一个公司到底谁说了算？ | OpenAI背后权力的游戏

Didn't we talk about the Israeli and Palestinian economies in the last two episodes To be honest, it was quite depressing I was wondering what to talk about in the next issue then guess what, something happened to OpenAI.

Of course, I'm not gloating about it Board of directors, managements, power struggle All these are perfect for me to talk about White I find interesting about this is first of all, because the main character is called Altman (Ultraman) Second, let's get serious now Why are the CEO and director of a company being squeezed out This is actually quite uncommon This involves OpenAI's weird and unique equity structure So today I will also talk to you about,

for example, the infighting within the board of directors, the power struggle between the board of directors and management, including the fight on ownership Today we'll be quite casual because there are a lot of short stories and examples First of all, we definitely need to sort out the ins and outs of the whole thing surrounding the OpenAI board of directors and Altman If you are very clear about the whole story Then you can jump to this minute

The OpenAI board of directors has a total of six people Three of them are its core members.

One is Sam Altman, who is its CEO.

also the number one figure in OpenAI and has even been called by many, the godfather of AI.

Another is Greg Brockman director and chairman of OpenAI.

This guy is pretty impressive He was one of the founding member of Stripe.

Stripe is also a unicorn with a valuation comparable to that of OpenAI.

These two are the two core founding members of OpenAI who were both kicked out this time.

There is also a founding member of OpenAI who is also on the board of directors.

The chief scientist Ilya Sutskever.

He is the technical core of OpenAI.

He is a great figure in the field of deep learning The other three people on the board of directors are people from outside OpenAI.

We will not introduce them here If you want to expel Altman with 6 members in the board you must have at least four votes.

These four people consist chief scientist and the other three.

The four of them teamed up to kick Altman and the chairman out of the board of directors How could this board of directors fire the CEO behind the chairman's back?

Why did they do it?

We'll talk about the reason later In short, he was fired On Thursday night, November 16th, the chief scientist sent a message to Altman and told him that there would be a call to the board of directors at noon tomorrow and told him.

that he was about to be fired.

At the same time, OpenAI's CTO was privately informed that he would become the new CEO.

Altman was fired at noon on the 17th.

Almost at the same time, Chairman of the Board, Brockman also received news that he would still serve at OpenAI but would be kicked out of the board.

Official website of OpenAI also released an announcement The first sentence clearly stated that the CTO will become the new CEO, Altman has been fired The official reason for Altman's expulsion was that he was "Not Candid", that is, he was not honest that's basically what it meant.

This announcement shook the world.

A personnel change in OpenAI that can be called a coup was made public.

The employees and investors of OpenAI who were all kept in the dark Both of them are the soul to the company The market must have been shocked when the CEO and chairman of the board were fired on the same Black Friday.

OpenAI had just released a press conference two days ago.

At that time, Altman was still talking about GPTs Everyone was discussing how many people would be laid off after this AI.

Unexpectedly, Altman himself was the first to be laid off.

The next Saturday morning, Brockman also announced his resignation.

Altman didn't make a kerfuffle he just posted an article saying that his time at OpenAI was great, the people are great, and so on.

Do you know what is really interesting here?

let's ignore the conspiracy theory Microsoft has nothing to do with this whole matter.

Nadella said when he heard about this whole thing he was Furious As soon as the news came out, Microsoft's stock fell sharply.

Although OpenAI has not been listed, but it has valuation Their value would be cut in half due to this.

Many investors in OpenAI definitely didn’t want to go wrong at such a critical moment in the development of AI, so they worked urgently over the weekend to bring Altman back Employees also put huge pressure on the board of director retweeting Altman's tweet on social media.

Under pressure from both investors and employees, the board of directors chose to compromise.

They agreed on Sunday to bring Altman back but with some conditions Altman is strong-willed he also put forward some conditions.

The first one is to replace the board of directors first and there are some other conditions. In short, the two sides couldn't reach consensus At the same time, OpenAI also announced a new CEO.

but it didn’t matter who it was Monday, November 20th, Microsoft came to the rescue.

It announced that it had successfully poached Altman and Brockman, saying that they would join Microsoft to establish a new AI research department.

and Microsoft’s stock immediately soared and reached a record high.

