed.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
