OpenAI Retains Nonprofit Governance Amid Backlash

Prime Highlights

OpenAI is retaining its nonprofit governance, reversing an earlier decision to alter its model.
The for-profit subsidiary will instead be a Public Benefit Corporation (PBC) controlled by the nonprofit.

Key Facts

The decision follows pressure from civic leaders and attorneys general in Delaware and California.
The Elon Musk-led lawsuit and mounting public criticism prompted the governance rethink.

Key Background

OpenAI, founded in 2015, began as a non-profit organization to make artificial general intelligence (AGI) serve the entire human kind. In an attempt to obtain needed funding while not fully giving up its core purpose, OpenAI formed a capped-profit subsidiary in 2019. It allowed it to obtain funding without entirely forgoing its original ethics and governance.

But in November 2024, OpenAI announced restructuring its for-profit affiliate as a Delaware-based Public Benefit Corporation (PBC), essentially freeing it from oversight by the nonprofit. It was to grant it greater fiscal independence but instantly caused alarm among ethicists, ex-staffers, and industry observers, believing this would threaten the safety guarantees of OpenAI and lead to uncontrolled commercial dominance.

The proposed changeover also raised legal ripples. Delaware and California state attorneys generals began investigating into the legality of the transition as well as any potential threats issued by it. OpenAI co-founder Elon Musk, in the meantime, sued on the grounds that the corporation has deviated from their initial values. A group led by Musk in February 2025 even made an offer of up to $97.4 billion to acquire the nonprofit corporation operating OpenAI — which eventually turned down.

In response to this growing backlash, CEO Sam Altman announced in May 2025 that OpenAI would retain its nonprofit governance. Instead of separating, the company will restructure the for-profit arm into a Public Benefit Corporation that remains under the nonprofit’s majority control. This compromise aims to preserve OpenAI’s ethical foundation while enabling necessary capital investments.

Altman was adamant that the basic requirement of building AI responsibly for the greater good remains the same. Regulators and critics are still worried, however, about whether a nonprofit is adequately equipped to manage a commercial company of this magnitude, especially as interests all around the world in the creation of AI continue to expand.