(Image source from: Economictimes.indiatimes.com)
Following the unexpected removal of Sam Altman from OpenAI on November 17, 2023, Microsoft was quick to position itself to take in OpenAI's key leaders and talent into an organization under its control, Microsoft CEO Satya Nadella disclosed during court statements on Monday. Nadella’s remarks emphasized how critical OpenAI was to Microsoft’s artificial intelligence plans and how swiftly Microsoft acted to safeguard its interests amid the leadership crisis. Nadella testified on the last day of the Elon Musk versus OpenAI trial in federal court in Oakland, California. He shared that Microsoft almost instantly made a backup strategy. Within merely a day, Microsoft had finalized the legal documents to establish a new subsidiary that could hire Altman, Greg Brockman, and possibly several other OpenAI staff if they opted to leave the organization.
In the technology field, especially in artificial intelligence, salary packages are greatly linked to equity and the future worth of the company. To persuade OpenAI employees to join them, Microsoft would have to propose extremely costly packages. Nadella revealed that Microsoft anticipated it would take about $25 billion to fully integrate Sam Altman, his leadership group, and a significant number of OpenAI staff into Microsoft while providing salaries, stock options, and equity in line with what they already had or expected at OpenAI. However, this proposal was never executed because Altman was reinstated as CEO of OpenAI afterward. When he came back and most employees remained at OpenAI, Microsoft found that the alternative plan was no longer necessary. Nadella also pointed out how puzzling and sudden the dismissal seemed, even to Microsoft, despite its close ties with OpenAI. He described Altman's firing as “amateurish. ” During his testimony, Nadella mentioned that even with Microsoft being OpenAI’s primary investor and closest business associate, the board failed to provide a clear reason for Altman’s removal.
Nadella expressed that his immediate worry was to determine if there were serious issues involved, such as financial misconduct, fraud, security problems, or ethical breaches. However, as he stated in his testimony, no one from OpenAI provided Microsoft with a clear response. The only public justification from OpenAI’s board was that Altman had not been “consistently candid” in his communications, a vague statement that many at the time felt didn't warrant such a drastic action. Nadella’s testimony also clarified the power struggle that emerged after Sam Altman rejoined OpenAI following the leadership crisis in November 2023. After Altman’s return, OpenAI aimed to rebuild or “reconstitute” its board of directors, and Microsoft—being OpenAI's largest investor and closest business partner—suggested 13 to 14 individuals they thought could serve on the new board. However, none of the candidates proposed by Microsoft were chosen initially.
During his testimony, Nadella recognized that Microsoft lacked the official authority to compel the nonprofit OpenAI board to follow its advice. When he was asked about Microsoft's options if the board chose to disregard its recommendations, he simply stated, “None,” indicating that even with Microsoft's significant financial investment, it did not have direct control over the management of OpenAI. Simultaneously, Nadella disclosed that Microsoft attempted to sway the board's composition by voicing objections to certain individuals. He mentioned he was against Diane Greene due to her associations with Google and also disapproved of Bing Gordon because of his connections to Amazon. This implied that Microsoft was worried about rivals having too much power within OpenAI. Elon Musk’s legal representatives asserted that Microsoft was trying to influence OpenAI's governance in ways that would help Microsoft's business goals and increase its control over the organization.
Ilya Sutskever, a co-founder and former chief scientist at OpenAI, also gave evidence during cross-examination. He mentioned that OpenAI's board considered serious backup plans to bring stability to the organization amid the crisis. One of these plans reportedly included conversations with Anthropic, a significant competitor in the AI field, regarding the potential for a merger or collaboration. Sutskever expressed his disapproval of the idea of OpenAI merging with Anthropic, stating that he was “not excited” about this suggestion. In addition to Satya Nadella’s testimony, numerous other Microsoft leaders also took the stand to discuss Microsoft's financial involvement in OpenAI.
