Scott Curran Talks Governance with TechCrunch

Beyond Advisers' CEO Scott M. Curran spoke with TechCrunch about Elon Musk's $97.4 billion bid to acquire OpenAI, and whether it would complicate OpenAI's mission and its commitment to ethical AI development. Read the full article below!

How Musk's 97.4B bid could gum up OpenAI's for-profit conversion

By Maxwell Zeff, Kyle Wiggers

On Monday, Elon Musk, the world’s richest man, offered to buy the nonprofit that effectively governs OpenAI for $97.4 billion. The unsolicited buyout would be financed by Musk’s AI company, xAI, and a consortium of outside investors, per a letter sent to California and Delaware’s attorneys general.

OpenAI CEO Sam Altman quickly dismissed Musk’s bid, and took it as a chance to publicly dunk on him.

“no thank you, but we will buy Twitter for $9.74 billion if you want,” Altman wrote in a post on X just hours after reports emerged of Musk’s offer for OpenAI. Musk owns X, the social network formerly known as Twitter; he paid roughly $44 billion for it in October 2022. 

The two have a history. Musk is an OpenAI co-founder, and both he and xAI are currently involved in a lawsuit that alleges that OpenAI engaged in anticompetitive behavior, among other things.

But Altman’s rejection of a $97.4 billion takeover offer is more complicated than just saying “no thanks,” according to corporate governance experts who spoke with TechCrunch.

Stalling OpenAI’s nonprofit conversion

For background, OpenAI was founded as a nonprofit before transitioning to a “capped-profit” structure in 2019. The nonprofit is the sole controlling shareholder of the capped-profit OpenAI corporation, which retains formal fiduciary responsibility to the nonprofit’s charter. 

OpenAI is now in the process of restructuring — this time to a traditional for-profit company, specifically a public benefit corporation — in a bid to raise much more capital. But Musk — who is notorious for drowning his enemies in legal troubles — may have stalled the transition and raised the price of OpenAI’s nonprofit with his bid.

Delaware and California‘s attorneys general have requested more information from the ChatGPT maker about its plans to convert to a for-profit benefit corporation. The situation also forces it to consider outside bids seriously.

OpenAI’s board will almost certainly refuse the bid, but Musk has been setting the stage for future legal and regulatory battles. He’s already attempting to stall OpenAI’s for-profit conversion via an injunction, for instance. The bid appears to be an alternative offer, of sorts. 

Now, OpenAI’s board will have to demonstrate that it’s not underselling OpenAI’s nonprofit by handing the nonprofit’s assets, including IP from OpenAI’s proprietary research, to an insider (e.g. Sam Altman) for a steep discount.

“Musk is throwing a spanner into the works,” said Stephen Diamond, a lawyer who represented Musk’s opponents in corporate governance battles at Tesla, in an interview with TechCrunch. “He’s exploiting the fiduciary obligation of the nonprofit board to not undersell the asset. [Musk’s bid] is something OpenAI has to pay attention to.”

OpenAI is said to be gearing up for a funding round that would value its for-profit arm at $260 billion. The Information reports that OpenAI’s nonprofit is slated to get a 25% stake in OpenAI’s for-profit.

With his bid, Musk has signaled there’s at least one group of investors willing to pay a sizable premium for OpenAI’s nonprofit wing. That puts the board of directors in a tight spot. 

Grounds for rejection

Still, just because Musk threw out an eye-popping offer doesn’t mean that OpenAI’s nonprofit has to accept.

Corporate law gives tremendous authority to incumbent boards to protect against unsolicited takeover bids, according to David Yosifon, a Santa Clara University professor of corporate governance law.

OpenAI could make the case that Musk’s bid is a hostile takeover attempt given that Musk and Altman aren’t the best of friends.

The company could also argue that Musk’s offer isn’t credible because OpenAI is already in the midst of a corporate restructuring process.

Another approach OpenAI could take would be challenging Musk on whether he has the funds. As The New York Times notes, Musk’s wealth is largely tied to his Tesla stock, meaning that Musk’s investment partners would have to supply much of the $97.4 billion total.

OpenAI’s board may need to review Musk’s offer to fully asses whether it aligns with the nonprofit’s mission, not just specific financial or strategic goals, according to Scott Curran, the former general counsel to the Clinton Foundation. That means Musk’s offer could be weighed against OpenAI’s mission: “to ensure that artificial general intelligence – AI systems that are generally smarter than humans – benefits all of humanity.”

“When Altman posted that response [on X], that was probably done without legal guidance,” Yosifon said. “It’s not good for a regulator to see that kind of dismissive, knee-jerk tweet.”

