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OpenAI investors considering suing the board after CEO's abrupt firing
- jacquesm 3y agoThat's a day later than I expected. The investors are not named, I wonder what the grounds are (there are several, quite narrow paths) and whether they will prevail. The fall-out from this will take months if not years to come to a close. TFA doesn't have much actual information and seems to be mostly speculative, the whole thing could have been made up and you wouldn't know the difference.
- infamouscow 3y agoGiven the board hasn't made a public statement at this point, I suspect it's because lawyers have advised them not to.
- jacquesm 3y agoYes, that's my reading as well. They want to avoid making things even worse than they already are.
- CPLX 3y agoWhat are those several narrow paths? The article is pretty speculative but it does have a law professor basically saying he can't think of much.
- jacquesm 3y agoDuty of care towards employees and investors, decision made too hasty, conflicts of interest, insufficient balance between the various interests and responsibilities. Note that even if the grounds of the lawsuit are narrow if you prevail the damages can be immense. So the professor is talking about the likelihood of success, not about what will happen if the plaintiffs prevail. The plaintiff with the strongest motive (Microsoft) is now actively contributing to the damage so I doubt it is them that are going to sue.
- jboydyhacker 3y agoMSFT doesn't have a fiduciary duty or a duty of care like a director does. They are shareholders.
- jacquesm 3y agoOf course they don't. I said 'plaintiff' not defendant.
- CPLX 3y agoConflicts of interest sure if they were clear and proven. The rest sounds like there’s not much to work with. The only actual action is firing an at will employee. The various supposed consequences are sort of second order effects that could easily be ascribed to the action of others and most of them haven’t actually happened as of now. There’s a LOT of people in the world that have absolutely no interest in a court precedent that a board can’t just fire a CEO if they want to. This is basically a textbook application of the business judgement rule, and it’s even more clear cut since it’s a non profit and the board gets to decide how they want to interpret the mission.
- jacquesm 3y agoI would rather not be on the receiving end of a lawsuit for any of those. Besides the possible reputation damage there is the real danger of personal liability.
- CPLX 3y agoNot really. People can sue anyone for anything and do all the time. Being sued by powerful people is worse than being sued by random people. These are truisms and meaningless observations. There's not really much of a case for the premise that you can sue the board of a charity for a hiring/firing decision. What's the rationale? There isn't one. And the law professor quoted in the article basically said yeah I can't really think of one. And you haven't stated one here. Look at this in the reverse. If the board of Microsoft fired Satya tomorrow suddenly would OpenAI have cause of action for a lawsuit against them? Of course not, what would even be the premise for that? It's literally the same fact pattern though.
- m3kw9 3y agoYeah you don’t want to be suing if it takes even 6 months to play out. The new company should be formed by Altman and the team, with MS funding and providing the IP. This has to be the best alternate route for Altman/engineers. I would say even Altman and team and MS 50/50. They both have leverage
- DalasNoin 3y agoGenuinely curious if they really could simply "provide the IP". Is there precedent for such a situation, seems like what is left of OpenAI could sue Microsoft.
- powera 3y agoThe same article was posted here yesterday. And it is pure mumbo-jumbo; I haven't talked to anyone and I could have told you "Microsoft has a legal team that will be looking into this", which is all the article actually says.
- jacquesm 3y agoYes, it is a very thin article. You could have written this on Friday evening without any sources to back it up and nothing of value would be lost.
- lawxls 3y agoWhile the unfolding situation at OpenAI is certainly complex, one can't help but question the role of D'Angelo in this scenario. Given his entanglement in AI development and his recent ventures that place him in direct competition with OpenAI, his continued presence on the board raises legitimate concerns. The essence of board membership, especially in a field as intricate and rapidly evolving as AI, should be rooted in unconflicted support and clear alignment with the organization's goals. If the circulating rumors hold any weight—those hinting at his involvement in the CEO's abrupt dismissal—then it only compounds the argument for a reconsideration of his board role. Entrepreneurship, while often a game of strategic moves, must also adhere to a code of ethics. If these stories of past betrayals among peers are more than just whispers, it does raise questions about the integrity of leadership and decision-making within such influential tech circles. In the interest of transparency and maintaining trust within the tech community, perhaps it's time for D'Angelo to reevaluate his position and possibly step down, ensuring OpenAI can navigate its path without potential conflicts.
- deleted 3y ago[deleted]
- m3kw9 3y agoSo OpenAI has no conflict of interest clause?
- vkou 3y agoDid Sam Altman have any conflicts of interest, between OpenAI's charter and his other investments?
- cbsmith 3y agoThe answer to that one is of indeed YES. It would appear that there are different rules when profit is involved, which ironically is exactly what OpenAI's nonprofit parent was intended to prevent.
- jacquesm 3y agoYes, it would be funny if it wasn't tragic: the exact scenario they wanted to prevent materialized but from the one angle where they weren't covered. I predict this is the last time that a non-profit is put in charge of a for profit that has investors. That mistake is not going to be made again. And it also shows how risky it is to put together new governance structures even if they seem to be a good idea at the time. Because the fig leaf suddenly turned into a hammer the size of which would be hard to replicate in a normal governance setting. Unparalleled destruction with zero regards for the consequences.
