OpenAI has changed its policy on stock sales and exit agreements to ensure all employees are treated fairly, following controversies about equity clawback clauses.
Short Summary:
- OpenAI’s controversial stock sale policy has been revised.
- Ex-employees were previously at risk of losing vested equity.
- OpenAI is working to regain trust amidst safety concerns and leadership changes.
OpenAI, the renowned AI research lab behind ChatGPT, has decided to make significant changes to its stock sale policies for current and former employees. This policy shift follows intense scrutiny and employee concerns about potentially losing vested equity if they did not sign nondisclosure and non-disparagement agreements upon exiting the company.
“This is on me and one of the few times I’ve been genuinely embarrassed running OpenAI; I did not know this was happening and I should have,” OpenAI CEO Sam Altman stated on X.
The policy initially allowed OpenAI to “claw back” vested equity from ex-employees who did not comply with exit agreements. These agreements typically included restrictive clauses that barred former employees from speaking critically about the company. Unveiled by Vox News, the provision indicated that employees could “lose all vested equity they earned during their time at the company, which is likely worth millions of dollars.”
Altman asserted that no instance of equity clawback had occurred and that the policy was being rectified to align with the company’s values. He also offered reassurance to former employees affected by the old agreements, encouraging them to reach out for resolution.
“We’re incredibly sorry that we’re only changing this language now. It doesn’t reflect our values or the company we want to be,” stated an OpenAI spokesperson.
This development comes on the heels of several high-profile departures from OpenAI. Notable exits include co-founder and former chief scientist Ilya Sutskever and Jan Leike, co-lead of the superalignment team, who cited the company’s focus shifting to “shiny products” at the expense of safety culture.
Former employee Daniel Kokotajlo, who left OpenAI in April, highlighted his departure was influenced by a loss of confidence in the company’s responsible behavior around artificial general intelligence (AGI). Kokotajlo declared that he relinquished a significant financial stake rather than signing any restrictive agreements, a sacrifice that he equated to about 85% of his family’s net worth.
The staff’s apprehensions about OpenAI’s power to determine their financial futures also stem from recent internal communications and documents. These showed that the company circulated a “Tender Process” overview among employees, indicating how equity purchases were managed historically and projecting future handling. There have been increased concerns over access to liquidity as many early employees are sitting on lucrative stock options.
“If you have any vested Units and you do not sign the exit documents, including the General Release, as required by the company policy, you will not be eligible to participate in future tender events or other liquidity opportunities that we may sponsor,” said OpenAI in one such document.
OpenAI confirmed to CNBC that eligible current and former employees had always been offered liquidity opportunities at consistent rates, irrespective of their post-employment status. Nevertheless, employees have voiced doubts.
“I think there are further questions to address before I and other OpenAl employees can feel safe from retaliation against us via our vested equity,” a former employee expressed in an email to the company.
Questions have also been raised regarding the potential forced sale of stock at “fair market value” and the periods involved for current versus former employees’ stock sales. Current employees typically had more immediate opportunities compared to former ones, who could wait several months post-departure for similar offers.
Internal discord peaked when an employee flagged CEO Altman on Slack, questioning the moral compass of OpenAI’s leadership in light of the departures and restrictive exit agreements. Their stark message highlighted perceived contradictions between OpenAI’s asserted mission and its treatment of departing staff.
“You often talk about our responsibility to develop AGI safely and to distribute the benefits broadly. How do you expect to be trusted with that responsibility when you failed at the much more basic task of not threatening to screw over departing employees?” the message read.
OpenAI’s stance on treating former employees who joined competitors with a third category for direct secondary transactions hasn’t helped either. The company justified this by citing legal obligations to disclose sensitive information during sales processes, which could conflict with new employment at rival firms.
With a valuation soaring past $80 billion and no immediate IPO prospects, the company’s stringent equity management reflects a broader strategy to control financial flows and maintain competitiveness. Yet, legal experts warn of potential litigation risks, especially in California, where employment laws could clash with OpenAI’s internal policies around nondisparagement and non-compete clauses.
“OpenAI’s behavior towards those ex-employees leaves a plausible argument for future litigation tied to the non-compete issue,” revealed an attorney familiar with employment law.
OpenAI assured that there had been no cancellations of vested equity and no forced sellback at $0 despite claims suggesting otherwise. According to Altman, necessary changes to exit paperwork have been ongoing for the past month to mitigate these concerns.
The evolving narrative showcases the tension between maintaining competitive advantage and ensuring ethical employee treatment, a balance that tech leaders like OpenAI must navigate constantly. The broader AI community, including platforms like Autoblogging.ai, can learn valuable lessons from these developments about ethical practices and employee rights.
As AI continues to redefine industries, including AI Ethics and the Future of AI Writing, it’s imperative for companies like OpenAI to demonstrate transparency and fairness. This commitment will ensure trust and collaboration from both their current and former workforce, paving the way for more responsible advancement in AI technology.