In 2020, Sam Altman’s income from OpenAI Limited made 55,108 dollars for his work as chief executive of the non-profit with an additional 8,472 in compensation, which may have been some kind of bonus. In 2021, Sam Altman generated about 58,333 dollars a year in compensation while also receiving about 8,459 dollars in additional compensation – a healthy 5 percent raise typical for a worker performing their duties on par with the usual standards. Make no mistake, prior to the position, Altman was a rich and influential man in the technology space, but within OpenAI, power was vested in its research.
De Facto Chain of Command
For most people in technology, the Altman salary would barely cover the usual cost of a software engineer intern at Silicon Valley. For a part-timer, like Altman, this must have been okay since being in a hot non-profit AI organization could function as a springboard for bigger and better things – possibly in the same space, possibly elsewhere.
Research Director, Ilya Sutskever, on the other hand, was always getting that money: $298,372 USD in 2020 and $278,609 USD in 2021. When measured in terms of compensation, these figures are aligned with the internal mandates of the company. The structures reflect the intent and priorities of the entity: research.
As a non-profit, OPENAI Inc received tax benefits that allowed it to court donations (which were tax deductible for donors), access to grants from companies and all levels of government. The officers of the organization are not paid market rate for what is typical in a privately held or publicly traded operation, but the researchers were paid market rate. After all, it was a non-profit, but it wasn’t quite the mom-and-pop operation.
OpenAI to Open Code For Microsoft
Elon Musk, in a statement, mentioned that “as part of their investment, Microsoft gained exclusive access to the entire OpenAI codebase,” confirming the notion that the investment had certain conditions attached. This further adds to the complexity of the situation. Normally, 100 million dollars directed at a non-profit organization carries no real pre-conditions of that nature. While there may be an LLC that holds all of the OpenAI’s intellectual property, there is likely no way to disconnect the LLC and the non-profit such that directing money at one over another would not violate the spirit of either corporate structure.
Transition to Ouster
I highly doubt that Altman will not return to OpenAI.
Already, there are talks centered around Altman’s return and changes to governance. I can surmise that Altman wants the rules to be enforced in all fronts since the executive title means more now. Even so, there is confusion that OpenAI is a startup. OpenAI is a non-profit that is licensing IP, but more importantly, it’s a newly established and powerful brand that makes money.
First and foremost, the transition of OpenAI from a research project to something more akin to an S-Corp has raised concerns among various stakeholders, including the original donors. These donors publicly expressed their discomfort with the ‘exclusivity’ aspect of Microsoft’s $100-million investment, which effectively resulted in a technology transfer to the tech giant. This move has sparked confusion within the industry, as it represents a shift from a non-profit status to a for-profit entity. In my view, this transition was actually the intention all along, as indicated in the Form 990 of 2020, where the individuals involved in OpenAI shrewdly demonstrated their desire to play in a grey area of non-profit and corporate governance but most were compensated at market rate while others, like Altman, could wait for this moment.
In the business world, once a product is out the door, non-profit and corporate structures become rigidly defined. Altman is, or was, at the help of a for-profit company-to-be, with a board that reflects the old priorities prior to their blockbuster product. This ouster was a last-minute attempt to pull the plug on Altman’s mutual embrace of the role of a ‘CEO’ despite being at the low end of compensation for so long within the old structure. Microsoft and other private investors will likely help navigate and bend the non-profit to their whims. This means Altman will return not for his acumen, but for the brand.
Market Dynamics
Either way, the launch of Chat GPT3 as a product propelled Sam Altman into a conventional CEO role, regardless of any potential conflicts with IRS regulations on non-profits. Investors perceived Altman as the driving force behind the company’s innovation, possibly due to his ability to effectively communicate and shape the company’s mission. His name not appearing on research papers became irrelevant.
Altman, already several times a millionaire, was well-prepared to handle investment opportunities, and OpenAI has generated significant revenue. It is possible that the research community inside and outside of OPENAI, may feel aggravated that someone with a computer science background also possesses astute business and social skills. More to come, I’m sure.
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