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- OpenAI's board of directors fired Sam Altman, the man behind ChatGPT, in a shock move on Friday.
- The board provided little notice to its shareholders and even big investors like Microsoft.
- Yahoo's CEO said OpenAI's "crazy governance model" is to blame for Altman's abrupt removal from the firm.
OpenAI's board ousted its high-profile CEO and the man behind its chatbot superstar ChatGPT, Sam Altman on Friday, in a move that shocked its investors and the tech industry as a whole.
OpenAI's board announced Friday that Altman is out saying it "no longer has confidence in his ability to continue leading OpenAI."
The board did not notify its investors of this decision in advance, including Microsoft which invested over $10 billion into the AI firm and even owns as much as 49% of it, according to some reports.
The board consisted of six people including OpenAI's president and cofounder Greg Brockman, OpenAI's chief scientist Ilya Sutskever, Adam D'Angelo, Tasha McCauley, Helen Toner and Sam Altman himself.
Altman and Brockman were not privy to the decision beforehand, raising concerns about why and how a leading tech figure was pushed out of a company he cofounded so effortlessly.
John Bates, a British tech entrepreneur and former fellow at Cambridge University, told Business Insider that CEOs are often "working at the pleasure of the board of directors."
"It's part of the board's job, hiring and firing CEOs, whether it's a public company, private company, or whatever."
He pointed out that even CEOs are "at-will employees," at US companies, but that OpenAI's board "behaved like a bunch of kids" and "erratically" in this instance.
"I don't think there's anything wrong in principle with boards firing CEOs," he said. "That's a good and necessary thing. We have to have that because we don't want dictators who can't be removed if they behave badly. It's just, in this case, the system's gone wrong because the board have not communicated what they've done, they've not thought of the shareholders, they've not thought of the staff."
Microsoft's CEO Satya Nadella said on Kara Swisher's podcast on Monday that the tech giant should have been "consulted" before Altman was ousted because of its investment in the company. It's the "very least," they could have done, he said.
"They have the right to do this, but that board's behaved very oddly because the first thing you do is socialize this with your shareholders," Bates told BI.
"You have a responsibility. They may not feel the need to do that but maybe they're just an immature board."
He added: "This is one of the most important companies in the world. It's doing amazing things. It has a $13 billion investment from Microsoft and to behave so naively in front of the world, I think really hits the credibility of that company."
Yahoo's former CEO Marissa Mayer agrees with this view and said on X — formerly Twitter — that OpenAI's "crazy governance model," is what enabled Altman to be pushed out. Mayer added that its board members were "broken and underadvised."
It partly comes down to OpenAI's atypical structure
OpenAI was founded as non-profit company in 2015 to build artificial intelligence in a way that is responsible and beneficial for the public. It then created a capped-profit company OpenAI LP in 2019 to raise investments while limiting the profits made. It received a huge $1 billion investment from Microsoft at the time.
Most of OpenAI's board members don't own shares in the company, including Sam Altman himself who chose not to take any equity in, which ultimately limited his power and influence. A simple majority vote from board members was all it would take to get rid of him.
This stands in great contrast to companies like Google and Meta. For example, Mark Zuckerberg is virtually unfireable because Meta has a dual-class structure. This means that the company has two types of stocks which provides different voting rights to shareholders.
Zuckerberg holds a type of stock that gives him greater voting rights and decision-making powers at the company than any other shareholder, making him almost untouchable, BI previously reported.
Bates said Altman's decision to forego equity was "strange" but he may have been "inspired by the goal of changing the world."
"To young people, what's increasingly more important is solving climate change, helping the world, helping people, that's all more important than money."