OpenAI may become a public benefit corporation: What is it and what will change?
A public benefit Corp is a corporate structure under Delaware law which allows a for-profit entity to also commit to pursuing goals of bettering society
OpenAI's managers are weighing on turning the AI giant into a public benefit Corp (PBC) in contrast to the nonprofit entity it is currently, after it dispays explosive growth as well as intense investor interest.
A symbol for the OpenAI virtual assistant arranged on a smartphone in Riga, Latvia, on Friday, Aug. 16, 2024. (Andrey Rudakov/Bloomberg)
A public benefit Corp is a corporate structure, created specifically under Delaware law in the US, according to a Bloomberg report, which added that this allows a for-profit entity to also commit to pursuing goals of bettering society, with directors and managers having to balance both shareholder interests and public benefits.
This allows the company to get funding from investors easily, while also ensuring investors who try to lobby for it to depart from it social mission won't be successful at it.
It can also allow the company to raise funds through an Initial Public Offering (IPO).
A traditional nonprofit doesn't have owners or shareholders, while a PBC does.
How is OpenAI's current structure like?
OpenAI currently has a hybrid structure where OpenAI Inc is a nonprofit and OpenAI LLC is a for-profit subsidiary, which Microsoft has a minority stake in.
The main disadvantage with a PBC structure is that there's no requirement of using independent standards to evaluate compliance with their social or environmental goals, according to the report, which added that this can cause accusations of “ethics washing”
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Anthropic and Elon Musk's xAI are both PBCs while shoe brand Allbirds and eyewear company Warby Parker are also PBCs, according to the report.
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