Shifting Tides in Tech: The OpenAI Turmoil and the Power of Employee Advocacy
Exploring an alternative governance model
We are all aware of the dramatic events that unfolded at OpenAI over the weekend of November 17, 2023. Here's a brief summary:
On Friday afternoon, November 17, 2023, the OpenAI Board of Directors (BoD) announced that Sam Altman, a co-founder and CEO of OpenAI, would be terminated due to a lack of “candid” communication with the board.
This news caused an uproar in the tiny world of Silicon Valley.
Numerous employees, including the President of OpenAI and another co-founder, Greg Brockman, either resigned or threatened to resign from OpenAI.
OpenAI leadership, the BoD, and Sam Altman tried exploring options to bring Sam himself and Greg back into the company but failed to reach a mutual agreement.
Eventually, Microsoft CEO Satya Nadella intervened, suggesting that Sam and others join Microsoft, while OpenAI would continue operating as before.
This development led to further frustration among OpenAI employees. Many expressed their discontent on Twitter and other platforms.
After extensive confusion, closed-door meetings, and negotiations, Sam and Greg were reinstated at OpenAI, following a revamped OpenAI BoD. (Larry Summers as a member of the new board is a shame and story for another day)
The events of those 4-5 days, including a weekend, were highly stressful for OpenAI employees. Many faced complex US visa situations, where resigning could have jeopardized their immigration status. Some also had to navigate critical family issues amidst the chaos. Nevertheless, the majority of employees expressed their support for Sam and Greg as soon as they learned about the situation. A significant number voluntarily resigned, and nearly 90% signed a letter advocating for the return of Sam and Greg, which eventually happened.
Despite the overwhelming support from OpenAI employees, mainstream media overlooked this aspect, focusing instead on the influence of venture capitalists like Vinod Khosla and CEOs like Brian Chesky and Satya Nadella in supporting Sam Altman. While these high-profile individuals played a significant role in the negotiations with the former OpenAI BoD, they were not the sole and primary driving force behind the resolution.
The OpenAI employee community almost unanimously rallied behind Sam. While not everyone may have acted to their fullest intent, their collective support was crucial in securing Sam and Greg's return to OpenAI. It also bolstered external calls to bring them back to the company. At one point, Sam and Greg accepted Microsoft's offer to develop a new Generative AI/LLM division with complete autonomy. Sam also contemplated starting a new AI venture focused on profit, and with his prowess in fundraising and connection in the Valley, he was possibly doing right from his perspective. However, it was the ironclad support from OpenAI employees that altered the course of events.
Yet, in the end, the role of the employees was largely ignored. There was little discussion about alternative corporate governance models. Influential tech figures, including Vinod Khosla and Paul Graham, highlighted the unique and odd administrative and corporate structure of OpenAI. The for-profit and non-profit relationship within OpenAI also came under scrutiny. As a result, a new board was formed at the end of all the drama, with the possibility of Microsoft gaining a board seat later.
However, this does not address the core issue. The real solution lies with the OpenAI employees themselves. The collective action of the company's workers determined the next steps. They understand what is best for them and for the company. It is only fair and justified that they decide what happens to their company, given a grave crisis has emerged. Their involvement is crucial in managing crises like this. If there was a democratic procedure within OpenAI that would decide what happens next, this crisis could have been averted from the beginning.
Consider this: if the board of directors operated like elected officials in a democracy, the employees, not just shareholders or founders, would have a say in key decisions, because the employees may have chosen the board of directors themselves. The only issue is that, instead of one person one vote, the BoD and other key decisions at a corporation are decided by the shareholders, the majority of whom are wealthy individuals and founders of a company. Some may just have more shares because they are wealthy (e.g., Apple’s majority shareholder is Berkshire Hathway aka Warren Buffet). Instead, just like a democratic nation, a corporation can also democratically be owned and controlled by the employees who collectively do the work in a company. For most decisions, democracies rely on their elected officials to make the right decisions, but for some key decisions, they directly go to the public and ask for their mandates through a referendum or plebiscite. For instance, Ohio recently voted to protect abortion rights through a public referendum, despite the Supreme Court's federal ruling. A corporation could do the same for any deeper crisis, otherwise elected board or management would look after major decisions.
If OpenAI employees had a democratic say within the company, they could have voted for Sam and Greg to remain without going through Twitter/X posts, phone calls, and numerous hours of tension. When the BoD decided to oust Sam from OpenAI, Sam himself a member of the board could have called for a referendum, which is usually what happens when there is a contention among elected officials or board members. Then, a referendum vote among OpenAI employees could easily save us from this crisis.
The media and others have overlooked this democratic approach, fearing it would shift control from the ultra-wealthy to a more open public. However, as we progress towards a more advanced economy, especially in the educated tech sector, we should seriously consider worker-owner cooperative models. This approach has been successful even with workers who do not hold traditional degrees. There's no reason it wouldn't work in the tech sector. We already have the infrastructure to support it - we already call for votes from the shareholders of a company. Instead of the share percentage being the dictating voting power, which is not what we do in our state-level democracy, the ultra-wealthy class does not have 10x voting power compared to, for example, poor people, employees would decide a company’s future. Although we are not on this path yet, with increasing union participation, the era of worker-controlled sectors is drawing closer and will be more common than expected.