- yieldcrv 3y agoIf anybody holds those "PPU's" and this action messes up a financial aspect of them - either the revenue or their market value - then the courts are the proper venue to sort out what the fuck these things even are and how that interplays with the non profit duties If anybody holds actual equity, same thing applies, just slightly simpler. Its completely a "we'll see" moment, and a lesson in not ever doing anything aside from the Delaware C-Corp when outside investors are involved. Open AI tried the non-profit only route and only received $130 million, even with the stacked deck they had. Our system simply isn't compatible with altruistically crowdfunding things that would be optimal to be funded. They added the for-profit component and are selling shares of it at an $80bn valuation, that reality is not compatible with the non-profit's mission and duties. That's fine, I am only stating it as matter of fact.
- hesdeadjim 3y agoYea, you know it was investor FOMO when they accepted the ridiculous corporate structure that OpenAI has.
- paxys 3y agoThe bigger question should be – why does a "non profit" have investors in the first place?
- VirusNewbie 3y agoit doesn't (directly), the non profit owns a for profit company that has some investors with an upside cap.
- rileymat2 3y agoI don’t think the nonprofit does, the majority owned subsidiary does. It is not a terrible setup if you need funding to get off the ground but also want to be able to operate the nonprofit on a stream of income being thrown off by the for profit subsidiary going forward.
- staunton 3y agoIt's a setup that in practice usually ends up equivalent to the nonprofit not existing in the first place. Seems like this happened here, too.
- signatoremo 3y agoWhat does existing mean here? That the nonprofit part ceases to exist? Or not effective? Can you name some examples of such failed setup?
- dboreham 3y agoI know everyone nods when this is said, but is a non-profit owning a for profit entity actually a thing? Isn't the profit motive a thing that taints the transitive closure?
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- hiatus 3y ago
- AlbertCory 3y agoThere is such a thing as Directors and Officers insurance, which I assume was provided to every member of the board. Maybe someone with more legal expertise can advise here, but from what I know, it does not protect you against certain things. Being sued by another member of the board might be one of those.
- jacquesm 3y agoIt wouldn't shield you from things that you purposefully did wrong, for instance fraud. Far more than you ever wanted to know about this: https://www.investopedia.com/terms/d/directors-and-officers-liability-insurance.asp https://www.investopedia.com/terms/d/directors-and-officers-...
- AlbertCory 3y agoThanks, I was briefly considering being a director at a nonprofit. I concluded that it was way more risk & hassle than it was worth, even with D&O.
- jacquesm 3y agoLikewise, but for two different for profit companies. I figured that if I wanted to do that sort of thing I should focus on it entirely and first bone up on the exact ins and outs and I don't think I have the right temperament for such a role (to put it mildly).
- jrapdx3 3y agoI've been a director on non-profit boards for 20+ years. These were small organizations, nothing at all high profile. Well-run boards with honest, dedicated members have little to worry about. Thing is, fundamental to board integrity is the concept that directors must avoid even the appearance of conflicts of interest. If directors adhere to this advice serious harm is unlikely. The OpenAI board members were vivid examples of massive COI. It was bound to blow up in their faces. They really should have known better. Hard to believe such smart people could act so wrongly. Truly unbelievable.
- petesergeant 3y agoThis is a complete non-story. They have no recourse, as summed up in the second-to-last paragraph: > Even if investors found a way to sue, Weitzel said they would have a "weak case." In similar news, I am "considering becoming a billionaire".
- kashyapc 3y agoBased on my understanding[1] about the board, essentially it's all "I know a guy who knows a woman who knows a guy" situation. I.e. a conflict-of-interest minefield. Also, none of them seem to have the temperament either (they are all relatively very young) to be able to handle such a complex topic as AI. [1] https://news.ycombinator.com/item?id=38350890 https://news.ycombinator.com/item?id=38350890
- code_runner 3y agoyouth wouldn't have a bearing on their ability to comprehend the complexities of AI, but maybe they have less experience with startups/companies/management.
- corethree 3y agoStill don't know why Sam Altman was fired. Do the investors know?
- bunabhucan 3y agoDo we have a timeline for the board members leaving over the last few years? I'm curious how the numbers dwindled. If the more ideological non employees stayed then it would increase the division between them and the "employees."
- baobabKoodaa 3y agoYes, here: https://news.ycombinator.com/item?id=38330158 https://news.ycombinator.com/item?id=38330158
- hn_throwaway_99 3y agoI commented in another thread that the timing of this uniquely enabled this coup. The board went from 9 at the beginning of the year to 6 before Sam's firing: https://news.ycombinator.com/item?id=38358208 https://news.ycombinator.com/item?id=38358208
- enahs-sf 3y agoI wonder who's holding the bag on this D&O policy. Likely going to be a spicy payout for some insurance companies.
- wnc3141 3y agoDoesn't a non profit board (or any firm) not have an (strictly legal) obligation to investors? https://hbr.org/2010/04/the-myth-of-shareholder-capitalism https://hbr.org/2010/04/the-myth-of-shareholder-capitalism
- dragonwriter 3y agoA nonprofit board that has control of a for-profit LLC and a for-profit LP that acts as a holding company through which it controls the LLC has some obligations to the members of the former and the limited partners of the latter, but the exact obligations will depend on the governing agreements of each entity.
- wnc3141 3y agoMy takeaway is that: matters are complicated! Is there any well known precedent for this type of structure?
- cyclecount 3y agoIs there any chance this had to do with the rape allegations from Sam Altman’s sister?
- Bukhmanizer 3y agoWild speculation aside, it probably wouldn’t be a good thing for this lawsuit to be successful. Broadly speaking, allowing a nonprofit to own and control a for profit is already a big loophole in the tax system. If the nonprofit then becomes technically beholden to the shareholders of the for profit, then what exactly is the point of the nonprofit?