Some of you might think that Microsoft is the biggest winner managed to get these two for free But actually they were left with no choice If they got these two people they might face various problems like antitrust, regulations, many lawsuits so for Microsoft, this is at best a stopgap But the story is not over yet Altman probably haven't gotten his own access card yet then something else broke out in the market

OpenAI employees sent abdicate letter to the Board I think it is quite intense What it says is that your actions have made it clear to us that you are completely incapable of leading OpenAI.

Everyone who signed choose to leave OpenAI and join Altman's new team at Microsoft.

If you don't want us to resign, unless all board members resign now and let two new independent directors and let Altman and Brockman return to the board Then there's long list of hundreds of people including 770 OpenAi employees the vast majority.

Surprisingly, the list also included the chief scientist Sutskever who supported the firing of Altman He posted on social media saying he deeply regrets what he did at OpenAI and hopes to do his best to bring OpenAI back together again.

Well the employees abdicated in such manner the result is actually quite clear.

Next day on November 21, OpenAI officially announced the return of Altman and Brockman, and it formed a new board of directors.

Only one of the original 3 directors left in the Board Altman and Brockman stated that they were happy to return.

Microsoft CEO Nadella also extend his congratulations.

The whole incident ended with a happy ending after only four days.

At this time, everyone should be together be happy.

So that's what it's all about So why do you think the OpenAI board of directors wanted to fire Altman?

Many people speculated that Altman’s development strategy is too radical, and the board is worried about what he will bring to human security.

Of course, there are other speculations This is something that has been talked about a lot in the news.

It is not the focus of what we are going to talk about today.

Let’s use Lin’s unique financial perspective to analyse the power struggle behind this coup.

First of all, to make sense of this we need to first have a general understanding of the power structure of a normal corporate governance.

Most companies with a complete system have three layers the management, the board of directors and the shareholder The management are mainly responsible for most of the daily operational decisions such as which market to enter, what products should be developed How much does this product cost The boss is the CEO.

These are all at the executive level.

The shareholders are the owners of the company.

In theory, major decisions related to the company should actually be made together by shareholders.

But the problem is that, with a big company there may be hundreds or even thousands of shareholders.

It is impossible to call all the shareholders together and then synchronize the information to everyone.

This is obviously unrealistic so most companies will elect a small group of people to establish a board of directors to help shareholders make most of the major decisions.

Board of directors usually gathers together for a meeting every few months and one of the most critical aspects of their decision-making power is that they can appoint and dismiss the management such as the CEO and CFO.

Only major issues will be raised to the shareholders' meeting for a vote The most critical thing here is the appointment of a new director to the board of directors.

So simply speaking, if the board of directors is unhappy with the management they can dismiss him If the major shareholder is dissatisfied with the Board He can convene shareholder meeting and re-appoint the board of directors.

So if you are the CEO of the company and a major shareholder at the same time, the Board can dismiss you but in turn you can dismiss the Board.

At the end, whoever has the largest shares has the final say.

This is reasonable.

But OpenAI is special It is a non-profit organisation OpenAI was established in 2015 by a group of big guys who invested hundreds of millions of dollars and formed a non-profit organization Which means that its main purpose is not to make profits but was established to fulfill the AI dream This non-profit organization has a key feature.

It has no concept of owners.

There are no shareholders at all, let alone a shareholders’ meeting.

So in the structure we talked about the highest authority of this company is the Board The Board has the final say.

This simple structure is actually enough if placed in a general non-profit organization.

However, OpenAI is different because it develops so fast.

It slowly discovered that the characteristics of non-profit organizations began to slowly restrict it.

On the one hand, AI training is too expensive and the competition in the industry is so fierce.

Simply relying on a few big guys to donate money and generate electricity with love is definitely not enough .

At the same time, it also needs enough benefits to motivate employees and talents.

The founders can join you not for profit but for ideals but you can’t expect all employees not to be for profit.

People have to eat, right?

In short, in 2019 transformed itself into a profit-making organization so that it can attract employees through equity incentives and at the same time using investment income to attract investors to be sustainable.

However, in order to maintain its original intention of not making profits at the beginning, it limits the income to all investors to a hundred times extra profit will be invested back into the company to help company continues to develop This structural change from non-profit to profit is also the key reason for this earthquake.

Didn’t we just mentioned why Microsoft has been kept in the dark.

You must know that Microsoft just invested 13 billion at the beginning of this year.

Holding 49% of the shares.

