OpenAI's Corporate Saga: Lessons in Governance

Written by Krystian Sekowski
JD Candidate 2025 | UCalgary Law

The recent turbulence at OpenAI sent shockwaves throughout the tech landscape, unveiling a story of corporate upheaval, power struggles, and the intersection of ethics, profit motives, and governance. The drama began when Sam Altman, a central figure within OpenAI and pivotal to its direction, was abruptly ousted from his role as CEO by the company's nonprofit board of directors. Altman's alleged lack of transparency and honesty was the catalyst for this decision, an accusation tantamount to exile in the corporate world.
 
The sudden dismissal of Altman, a revered figure in the tech community, rattled not just the internal dynamics of OpenAI but also triggered a chain reaction of resignations and concerns among investors, notably Microsoft, a major stakeholder. The resultant outcry from within the organization and the influential pressure from external stakeholders led to a swift series of negotiations and mounting tension upon the board of directors.
 
The high-stakes nature of the situation became apparent as Altman, supported fervently by Microsoft and amidst threats of mass resignations from almost the entire OpenAI workforce, ultimately regained his CEO position. However, it was not without conditions—Altman, alongside Greg Brockman, OpenAI's president, also ousted from the board, did not immediately reclaim their board seats. Instead, the board was now chaired by Bret Taylor, formerly a co-CEO at Salesforce, joined by eminent personalities such as Larry Summers and Adam D'Angelo.
 
During a Friday video conference, the crisis erupted unceremoniously when the board abruptly dismissed Altman, followed by a cryptic announcement on OpenAI's website, citing discrepancies in Altman's communication with the board. This sparked outrage and a wave of resignations, both internally and from investors, including the influential Microsoft. Efforts to quell the unrest eventually led to Altman's reinstatement, albeit under the shadow of an internal investigation into the reasons for his initial dismissal.
 
Apart from the internal turmoil and potential fallout from resignations, OpenAI faced the jeopardy of losing critical strategic discussions, notably a substantial sale that valued the company at $80 billion. This mounting pressure eventually forced the board's hand, resulting in Altman and Brockman regaining their roles, signifying a hard-earned victory for the embattled AI powerhouse.
 
The saga at OpenAI unveiled the intricate interplay between corporate governance, investor influence, employee morale, and the complexities inherent in the AI landscape and corporate world. It underscored the challenges organizations face in balancing profit motives with altruistic goals, which Effective Altruism principles aim to reconcile but often find challenging in practice.
 
An essential takeaway from this tumultuous episode was the need for a clear delineation between board responsibilities and management. The blurred lines in OpenAI, where Altman's influence seemed to transcend traditional board authority, highlighted a significant governance concern: a board should not merely serve to support management but also assert independent oversight and decision-making.
 
Furthermore, the unified expression of no confidence in the board by OpenAI's workforce underscored the potential impact of employee sentiments on significant leadership decisions. This highlighted the rising influence of employee activism in shaping corporate outcomes, prompting reflection on its implications across industries.
 
While the saga unfolded within the tech industry, its lessons extend far beyond, serving as a valuable guide for governance structures, decision-making processes, and leadership responsibilities across diverse industries. Should a board of directors decide to remove someone as prominent as the CEO, they ought to be more prudent by privately negotiating the departure with the executive, preserving their credibility and reputation. Springing the news of termination on anyone moments before the public announcement stands out as a significant misstep, marking a crucial lesson for all future boards: the importance of handling such matters discreetly and with due respect. Boards of directors ought to also hold a finger on the pulse and know the attitudes of critical employees and investors before making such drastic moves.
 
In conclusion, the OpenAI saga laid bare the complexities inherent in navigating governance, ethical dilemmas, and the high-stakes dynamics of the technology sector. It serves as a compelling narrative, offering multifaceted lessons applicable within the AI domain and across all industries.
 
Sources:
 
Perrigo, B. (2023, November 22). How Sam Altman Returned to OpenAI: A Timeline. TIME. Retrieved from https://time.com/6338789/sam-altman-openai-return-timeline/
 
Peregrine, M. (2023, November 27). Leadership lessons from OpenAI's wild week. Forbes. https://www.forbes.com/sites/michaelperegrine/2023/11/27/leadership-lessons-from-openais-wild-week/?sh=46f1241f7a13