Raising the value for OpenAI assets

The board is likely to side with Altman. Nearly all the directors joined after Altman was briefly fired, then rehired, by the nonprofit’s board in late 2023. Altman himself is also a board member.

If nothing else, Musk’s bid may raise the potential market value of the OpenAI nonprofit’s assets. That could force OpenAI to raise more capital than it originally anticipated, and complicate talks with the startup’s existing backers. It could also dilute the value of stakes held by OpenAI investors in the for-profit arm, including major partners such as Microsoft. 

That’s sure to anger Altman, who’s been working with investors for months to determine how to fairly compensate the nonprofit.

The gist is: OpenAI’s corporate restructuring plans just got more complex.

The Do (More) Good (Better) Newsletter™ #15

Scott Curran Speaks with Yahoo! News about DEI

Beyond Advisers' CEO Scott M. Curran spoke with Yahoo! News about the current controversy around DEI initiatives, noting that such initiatives have existed and evolved in the US over decades and are unlikely to go away - regardless of the acronym. Read on for the full article!

Trump's ban on DEI Initiatives reaches Las Vegas, as UNLV president defends hiring practices

By Kyle J. Paine

LAS VEGAS (KLAS) – In the wake of President Trump’s executive order outlawing Diversity, Equity, and Inclusion initiatives for any U.S. business or academic institution that receives federal funding, UNLV’s president defended his university’s hiring practices. “We’re still people. We’re all going to have our diversity pieces to our background and some of that comes out.”

Under questioning from the 8 News Now Investigators after UNLV President Keith Whitfield’s State of the University address on Thursday, UNLV’s top boss said that job descriptions requiring faculty to “demonstrate support for diversity, equity and inclusiveness” and a document providing guidance on hiring diverse candidates – with a score sheet – do not properly articulate the university’s recruitment process.

“I think there have been some thoughts that we’re trying to brainwash people,” Whitfield said, in response to a question about whether UNLV teaches ideology on both sides of the DEI debate. “It’s like, no. What we try to do is to offer opportunities to be able to understand difference of, different perspectives. We’re a national university.”

That national university, is now caught up in a national debate ever since Trump – who recently said to a group of reporters that “DEI would have ruined our country, and now it’s dead” –  wound back DEI initiatives that became commonplace on Wall St. and in higher education. UNLV has one of the most diverse college campuses in the nation, Whitfield said.

“For our policy,” Whitfield said, “it’s always been about talent. You know, we try to get the best.”

Rashi Jawade, CEO of the Texas nonprofit Embracing Equity, says corporations and colleges began to buy into the notion of DEI if not just the acronym after George Floyd was murdered by a Minneapolis police officer in May 2020, during the Covid-19 pandemic.

“Because that happened during the pandemic, when we couldn’t really avert our gaze, everybody in the nation – and I would say across the globe, had a spotlight to the clear inequities and racism that we see in the United States,” Jawade, who has done work in Las Vegas preparing teachers and helping diversity universities, said. “As a result of that clear, glaring spotlight, there were many corporations and universities and, you know, anybody really, any company, that was like, oh, this feels like we need to do something. We need to ensure, you know, that we’re being responsive to this moment.”

She said some companies’ responsiveness was integrated with their business principles, and others wanted to seem more egalitarian and inclusive.

“I think there were a lot of companies … that kind of jumped in … without actually, I think, thinking through what does this mean for us as a company? What is DEI other than just diversity, equity, and inclusion?”

Scott Curran, a lawyer and college professor in Chicago, who represents high-profile clients in the so-called DEI space, says DEI has existed – and will continue to exist – without the controversial acronym.

“I’ve never counseled clients to solve for one acronym or another, but to realize this is all part of the ways in which institutions, organizations, and individuals in civil society do good in their work and in their organizations and in their life,” Curran told the 8 News Now Investigators. “And so it’s OK if we have to reframe the language we use or if we have to change the acronyms we use, or if we have to stop using certain acronyms.”

Curran pointing out the trend of private-sector organizations adopting Corporate Social Responsibility as early as the 1950s and the decades that followed, was one example of a similar trend. He says today’s companies and unviersity’s relying on federal funding will not want to run afoul of the law of the land, but will seek clarity in the courts.

“That is part of the American experiment,” Curran said. “And if we address it fairly honestly, openly, if we care about democratic institutions like the rule of law, like the courts, like our legislative bodies and our executives, we’ll get through this.”

To that end, most recently, while reactions to Trump’s DEI mandates have been strong and varied, the city of Baltimore sued the Republican administration over DEI program cuts Monday in federal court, declaring them unconstitutional.