Does Microsoft have too much control over OpenAI? | Mint

Does Microsoft have too much control over OpenAI?

In India, the celebration of Microsoft CEO Satya Nadella's ‘victory’ reflects our cultural inclination to celebrate desi wins, which can often override objectivity (Photo: AP)
In India, the celebration of Microsoft CEO Satya Nadella's ‘victory’ reflects our cultural inclination to celebrate desi wins, which can often override objectivity (Photo: AP)

Summary

  • The tech giant’s role in Sam Altman’s reinstatement raises questions about corporate governance and rank opportunism

Sam Altman is the Rajnikanth of the AI world. In four days, he changed the OpenAI board that showed him the door, albeit with more than a little help from Microsoft, OpenAI’s largest investor. Many CEOs have been sacked only to return to their position years later, but Altman’s comeback is the quickest in corporate history.

Altman was removed as he was allegedly not “consistently candid" with the board regarding his decisions. His sacking unfolded on a virtual call, notably in the absence of Greg Brockman, the chairman of OpenAI, who was subsequently ousted as well. More than 700 employees expressed solidarity with the ousted CEO and threatened to follow him wherever he went – most likely Microsoft, which had offered him a role. But in another twist, Altman was reinstated by Tuesday. He promptly overhauled the board that had expelled him, retaining only one director.

The OpenAI board, comprising nine members (three positions remained vacant for over a year) was apparently uncomfortable with how the company was deploying its AI. Despite concerns about his working style, the CEO continued without facing action from the board. A board member had called for replacing Altman a year before he was briefly ousted, highlighting a prolonged governance lapse.

Corporate governance principles demand that the board be able to provide oversight and control, a role it had seemingly abdicated. The sudden decision to oust Sam Altman raised questions about its ability to handle a well-known, maverick founder and CEO. Did the decision to dismiss Altman reflect a sense of insecurity rather than a commitment to preventing unchecked influence within the organisation?

What role did Microsoft – which holds a 49% stake in OpenAI – and its prominent CEO play? According to media reports, the board removed Altman without informing investors in advance, and Microsoft apparently found out about it only minutes before the board meeting. 

Upon learning of Altman's dismissal, was it right of Microsoft to hire him instead of advocating for his retention as CEO? As the largest shareholder lacking a board seat, did it overlook the concerns of other investors and stakeholders? Notably, at least one institutional investor had expressed concerns months earlier. Should these investors not have united to voice their stand and guide the board's actions?

Microsoft emerges as a central figure in this narrative. Its involvement appears calculated, bordering on cunning. If Altman's comeback proves successful over the next few years, Microsoft will be seen as a crucial supporter during a critical juncture, having rescued Altman and OpenAI for the greater common good.

The Altman saga holds valuable lessons for boards, notably in the context of how Microsoft deviated from conventional corporate governance norms to retain a key figure. The company’s moves could be seen as a way of safeguarding its substantial investment in OpenAI and strategically betting on Altman's leadership.

The perceived alignment with Altman and the attempt to consolidate OpenAI's talent under Microsoft's umbrella raise questions about opportunistic maneuvers that may compromise principles of fair play and healthy competition. These maneuvers, even within legal boundaries, may be seen as exploiting a partner organisation’s vulnerabilities, challenging the collaborative spirit of innovation, and reflecting a lapse in governance ethos beyond regulatory compliance. Before Altman's return, Microsoft, the principal investor in OpenAI, did not hold a position on the board but has since assumed an observer role.

The prospect of an internal investigation into the conduct leading to Altman’s dismissal, overseen by the new board members assembled by Altman and influenced by major investors like Microsoft, raises serious concerns about the impartiality and thoroughness of the inquiry.

In India, the celebration of Microsoft CEO Satya Nadella's ‘victory’ reflects our cultural inclination to celebrate desi wins, which can often override objectivity.

Microsoft's eagerness to safeguard its $10 billion investment in OpenAI and position itself as a supporter of the contemporary AI pioneer is a high-stakes game. But if the venture falters, Microsoft could attribute it to myriad reasons. On the other hand, if it is successful, Nadella will be hailed as a genius who rescued the AI world from a board misstep. Given Microsoft's substantial but non-controlling stake, the saga raises questions about its rights beyond the boardroom.

Dr Srinath Sridharan is a policy researcher and corporate advisor.

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