Although it is less than half but how can there be no seat for them among the 6 directors This is quite strange.

Let's take a look at this strange structure of OpenAI.

Look at this In the beginning OpenAI is a very simple non-profit organization.

Altman is the CEO and the board of directors is the highest decision-making body.

After transforming into a profit-making organization, it became such a framework that allowed OpenAI INK, a non-profit organization, to hold OpenAI Global.

OpenAI Global is a profit-making organization, which is what most of us call OpenAI.

Microsoft paid $13 billion in exchange for 49% of its shares.

Most of OpenAI employees also work for this company.

We mentioned that they want to provide incentives to investors and employees so this non-profit organisation and OpenAI employees as wll as investors jointly hold a shareholding platform and use this holding company to hold 51% of the shares of OpenAI Global.

In this way, employees, investors can also obtain the equity income of OpenAI.

In fact, in October this year, Altman also discussed with some investors that he would sell part of the shares held by employees at a valuation of $86 billion to allow employees to cash out.

By the way, Even if it turns into a profit-making organization, these founding members are actually still trying to ensure that they keep their original intention.

In its announcement of turning into profit-making organisation, OpenAI specifically emphasized that most members of the board of directors will not take any financial benefits from OpenAI, including Altman.

To be honest, I'm really surprised by this.

Altman really didn't take any shares in OpenAI.

He also emphasized on many occasions that he does this kind of work purely because of his love for OpenAI and this career.

At that time Altman was already famous in the Silicon Valley venture capital circle, right?

He set up a non-profit organization and didn't get a cent.

So no matter what you think about AI or ChatGPT, you have to admit that the founding members are really the kind of people with ideals and sentiments.

In May this year, at a hearing on AI in the US Congress, a congressman asked Altman You make a lot of money do you?

I make no I...

I...

I paid enough for health insurance I have no equity in OpenAI Really?

Yeah You need a lawyer or an agent I'm doing it cause I love it But look at this this congressman was half-joking joking you need a lawyer Altman probably can't laugh now Okay, let’s go back to the OpenAI framework.

This structure can indeed protect the interests of investors and employees.

However, the problem this time is not the distribution of interests but the distribution of power, which is the distribution of the company’s control rights.

OpenAI Global, a key profitable company It is fully controlled by this 51% holding company and this holding company is controlled by OpenAI, a non-profit organization.

This organization is controlled by its board of directors, the same six people before but at the same time, it is a non-profit organization, right, and it does not have a shareholder meeting.

So legally no one can shake the power of the board of directors.

So in the end, Even if Microsoft holds 49% of the shares of Global Even if your other employees, investors hold a lot of shares of Global but the company that leads the global AI wave is completely controlled by six people on the board of directors of OpenAI INK Even if Altman, Brockman and Microsoft join forces, they can't beat this board of directors from the perspective of control.

So you can see how powerful this board of directors is.

Don't you think this is similar to Samsung conglomerate in previous episode.

Despite holding small shares they controlled the entire consortium layer by layer.

Before this Musk was also suffered losses from this profit, non-profit mess.

We know that he is one of the key founders of OpenAI, and he donated about $50 million to it.

However, it is because OpenAI does not have the concept of shareholders So Musk parted ways with OpenAI for various reasons, and abandoned by OpenAI.

So Musk may not care about the financial benefits of the shares, but what is the problem You can't just change it like that and abandon me.

In his interviews he was quite upset about it jokingly say well I...

well I...

I fully admit to being a huge idiot here Actually in ordinary non-profit organizations, people choose directors not for financial gain It's not likely to cause that much trouble.

But the problem lies in things like OpenAI, which didn’t want to make money at first but later they found that the potential was too great that they had to set up a profit-making organization and turned it into profit halfway and came up with such a crappy structure.

That's why we have this concentration of power problem.

Let's diverge and talk about how the company’s board of directors and management have this power struggle.

Let’s first talk about the board of directors.

In most companies, the board of directors usually has five to fifteen people, it's not good to have too many people if too less then fight breaks out easy.

Actually there is a saying that it is best to have an odd number of people so that it is not easy to have a tie vote.

Anyway, this is what I learned in the textbook.

But this theory has long been outdated.

Just look at the number of people on the board of directors of some listed companies.

In fact, odd numbers and even numbers are almost the same.

