OpenAI staff threaten to quit after Sam Altman's ouster, investors explore legal options against board

OpenAI's staff has threatened to quit the artificial intelligence startup and join former boss Sam Altman at Microsoft's new division unless the board resigns, according to a letter seen by Reuters.

Apart from Chief Technology Officer Mira Murati, Chief Data Scientist Ilya Sutskever and Chief Operating Officer Brad Lightcap, about 700 members of OpenAI staff said they would resign, a person familiar with the matter told Reuters.

They threatened to quit in a letter demanding the resignation of the board and reinstatement of Altman and former President Greg Brockman, according to a copy viewed by Reuters and a person familiar with the matter. The document was signed by employees including OpenAI Chief Scientist Ilya Sutskever, the board member who fired Altman.

"I deeply regret my participation in the board's actions. I never intended to harm OpenAI. I love everything we've built together and I will do everything I can to reunite the company," Sutskever said in a post on social media platform X, formerly known as Twitter, on Monday.

OpenAI did not immediately respond to a Reuters request for comment.

Investors explore legal options against board
Some investors in OpenAI, makers of ChatGPT, are exploring legal recourse against the company's board, sources familiar with the matter told Reuters on Monday, after the directors ousted CEO Sam Altman and sparked a potential mass exodus of employees.

Sources said investors are working with legal advisers to study their options. It was not immediately clear if these investors will sue OpenAI. Investors worry that they could lose hundreds of millions of dollars they invested in OpenAI, a crown jewel in some of their portfolios, with the potential collapse of the hottest startup in the rapidly growing generative AI sector. OpenAI did not respond to a request for comment.

Microsoft owns 49 per cent of the for-profit operating company, according to sources familiar with the matter. Other investors and employees control 49 per cent, with 2 per cent owned by OpenAI's nonprofit parent, according to Semafor.

OpenAI's board fired Altman on Friday after a "breakdown of communications," according to an internal memo seen by Reuters.

Venture capital investors usually hold board seats or voting power in their portfolio companies but OpenAI is controlled by its nonprofit parent company OpenAI Nonprofit, which according to OpenAI's website was created to benefit "humanity, not OpenAI investors."

As a result, employees have more leverage in pressuring the board than the venture capitalists who helped fund the company, said Minor Myers, a law professor at the University of Connecticut. "There is nobody exactly who is in the seat of an injured investor," he said.

That is a feature, not a bug of OpenAI's structure, which started out as a nonprofit but added a for-profit subsidiary in 2019 to raise capital. Keeping control of operations let the nonprofit preserve its "core mission, governance, and oversight," according to the company's website.

Nonprofit boards have legal obligations to the organizations they oversee. But those obligations, such as the duty to exercise care and avoid self-dealing, leave a lot of leeway for leadership decisions, experts said.

Those obligations can be further narrowed in a corporate structure such as OpenAI, which used a limited liability company as its operating arm, potentially further insulating the nonprofit's directors from investors, said Paul Weitzel, a law professor at the University of Nebraska.

Even if investors found a way to sue, Weitzel said they would have a "weak case." Companies have broad latitude under the law to make business decisions, even ones that backfire.

"You can fire visionary founders," Weitzel said. Apple famously fired Steve Jobs in the 1980s, before bringing him back around a decade later.

Emmett Shear appointed OpenAI's interim CEO
On Monday, OpenAI named ex-Twitch boss Emmett Shear as interim CEO, while outgoing chief Sam Altman moved to backer Microsoft, in a surprise turn of events that clouded the future of the startup at the heart of the artificial-intelligence boom.

The appointments settled late on Sunday, followed Altman's abrupt ousting just days earlier as CEO of the ChatGPT maker and ended speculation that he could return. Microsoft CEO Satya Nadella said that ousted OpenAI CEO Sam Altman and Greg Brockman will be joining Microsoft to lead a new advanced AI research team.