Regardless of the board's failure to make their case, recent news suggests that the SEC is going to investigate whether it is true that Altman acted in the manner you describe, which would be a violation of fiduciary duty.
I agree that it seems like an open & shut case.
Typical SEC timelines mean that this will go public in about 18 months from now.
An anonymous person has already filed an SEC whistleblower complaint about the behavioral pattern of Altman and Nadella, which has SEC Submission Number 17006-030-065-098.
As the quid pro quo favoritism allegations remain under investigation, it is crucial to note that they are as yet unproven, and both Altman and Nadella are presumed innocent until proven guilty.
11 hours ago, the SEC tweeted the following new rule, which could be interpreted as a declaration that if Altman and Nadella are found guilty in this case, the SEC will block certain asset sales by OpenAI until the conflict of interest is unwound / neutralized:
The Commission has adopted a new rule intended to prevent the sale of asset-backed securities (ABS) that are tainted by material conflicts of interest.
Washington D.C., Nov. 27, 2023 — The Securities and Exchange Commission today adopted Securities Act Rule 192 to implement Section 27B of the Securities Act of 1933, a provision added by Section 621 of the Dodd-Frank Act. The rule is intended to prevent the sale of asset-backed securities (ABS) that are tainted by material conflicts of interest. It prohibits a securitization participant, for a specified period of time, from engaging, directly or indirectly, in any transaction that would involve or result in any material conflict of interest between the securitization participant and an investor in the relevant ABS. Under new Rule 192, such transactions would be “conflicted transactions.”
The Company exists to advance OpenAI, Inc.’s mission of ensuring that safe artificial general intelligence is developed and benefits all of humanity. The Company’s duty to this mission and the principles advanced in the OpenAI, Inc. Charter take precedence over any obligation to generate a profit.
Some analysts, including Stratechery writer Ben Thompson, have described the 2019 acceptance of Microsoft’s controversial investment by Altman as the beginning of a troubling pattern of Altman repeatedly making deals with Microsoft which were often unfavorable to OpenAI. ... As Thompson describes it, this pattern of behavior culminated in an unusual intellectual property licensing arrangement which Microsoft’s Investor Relations site describes as a “broad perpetual license to all the OpenAI IP developed through the term of this partnership” “up until AGI” (Artificial General Intelligence). This perpetual license agreement includes the technology for OpenAI’s flagship products GPT-4 and Dall•E 3. https://www.microsoft.com/en-us/Investor/events/FY-2023/AI-Discussion-with-Amy-Hood-EVP-and-CFO-and-Kevin-Scott-EVP-of-AI-and-CTO
U.S. Securities and Exchange Commission – Tips, Complaints, and Referrals – Summary Page - Submitted Externally – PDF excerpt obtained 2023-11-26 via Signal
Submission Number (redacted) was submitted on Wednesday, November 22, 2023 at 12:18:27 AM EST
This PDF was generated on Wednesday, November 22, 2023 at 12:28:38 AM EST
Image above includes ... the heading of a 7-page PDF titled "TCRReport (1).pdf" which was received by this reporter over the weekend via Signal.
The Michigan Post article is mostly speculation and that publication doesn’t have much depth/history to it. Check out their “advertise with us” page.
This whole info dump feels like a mishmash of links to thoughtful things (Stratechery) with links to speculative articles that are clearly biased. Like how is “Influencer Magazine” breaking a story that Wall Street Journal and Kara Swisher are overlooking?
I don’t mean to be a jerk. Just really unconvinced.
I would guess that "WLW FUTURE PRESS RELEASE DISTRIBUTION" is a publicist service that was hired by the person making the whistleblower complaint. upwardbound claims there's a lot of money in being a successful whistleblower: https://news.ycombinator.com/item?id=38388246
I don't know if I find the Microsoft/OpenAI favor trading allegation that persuasive (unless new information is uncovered, e.g. Microsoft letting Sam use a private jet or something like that). However if the SEC actually ends up enforcing the "fiduciary duty is to humanity" thing in OpenAI's charter at some point, that would be incredibly sweet.
Interestingly, it appears that Microsoft has been caught violating SEC regulations at least 6 previous times, and that's just what I turned up in a cursory search:
And yet, they continue to exist and no CEO of MS ever stepped down because of any of these.
And I predict that even if Microsoft is going to be caught again that it will be a non-event in terms of actual repercussions. If Nadella exits MS HQ in Seattle in handcuffs I would be most surprised.
Yeah. I think the most realistically-achievable positive outcome is that Microsoft is forced to give up their new board-observer seat, which seems highly improper for them to have since the board they are observing is supposed to make decisions that benefit all of humanity equally. If Microsoft gets to have a fly on the wall in those discussions, it gives them a gold mine of juicy insider knowledge about which sectors of the economy are about to be affected next by Generative AI — knowledge which they can use to front-run the market by steering the roadmaps of Bing, MS Office, etc. so as to benefit from upcoming OpenAI product launches before any non-insiders are aware of what OpenAI is currently planning.
Microsoft plainly shouldn't be allowed to have this advantage, in that giving an advantage to any one party directly harms the mandate set forth in OpenAI's Charter:
Broadly distributed benefits
We commit to use any influence we obtain over AGI’s deployment to ensure it is used for the benefit of all, and to avoid enabling uses of AI or AGI that harm humanity or unduly concentrate power.
