Don’t believe OpenAI’s “nonprofit” spin (emergency pod with Tyler Whitmer)

OpenAI’s recent announcement that its nonprofit would “retain control” of its for-profit business sounds reassuring. But this seemingly major concession, celebrated by so many, is in itself largely meaningless.

Litigator Tyler Whitmer is a coauthor of a newly published letter that describes this attempted sleight of hand and directs regulators on how to stop it.

As Tyler explains, the plan both before and after this announcement has been to convert OpenAI into a Delaware public benefit corporation (PBC) — and this alone will dramatically weaken the nonprofit’s ability to direct the business in pursuit of its charitable purpose: ensuring AGI is safe and “benefits all of humanity.”

Right now, the nonprofit directly controls the business. But were OpenAI to become a PBC, the nonprofit, rather than having its “hand on the lever,” would merely contribute to the decision of who does.

Why does this matter? Today, if OpenAI’s commercial arm were about to release an unhinged AI model that might make money but be bad for humanity, the nonprofit could directly intervene to stop it. In the proposed new structure, it likely couldn’t do much at all.

But it’s even worse than that: even if the nonprofit could select the PBC’s directors, those directors would have fundamentally different legal obligations from those of the nonprofit. A PBC director must balance public benefit with the interests of profit-driven shareholders — by default, they cannot legally prioritise public interest over profits, even if they and the controlling shareholder that appointed them want to do so.

As Tyler points out, there isn’t a single reported case of a shareholder successfully suing to enforce a PBC’s public benefit mission in the 10+ years since the Delaware PBC statute was enacted.

This extra step from the nonprofit to the PBC would also mean that the attorneys general of California and Delaware — who today are empowered to ensure the nonprofit pursues its mission — would find themselves powerless to act. These are probably not side effects but rather a Trojan horse for-profit investors are trying to slip past regulators.

Fortunately this can all be addressed — but it requires either the nonprofit board or the attorneys general of California and Delaware to promptly put their foot down and insist on watertight legal agreements that preserve OpenAI’s current governance safeguards and enforcement mechanisms.

As Tyler explains, the same arrangements that currently bind the OpenAI business have to be written into a new PBC’s certificate of incorporation — something that won’t happen by default and that powerful investors have every incentive to resist.

Full transcript and links to learn more: https://80k.info/tw

Chapters:

• Cold open (00:00:00)
• Who’s Tyler Whitmer? (00:01:35)
• The new plan may be no improvement (00:02:04)
• The public hasn't even been allowed to know what they are owed (00:06:55)
• Issues beyond control (00:11:02)
• The new directors wouldn’t have to pursue the current purpose (00:12:06)
• The nonprofit might not even retain voting control (00:16:58)
• The attorneys general could lose their enforcement oversight (00:22:11)
• By default things go badly (00:29:09)
• How to keep the mission in the restructure (00:32:25)
• What will become of OpenAI’s Charter? (00:37:11)
• Ways to make things better, and not just avoid them getting worse (00:42:38)
• How the AGs can avoid being disempowered (00:48:35)
• Retaining the power to fire the CEO (00:54:49)
• Will the current board get a financial stake in OpenAI? (00:57:40)
• Could the AGs