The Wall Street Journal reported that OpenAI, the developer of the artificial intelligence program ChatGPT, has backed away from a controversial plan to spin off its AI business into a for-profit entity, deciding instead to continue under the oversight of its current non-profit board.
The newspaper explained that this decision could complicate the company’s efforts to raise funding in the future, as its board of directors, unlike traditional boards that are responsible for acting in the best interests of shareholders, is bound by a fiduciary duty to “humanity.”
The plan was to transform OpenAI into a “public benefit” company, while maintaining the nonprofit entity that currently controls the company.
However, this move faced opposition, most notably from Elon Musk, the company’s co-founder who has since left the company, who attempted to block the transformation through legal action.
The company explained that it abandoned this radical change after consultations with civil society leaders and attorneys general in California and Delaware, who were supposed to approve the amendment. Instead, the company will transform its for-profit subsidiary into a public benefit corporation, while remaining under the oversight of the parent nonprofit entity.
This decline is considered a victory for Musk and other critics who saw the company as straying from its core humanitarian mission.
Previous reports have raised questions about the company’s ability to balance profit motives with ensuring free or easy access for users, following reports that OpenAI was seeking to transform into a for-profit entity.
Although the company assured that investments would continue to flow, the original plan was primarily aimed at encouraging more investors.
OpenAI faces a striking paradox between its rapid growth, which has brought the number of its weekly users to 500 million, and the fragility of its economic model, as less than 5% of those users opt for paid subscriptions.
Moreover, its tools, particularly for image generation, consume huge resources without sufficient returns, exacerbating the pressure on its infrastructure.
With its limited capacity to scale and its reliance on Microsoft, there are real concerns about the sustainability of this growth.