OpenAI Investors Mull Lawsuit Over Altman’s Firing

Some OpenAI investors are reportedly considering legal action in response to ex-CEO Sam Altman’s firing.

Such action would target the artificial intelligence (AI) firm’s board, which last week ousted Altman, leading to what could be the resignation of most of the company’s employees, Reuters reported Monday (Nov. 20) evening.

Sources told Reuters these investors are examining their options with the help of legal advisors, though it’s not clear whether they will sue the company.

According to Reuters, investors worry they could lose hundreds of millions if OpenAI were to collapse after enjoying a year-long reign as the flagship AI startup.

Altman was removed as head of the company last Friday (Nov. 17), with the board saying the decision came after a review that found the CEO had not been “consistently candid in his communications with the board.”

Supporters of Altman — among them Microsoft, OpenAI’s largest investor — spent the weekend lobbying for his return. 

However, the board apparently resisted Altman’s return. Hours after reports that Altman had been at OpenAI’s headquarters negotiating a possible comeback, Microsoft CEO Satya Nadella took to X (formerly Twitter) to announce that Altman, along with Greg Brockman, OpenAI’s president and co-founder who quit in protest of Altman’s firing, will oversee Microsoft’s new AI research team.

Monday brought the news that more than 500 of OpenAI’s 770 employees have signed an open letter saying that they’ll quit as well if the board does not resign and reinstate Altman and Brockman, adding that Microsoft has promised them jobs.

PYMNTS’ CEO Karen Webster examined the fallout of Altman’s firing Monday, warning — even before the open letter surfaced — of a “brain drain of developers who now worry about OpenAI’s long-term viability” and take their talents to other platforms.

“It will take months, and maybe many of them, for the current destabilization of the OpenAI business to return to normal, for trust to be restored, for a new board to be created and installed, and for whatever governance changes occur to be socialized and implemented across both businesses — OpenAI’s and Microsoft,” wrote Webster. “In the meantime, AI dollars and talent may flow elsewhere.”

The Reuters report notes that investors could face an uphill fight in suing OpenAI, which is a non-profit. That structure, experts told Reuters, gives leadership a lot of leeway.

Paul Weitzel, who teaches law at the University of Nebraska, told Reuters that even if investors did sue, they’d have a “weak case,” as the law gives companies a lot of latitude to make business decisions, even ones that come back to haunt them.

“You can fire visionary founders,” Weitzel said. 

The report gives the example of Steve Jobs, fired by Apple in the 1980s before returning to help usher in the iPhone.