OpenAI, this is not how you run a company

It has, quite accurately, been called an “embarrassing circus”. The chaotic dismissal of OpenAI’s CEO, Sam Altman, has shown very little structure or certainty. 

But structure and certainty are what boards are supposed to provide in management reshuffles – particularly this management reshuffle, for a company that commands a corporate spotlight with the world following its every move. 

Instead, OpenAI’s board of directors quickly plunged themselves into frantic damage control. Did it work? Perhaps – but certainly not for them.

The board of OpenAI – one of the most newsworthy companies of 2023 due to ChatGPT – announced it had dismissed CEO Sam Altman on Friday, 17th November. 

Directors claimed he had not been “consistently candid in his communications” in a statement. It invited way more questions than answers – at a time when the board is supposed to be candid. 

Most of OpenAI’s 700 workers threatened to resign in protest at Altman’s dismissal. Microsoft (which owns just under half of the company) offered jobs to them and Altman himself. 

By the morning of Wednesday 22nd, it was confirmed that Altman was back in his role. As part of that agreement, the board will see a major reshuffle.

There is no doubt that the board got the six-day saga disastrously wrong – amplified by the amount of global attention that’s been feeding OpenAI this year. When you’re in the spotlight like that, and your actions instil only shock and embarrassment, you’re in deep, deep trouble.

The nightmare doesn’t end for the pre-firing board now that Altman is back. If anything, it’s an admission of wrongdoing. 

How will any of them fare when searching for another board role? The answer is not well. They will now carry the weight of botched decision-making, poor strategising, and in-defensible communication practices in their future careers.

Plus, it’s a famous company with a small board – everyone knows who they are now.

Just because Altman is back doesn’t mean the company’s projected value has recovered entirely yet. Investors will be angry if the planned sale closes with much less than the pre-firing $86 billion price tag. Lawsuits are not off the table. Why should they be? If you screw up this badly as a director, legal action is always possible.

None of OpenAI’s key investors (including Microsoft) had a presence on the pre-firing OpenAI board. Microsoft CEO Satya Nadella even admitted not knowing most of them. 

It goes without saying that it won’t be that way going forward.

Here were the main factors:

It’s governance 101: boards cannot lead convincingly if employees consider them the enemy. And if there was ever an example to note, this is it. Over 80% of OpenAI’s employees stood behind their ousted leader and threatened to quit. 

How did the board not know this might happen? Had there been any communication with staff pre-firing? Had the board done surveys around Altman’s leadership? 

Such woeful, out-of-sync ignorance is an evident and crucial governance failure – a simultaneous catastrophe for communication, strategy and leadership.

Strike one.

Even now, we don’t know the full details of why the board ousted Altman in the first place… and we could have really done with that information during the height of the saga. 

The board needs to support crucial decisions with logical reasoning, and that reasoning needs to be communicated. Otherwise, you get exactly what happened to OpenAI: extreme pressure from investors and journalists, looking for an answer and receiving radio silence. 

Strike two.

The planned sale was supposed to put the company’s value around $86 billion, but critics immediately called that into question. 

When a well-functioning board removes a CEO, part of their reasoning should be that the company’s value should go up, not down. 

Strike three.

This is a ready-made case study of how quickly a company’s fortunes can be shaped by its board of directors. 

Being on a board means crucial decisions; if you get them wrong, the outlook can enter freefall before you know it.