Researchers, former OpenAI employees ask California AG to block its restructure
Good morning, happy Wednesday. This is the Capitol A.M. Alert!
A PLEA FOR BONTA ON OPENAI
More than 30 academics, advocates and former OpenAI employees are asking Attorney General Rob Bonta and his Delaware counterpart Kathy Jennings to block the AI giant’s proposed restructuring.
OpenAI, the non-profit startup behind ChatGPT is headquartered in San Francisco and wants to turn its for-profit arm — the mechanism for raising profit-capped investor funds under its current model — into a Delaware-based public benefit corporation.
A letter sent to the Democratic AGs focuses on OpenAI’s founding mission to “ensure that artificial general intelligence benefits all of humanity” above “the private gain of any person.”
“The law is clear that a Delaware PBC has no fiduciary obligation to prioritize public benefit over profits, so it’s hard to see how OpenAI could claim that this restructuring would be consistent with its charitable purpose,” said Michael Dorff, executive director of the Lowell Milken Institute for Business Law and Policy at UCLA, who signed the letter.
The Sam Altman-led company has argued the proposed restructure — which requires approval from shareholders and the California attorney general — would help it raise more capital and remain competitive against larger companies in a rapidly evolving industry.
“The hundreds of billions of dollars that major companies are now investing into AI development show what it will really take for OpenAI to continue pursuing the mission,” the company wrote in a December post. “We once again need to raise more capital than we’d imagined. Investors want to back us but, at this scale of capital, need conventional equity and less structural bespokeness.”
Aside from asking Bonta and Jennings to stop the reorganization, the letter asks them to “ensure the board has the necessary independence, resources, information, and will to push back against management in furtherance of its fiduciary duties.”
The company is valued at $300 billion but stands to lose out on $20 billion from a new investor if the changes aren’t approved.
“It’s not about the money,” Page Hedley, a former OpenAI policy and ethics advisor who signed the letter, said in an interview with The Bee. He noted the main concern outlined in this letter is “whether the restructuring would advance the mission, the charitable purpose.”
Hedley said the proposed restructuring would place shareholder interests above that of the public while weakening board oversight, a dangerous combination.
“Right now, all frontier AI companies test their models for risks” which takes time and might be rushed, he said. “That’s exactly when the board should step in and say ‘No, I understand that you want to get this model out … but that would be contrary to the public’s interest.’”
The letter landed on Bonta’s desk as state lawmakers are considering new proposals to regulate AI, including a watered-down version of a bill Gov. Gavin Newsom vetoed last year. It may give Bonta an opportunity to show some teeth to an industry Newsom has been loathe to regulate.
Bonta’s office said it is “committed to protecting charitable assets for their intended purpose and takes this responsibility seriously,” but declined to comment further.
The company is also engaged in a legal back-and-forth with Tesla CEO Elon Musk, an early OpenAI investor and board member who has sued to block the restructure. OpenAI filed a countersuit earlier this month accusing Musk of unfair competition.
A FACTORY OF EARTH DAY METAPHORS
via Lia Russell...
Gov. Gavin Newsom continued to distance himself from the Democratic Party Tuesday, telling The Hill that he thought the party had failed to do any introspection after losing the White House in November.
“We have not done a forensic of what just went wrong, period, full stop,” he told the Washington, DC outlet. “I don’t know what the party is.”
Newsom has been undergoing his own political soul-searching since the election. He started another podcast and has taken contrarian positions on LGBTQ athletes that have rankled other politicians who accused him of backtracking on his beliefs to make himself more palatable to moderates should he run as expected for president in 2028.
Tuesday, he appeared alongside First Partner Jennifer Siebel Newsom at an Earth Day event at Chico State that would not have looked out of place as an Anthropologie ad. He spoke to a large group of ag students, and noted that his late mother was technically an alum though she dropped out when she fell pregnant with the future governor.
Newsom did not take reporter questions during the stop. He doubled down on the Golden State’s commitment to climate resilience in the wake of ever increasing wildfires and droughts, and noted the event’s proximity to Paradise, which was the site of California’s deadliest inferno, the 2018 Camp Fire.
“There are no Republican or Democratic thermometers,” he told students. “You don’t have to believe in climate science, but you got to believe your own eyes.”
He compared Mother Nature to “one cow that we don’t want to milk,” or a “tiger we want to tame,” and emphasized the next generation’s responsibility to be good stewards of the earth.
“(Mother Nature) is a sturdy wagon,” Newsom said, “And we’re the healthy horses going forward.”
QUOTE OF THE DAY
“I don’t think duplexes are driving people out of California. The cost of housing is driving people out of California.”
- State Sen. Scott Wiener, D-San Francisco, defending his SB 677, which he says would make it easier to build duplexes and fourplexes in California.
Have a story idea or tip? Reach me at nnixon@sacbee.com or the entire SacBee Capitol Bureau team at capbureau@sacbee.com.
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