OpenAI board acted in totally haphazard way: Legal tech expert

A decision by the OpenAI board to change leaders is a case study on how corporate boards of directors should not do it, a legal text expert, author, and lawyer said today.

In an interview with IT World Canada, Colin Levy, the director of legal for Malbek, a contract management company, said that the OpenAI board did “precisely the opposite of what a typical corporate board should normally do with respect to a major leadership change like the one that occurred.

“More specifically, it was incredibly abrupt, with no clear transition plan, which is normally something you would see.”

All in all, said Levy, author of the book The Legal Tech Ecosystem, the move by the board was haphazard, and there “was no sort of messaging in terms of how they want to frame it to the outside world.” That, he added, in part “led to the rumours, misinformation and negative news about OpenAI.

“Clearly there was tension between OpenAI’s original founding as a non-profit entity and Altman’s desire to pursue commercialization. At this point, there is no turning back on what has been done.”

The company, he said, is “now at risk of being gobbled up in part or in whole by Microsoft, given the current amount of tension and unhappiness with existing employees. Broadly speaking, there remains tension between commercialization of AI and exploration of it as an academic and theoretical exercise. OpenAI’s drama illustrates this tension.”

Levy said that although OpenAI is a startup, “it is probably the most well known, most heavily used startup in the world right now because of ChatGPT. Surely, they (board members) should have thought about that as well with respect to their decision and how they approached it.

“Not to mention the fact that their minority partner is Microsoft, you don’t really want to make them angry, and they clearly did, and Microsoft has been very open about that.”

Opting to hire OpenAI employees, including Altman, he said, was the best way for Microsoft to “make lemonade out of the lemons they were given.”

Damir Brescic, the chief information security officer (CISO) for Inversion6, a cybersecurity risk management provider, said the recent development at OpenAI, particularly the departure of Altman as CEO, “could have significant implications for the broader AI industry. It’s more than clear that Altman and the board at OpenAI do not see eye-to-eye and that the shift in leadership, with a focus on increasing transparency and collaboration in AI research, will have a significant impact on the future of OpenAI.

“I recall the story of Steve Jobs being removed from Apple, back in the day, due to a similar spat with the Apple board on the direction of the company. We all saw how that turned out – they did so well without someone steering their ship that they had to beg Jobs to return.”

From a cybersecurity perspective, Brescic said that as “AI systems become more integrated into our daily lives, it is essential that they are designed with cybersecurity in mind. This means that OpenAI and the broader AI community must prioritize the development of secure AI systems that are designed to protect user data and prevent cyber-attacks.”

Beatriz Valle, senior technology analyst at data and analytics firm GlobalData, said “Altman’s dismissal has also highlighted the growing rift between the proponents of a more measured rollout of the technology that emphasizes safety guardrails above commercialization, and the monetization of solutions. This could have deep-reaching implications for the market.

“The events have also shone a light on the unusual legal structure of OpenAI, which was founded in 2015 as a non-profit company and adopted a new structure in 2019, following Microsoft’s involvement.”

The company, said Valle, is controlled by its “non-profit board, which has no fiduciary obligations towards stakeholders or investors. (It) recently held its first developer conference, with a slew of announcements including GPT-4 Turbo with Vision and DALL·E 3 API, and also attracted headlines when it started talks with investors to seek a valuation of US$86 billion, an unusually high figure for a startup with a history of modest sales.

“However, as GlobalData forecasts indicate, the technology has enormous potential, and it was on this basis that investors were willing to enter talks for this level of valuation.”

It will, she said, be interesting to see how OpenAI, “arguably the most high-profile AI company in the world, fares after the ousting of its famous former CEO.

“The departure of other senior employees means that the financial backing from Microsoft may dry up, but also that OpenAI will now be free to pursue its own vision. But at what cost? Hundreds of employees have now signed a letter asking the board to reinstate Altman as CEO. At present, it is hard to know what the implications for other key players will be, as well as for the industry at large. The events of the last few days could have a lasting impact on the overall GenAI market.”

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Jim Love, Chief Content Officer, IT World Canada

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Paul Barker
Paul Barker
Paul Barker is the founder of PBC Communications, an independent writing firm that specializes in freelance journalism. He has extensive experience as a reporter, feature writer and editor and has been covering technology-related issues for more than 30 years.

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