For example, Tesla, Alibaba, Amazon, all even numbers If there are so many people on the board of directors, who should we listen to?

In theory, everyone votes and the minority obeys the majority However, East Asian companies and Western companies have different practices For East Asian companies, such as Mainland China or Japanese and Korean companies, as we can see from TV dramas the chairman is basically the boss in the absolute sense.

In Japan and South Korea, they may be called president or something like that.

You have to obey the chairman on everything.

The chairman is the greatest of all, looking handsome is even better This chairman is usually the largest shareholder.

Maybe more than half of the board of directors are appointed by the chairman or someone the chairman can control.

The CEO is either appointed by the chairman or he himself as the CEO Isn't it important to have an alliance within the board so in China they particularly like to sign something called Acting in Concert Agreement We signed this agreement so we stay hand-in-hand tying people up together so that the equity influence of both parties can be expanded.

In short from the management to the board of directors to the shareholders' meeting, it is basically a one-sided dominant structure And if in case of when the chairman is unable to control the majority seats that's when the opposition appears So what to do?

A great man cannot brook a rival A more famous example would be Wanbao dispute surrounding Vanke.

No matter how they fight a new boss must emerge and everything goes back to status quo everyone still has to listen to the Boss.

East Asian companies generally tend to be like this.

What about American companies?

I would like to ask everyone, do you know who is the chairman of Apple?

Do you know who is the chairman of Tesla?

Let me tell you The chairman of Apple is called Arthur Levinson.

The chairman of Tesla is Robyn Deynholm How about Dromdennom Have you heard of them before?

Most of you would've though thought it's Tim Cook , Elon Musk Many American companies doesn't even have chairman just a bunch of directors.

What is the responsibility of the chairman?

To put it simply, he is to maintain order make sure that discussions, meetings, votes are being done properly.

Else, why would OpenAI's chairman be kicked out of the board of directors without knowing it ?

Because as the chairman his power is not much greater.

It is a bit like the speaker of the British Parliament.

Although he sits in the middle, he doesn't have the final say.

Even if the position of chairman is not that important, why do you think OpenAI needs three outsiders for its board of directors ?

Isn’t Altman looking for trouble for himself?

This is not some unique special system of OpenAI Nor are they the hired puppets to check and balance power.

This is basically an industry standard.

These people are called independent directors, which refers to directors who do not work in the company and have no particularly important business contacts with the company and can make independent judgments fairly.

Of course, different countries have different definition of independent directors but the judicial systems of most countries require that listed companies must have at least a certain number and proportion of independent directors to help ensure the fairness of the entire board's decision-making, It is for the benefit of all shareholders.

To put it more broadly, it is for the benefit of the development of the whole society.

To give an extreme example, suppose that the board of directors are all executives in the company.

Then they got together and agreed on salary increase and three hundred days of annual leave for the executives This would be preposterous right Just look at the letter written by OpenAI employees at the end they didn't forget to mention to find two new reliable independent directors Actually in Chinese companies these independent directors is more like making up the numbers.

For example, the chairman appoints an individual.

Of course, the regulatory agencies have also been rectifying this matter in the past two years.

It is completely different in the United States.

Having independent directors in the Board is quite mainstream Both the New York Stock Exchange and Nasdaq require companies to have at least half of independent directors.

In many companies, more than three-quarters of the directors are outsiders For example, McDonald's once had an 100% independent directors in their Board Who are these independent directors?

Generally speaking, the bigger the company, the more it needs to find some highly respected people.

But after all, they still have to participate in the company's major decisions so you still need to have some management experience.

For example, for Google's director you can't just simply appoint some esteemed professor to be in the Board.

Therefore, the independent directors of large American companies are generally people who have served as executives or are currently serving as executives in other industries or companies.

This leads to a very interesting phenomenon Executives, former executives from major companies are interfering with each other in the Boards For example, Apple’s board of directors has people from Boeing, Johnson & Johnson, BlackRock, and Boeing’s board of directors has KPMG, GE Apollo.

All mixed up.

Why do they let more than half of independent directors to be in such major decision-making center?

Isn't it a bit unreliable?

Doesn't someone else have control of the company Well it's not the case.

The main characteristics of European and most American companies put it bluntly in most cases, the board of directors is just a decoration. It does not play a big role.

In general, the really important decisions of a company are decided my the management and the CEO Although in theory the Board has big power but its most important task is actually to screen, supervise and motivate the management.