Our primary fiduciary duty is to humanity. We anticipate needing to marshal substantial resources to fulfill our mission, but will always diligently act to minimize conflicts of interest among our employees and stakeholders that could compromise broad benefit.
It certainly seems that Microsoft, a "stakeholder", has managed to get a highly improper listening seat that will give them the ability to act on insider information about what's coming next in AI, allowing Microsoft to front-run the rest of the AI software industry and all those industries it affects, in a way that will plainly "compromise broad benefit". (Since any wealth that accrues excessively to Microsoft shareholders is not distributed to other humans who don't hold Microsoft shares.)
A mere 10 days ago, Nadella was shamelessly throwing his weight around on national TV, by appearing on CNBC where he improperly pressured the OpenAI non-profit board — which owes nothing to him legally or morally — to give him more deference, in direct violation of the "always diligently act to minimize conflicts of interest among our employees and stakeholders that could compromise broad benefit" provision of the OpenAI non-profit charter.
I doubt Microsoft will be punished for their role in this (it's not clear to me that they did anything wrong...), but I'll be surprised if OpenAI is allowed to still exist as a non-profit a couple years from now.
Of course they'll still be allowed to still be a non-profit. If they weren't "allowed" to, that would be a total victory for the Altman-aligned faction that sought to corrupt OpenAI from within and cause it to abandon its charter, and a total loss for Elon Musk and others that donated a total of $133M to the non-profit due to its charter. https://techcrunch.com/2023/05/17/elon-musk-used-to-say-he-p...
Musk and other donors are the most obvious aggrieved parties, and it is also arguably the case that every member of humanity has standing to sue for violation of the charter, because the charter explicitly declares that the primary fiduciary duty of OpenAI, Inc. (which is a non-profit) is to humanity broadly. (Therefore, every human is financially harmed by any charter violation, with such harm manifesting as a reduction in the net present value of the future benefits each human will receive from safe, broadly beneficial AGI.)
The SEC's role in fiduciary misconduct cases is not to rewrite a company's charter - that would be extremely improper and the opposite of their mandate. The SEC's mandate is to be the protectors of the status quo and of the original intent of the organizers of an entity. In this case, that means they will seek to protect the OpenAI non-profit's charter from efforts by Sam and others to erode the charter's power in violation of Sam's fiduciary duty to said charter.
The SEC's job in fiduciary misconduct situations is to remedy the situation by reversing improper governance decisions and forcing the fiduciary (Sam) to uphold their legal duty, which in Sam's case is his contractually bound duty to uphold the Charter of the non-profit entity named OpenAI, Inc.https://en.wikipedia.org/wiki/OpenAI#:~:text=the%20non%2Dpro....
OpenAI states this very clearly in multiple places on their website. For example:
"each director must perform their fiduciary duties in furtherance of its mission—safe AGI that is broadly beneficial" - https://openai.com/our-structure
If you would like to read about the types of remedies available in fiduciary duty violation cases, I recommend this resource:
For example (quoting from the book chapter above):
C. Permanent Injunction
A breach-of-fiduciary-duty plaintiff may be entitled to an award of a permanent injunction as a remedy. ...
The purpose of an injunction is to remove the advantage created by the wrongful act.
In the context of this suit, the permanent injunction or injunctions could block all of the following:
• Permanently prohibit Microsoft from holding any board seat or board observer seat on the OpenAI board
• Permanently prohibit Microsoft from making mass employment offers to OpenAI staff (a practice which, in the case of bad faith situations such as this one, is known as "workforce raiding")
• Permanently prohibit Sam Altman from owning Microsoft stock or derivatives thereof
• Permanently prohibit Microsoft from receiving early indications of OpenAI research & product roadmaps earlier than the general public
• Permanently prohibit Sam Altman from receiving job offers at Microsoft or any of its subsidiaries until after a sufficient cooling-off period has elapsed since departing OpenAI, to limit future occurrences of the "revolving door" mechanic documented here:
I dunno, seems more likely that they'd shutter a nonprofit that's a clear sham and assess a bunch of taxes and penalties on the for-profit subsidiary that was the beneficiary of the sham. But beats me!
It was supposed to have two functions: tax dodge + pull the wool over the eyes of regulators. It may fail on both counts now that they've shown that the nonprofit wasn't functional in its stated capacity. Win the battle, possibly lose the war?
Yeah this is what I think as well. Certainly regulation won't be avoided now, and regulators will (or should) know not to trust Altman to contribute to developing it.
In the financial world asset backed securities are typically anything that isn't a mortgage, I think that some crypto would qualify as well as the rights to future profits on some venture.
I agree that it seems like an open & shut case.
Typical SEC timelines mean that this will go public in about 18 months from now.
https://pressat.co.uk/releases/ai-community-calls-for-invest... https://influencermagazine.uk/2023/11/allegations-of-quid-pr...11 hours ago, the SEC tweeted the following new rule, which could be interpreted as a declaration that if Altman and Nadella are found guilty in this case, the SEC will block certain asset sales by OpenAI until the conflict of interest is unwound / neutralized:
https://twitter.com/SECGov/status/1729895926297247815https://www.sec.gov/news/press-release/2023-240
More information:
https://stratechery.com/2023/openais-misalignment-and-micros... https://michigan-post.com/redditors-from-r-wallstreetbets-ca... https://www.outlookindia.com/business-spotlight/sec-consider...