OpenAI investors mull suing the board for firing Sam Altman: Report

Sam Altman Ousted: Drama at OpenAI continues to unfold with investors of the firm considering to sue the Board for the abrupt firing of Sam Altman. As per Reuters, investors are working with legal advisers to study their options.

Legal actions against OpenAI board

This comes as over 500 employees threaten to quit unless the board resigns. Investors are also worried that they could lose hundreds of millions of dollars they invested in OpenAI which might collapse. OpenAI is a hottest startup in the rapidly growing generative AI sector.

Also Read: OpenAI employees warn of resignations unless board steps down

As per Reuters, Microsoft owns 49% of the for-profit operating company while employees and other investors have 49% stake and only 2% is controlled by OpenAI's non-profit parent. Venture capital investors usually hold board seats or voting power in their portfolio companies. However, OpenAI is controlled by its nonprofit parent company - OpenAI Nonprofit.

By this, employees have employees have more leverage in pressuring the board than the venture capitalists who helped fund the company, as per Reuters that quoted Minor Myers, a law professor at the University of Connecticut.

The report also mentioned that nonprofit boards have legal obligations to the organizations they oversee. But those obligations, such as the duty to exercise care and avoid self-dealing, leave a lot of leeway for leadership decisions