OpenAI reaffirms nonprofit control, scales back governance changes

OpenAI has scrapped plans to reduce its nonprofit parent’s oversight and will keep its existing governance structure intact, a move that limits CEO Sam Altman’s influence and responds to mounting external pressure.

“We made the decision for the nonprofit to retain control of OpenAI after hearing from civic leaders and engaging in constructive dialogue with the offices of the Attorney General of Delaware and the Attorney General of California,” the company said in a blog post.

The decision, announced Monday, comes in response to mounting legal and public scrutiny, including a lawsuit by co-founder Elon Musk. Musk has accused the company of abandoning its original mission to develop AI in the service of humanity.

Despite the announcement, Musk’s lawyer has said that the lawsuit will move forward, arguing that OpenAI’s latest announcement lacks clarity and fails to address core concerns about diminished nonprofit ownership and the company’s shifting priorities, Reuters reported.

In December, OpenAI proposed converting its for-profit arm into a public benefit corporation (PBC), aiming to attract more investment while pursuing social goals. The plan would have reduced the nonprofit parent’s control, though it would remain a major shareholder.

Aligning with political developments

While OpenAI’s nonprofit status may not have immediate implications for enterprise customers, who are more focused on the company’s technical capabilities and service reliability, its governance model is drawing increasing attention from regulators and political stakeholders.

“OpenAI would ideally like to be a for-profit organization because this would make it easier to support future funding rounds and financing,” said Hyoun Park, CEO and chief analyst at Amalgam Insights. “However, OpenAI’s current nonprofit status is politically important, as both Elon Musk and state attorneys general have expressed concerns about the company losing its nonprofit status.”

The controversy surrounding OpenAI’s structure goes beyond corporate governance and touches on broader legal and ethical issues.  

“The mission-based work of nonprofit organizations is fundamentally in conflict with maximizing profit,” Park added. “This is at the heart of the legal concern — that OpenAI may be skirting business and tax regulations if it becomes a purely for-profit organization. This is likely the primary concern for the attorneys general: the potential for tax or business fraud associated with changing the organizational structure.”

The tension underscores the challenge OpenAI faces in navigating the expectations of investors, regulators, and public interest advocates as it seeks to remain competitive in the fast-evolving AI sector.

Enterprise concerns

OpenAI’s decision has also reignited enterprise-level discussions about trust, accountability, and long-term vendor reliability in the AI space. For organizations operating in tightly regulated sectors, governance transparency is more than a legal formality — it’s a procurement necessity.

“While OpenAI’s structural shift may appear evolutionary, its implications for regulated industries are profound,” said Sanchit Vir Gogia, chief analyst and CEO at Greyhound Research. “In markets like healthcare, insurance, and the public sector, trust in AI tools hinges not just on performance, but on clarity of oversight and product governance. If enterprises sense ambiguity in how ethical principles are balanced with commercial priorities, that trust could erode.”

Gogia noted that CIOs are increasingly incorporating specific governance criteria into their procurement workflows, including the composition of a vendor’s board, its funding model, and the jurisdictions under which it operates.

“While OpenAI remains on many shortlists, its structural complexity has prompted some CIOs to pair its adoption with additional vendor assessments to maintain governance flexibility,” Gogia added.