To put it simply, find a good, reliable CEO and then give him enough incentives to perform well.

For example, Tesla's board of directors customized an incentive plan for Musk.

We have talked about this before.

After that, Musk overfulfilled the task Of course, there are many in the Board sided with Musk.

But I guess you know what I mean.

In most cases, the success of a company actually depends on its CEO.

When people invest in American companies, they basically look at the CEO and the management.

Those very senior researchers who study companies that I know of rarely study who is on the board of directors of a company.

Of course, I will reiterate that these are all referring to US companies.

Within Chinese companies there are quite serious factional disputes in the Board.

So when will this board of directors be useful?

Generally speaking, when the company's condition is too bad, the performance and the CEO is too bad, then everyone will look at the Board and ask to quickly replace CEO with a new person.

This is the time when you can feel the presence of the Board.

You can still be kicked out even if you are as strong as Musk.

In 2000, he founded X.com and merged it with another company to form a new company which became PayPal.

Musk was originally the CEO, but the Board was unhappy with him Peter Thiel fired Musk and kicked him out of the board of directors when Musk was on vacation in Australia.

It's similar to what happened with Altman right?

But what happened with Musk was still reasonable because after all, the company just went through a merger morale was still low.

Unlike with Altman he is the soul of the company.

And no matter what Musk had PayPal stock which he cashed out few years later and establish SpaceX and then join Tesla.

Many people actually joke that the technological progress and development of mankind is thanks to Peter Thiel for kicking this crazy kid out of PayPal.

Well, today we talked about various struggles for the entire control of a company Who has the final say in a company and who has the control In theory, at first glance whoever has the largest shares has the final say.

Whoever has the most seats has the final say.

No matter how powerful a CEO you are, you have to be elected by the board of directors.

If you don’t obey, you will be fired.

However if you think about it carefully, for those companies that are developing particularly fast and well whoever brings greater value to the company has the final say For example, a company's star managers and star employees bring huge value to the company.

Their irreplaceability is actually their implicit equity in the company.

The more successful a large company is the less important its board of directors will be.

Because this kind of company usually has a very strong, very impressive management and CEO.

For these powerful and talented people, the Board would not even dare to make a noise.

Of course, those management who are impressive such as those banks after the financial crisis the CEOs were changing rapidly.

At this time, the board of directors show its own value.

But the company's performance and stock price is not worth looking at.

For example, if the Board decides to fire Cook or Musk one day, the shareholders will definitely jump in immediately and dismiss the Board in a matter of minute and then get Cook and Musk back again.

Because shareholders knew the value and importance of these people to the company Some might say that Musk still has more shares and a certain amount of control.

However for Cook, he only owns two ten thousandths of Apple's shares, if you were to let Apple choose who to listen to can you tell Apple to listen to the chairman of the board?

Can you tell Apple to listen to the largest shareholder?

They would still listen to Cook.

This does not mean that the CEO has the greatest power.

It's just that him being in that position would bring higher value to the company because he is irreplaceable which makes him has the greater say.

Of course I'm just using Cook as example.

If you don’t agree with Cook’s role for Apple, then replace with others Anyway, that’s what it meant.

It's the same with OpenAI this time.

Let’s go back to this.

Although Altman was fired by the Board but in this case the employees play the shareholders' meeting role and brought them back.

The whole incident was like an earthquake.

It corrected an internal conflict within OpenAI itself.

In the end, whoever is more irreplaceable will have a higher say.

I guess this incident should also teach its chief scientist Sutskever a lesson in the capital game.

There is no doubt that he is a master in the field of AI but he might not have deep understanding on company control issues.

I feel that his original intention is not bad.

I even believe that he may have a very good and positive intention.

He simply thinks that Altman is too radical there is a problem with your idea and you are being too commercial so we invite you out and then redevelop.

This is not possible in reality.

Altman is the soul of the company if you kick him out how could you develop with low morale.

You kick him out he could establish a new company and attract all the investors, then how can you develop well?

The idea of ​​firing CEO and then wanting to develop well may indeed be a bit too naive.

But to be honest, in this case let’s put aside the cruel thing that is capital control, there are people like Sutskever in ​​OpenAI who are really willing to do such stupid things which shows that he really cares about the threats to human security caused by AI.

This in fact makes me feel more at ease.