Dee Templeton, a Microsoft executive, has joined OpenAI’s board as a nonvoting observer, potentially for the company to exert greater control over the startup following its latest CEO disaster. Microsoft is clearly worried about the company’s leadership (specifically the board) after it nearly lost OpenAI its popular CEO, Sam Altman, and most of its workforce.

The Information previously mentioned that Templeton could be a potential board member, and now, Bloomberg News reported that she has started attending board meetings. OpenAI and Microsoft have not commented on this.

The observer role allows Templeton to participate in OpenAI’s board meetings and access sensitive information, although Microsoft does not possess the authority to vote on decisions such as selecting or appointing directors.

Templeton’s presence alone may be enough to pressure board members into more Microsoft-friendly decisions. It’s also possible that Microsoft simply wants more insight in the day-to-day operations of the board.

Who Is Dee Templeton?

Dee Templeton, with over 25 years at Microsoft, is the Vice President for Technology, Research Partnerships, and Operations. In her current role, Templeton advises Kevin Scott, the CTO and Executive Vice President of AI at Microsoft. She manages a large team of nearly 1,500 scientists and engineers in the Technology & Research group. Her responsibilities include leading the team that works closely with OpenAI, ensuring the success of their joint projects.

Microsoft OpenAI board

Templeton’s career at Microsoft started in 1998 in New Zealand, where she was the first female technical employee. Since then, she has held various positions in engineering and product development across different departments, showing her wide-ranging skills and leadership.

OpenAI’s Leadership Shift and Board Reorganization

In November, OpenAI faced a major change. Sam Altman was fired by the board, shocking the staff and the entire business world.

The unexpected decision raised serious concerns about the company’s future, despite ChatGPT’s recent success. The situation got even more intense when almost all of OpenAI’s staff threatened to quit if Altman wasn’t brought back. This move was enormously risky for the employees, as a massive portion of their pay hinges on OpenAI’s success.

Along with Altman’s return, OpenAI reshaped its board, including giving Microsoft, its biggest investor, a nonvoting observer role. The new board now features Bret Taylor, previously co-CEO of Salesforce, as the Chairman; Larry Summers, who was a US Treasury Secretary; and Adam D’Angelo, the CEO of Quora Inc.

With Altman back as CEO, OpenAI has refocused on its artificial intelligence research and continues improving products like ChatGPT. For Microsoft, which has invested roughly $13 billion into OpenAI and uses its AI tech in its businesses, Altman’s presence reassures them about their partnership with OpenAI.

OpenAI is now focusing on making its operations more transparent and preventing similar issues in the future. Microsoft’s role as a non-voting observer on the board strengthens its relationship with OpenAI, especially in critical areas like security and ethical AI development.

The Microsoft-OpenAI Partnership Explained

The partnership between Microsoft and OpenAI, a leading AI research company, is unique in the tech world. Microsoft has invested a massive $13 billion in OpenAI, but this doesn’t mean it owns part of OpenAI in the usual way. Instead, Microsoft has a special kind of financial interest in OpenAI’s success.

What Microsoft’s Investment Really Means

Microsoft doesn’t own a traditional share in the company. Instead, it has a different arrangement where it gets a portion of the profits from a specific for-profit subsidiary of OpenAI, but there’s a maximum limit to what Microsoft can earn.

Microsoft’s chief communication officer Frank Shaw said the following in a statement:

While details of our agreement remain confidential, it is important to note that Microsoft does not own any portion of OpenAI and is simply entitled to share of profit distributions.

Ownership Structure

The profit-sharing subsidiary is majority-owned by a holding company, which includes OpenAI’s employees and other investors. This holding company is, in turn, overseen by a nonprofit charity controlled by OpenAI’s board.

The board argues that this setup matches OpenAI’s original mission, which is to develop AI for the good of everyone, not just a few investors. So, the profits are shared but capped, keeping in line with the idea of wider benefits from AI.

This setup is rather controversial as the startup was originally structured entirely as a nonprofit, accepting only donations and not investments. It was restructured in 2019 to allow for for-profit agreements like Microsoft’s after others donated massive sums of money. Elon Musk is particularly sore about the new arrangement because he donated a whopping $100 million to the original nonprofit with no hopes of making a dime off of it.

Furthermore, critics argue that the profit cap is mostly for show, if anything. It allows for up to 100x profits for investors, which would cap Microsoft’s potential profits at only $1.3 trillion (just under half of its entire market capitalization).

Exclusivity and IP Rights

Microsoft, as OpenAI’s exclusive cloud provider, also holds exclusive rights to some of OpenAI’s intellectual property. However, this doesn’t include any breakthrough Artificial General Intelligence (AGI) that OpenAI might develop. The decision to classify any development as AGI lies solely with OpenAI’s board.

Regulatory Interest in the Partnership

Recently, regulators in the US and UK started looking closer at this partnership. They want to understand if Microsoft’s role in OpenAI has grown, especially after their recent agreement expansion and changes in OpenAI’s leadership.

Inside OpenAI: Decisions and Pressures

There’s been some internal pressure within OpenAI about how fast to move forward with commercial projects. Microsoft, keen on using AI in its products, has been a driving force. This led to changes in OpenAI’s leadership, where Microsoft sought more insight into the company’s decisions, resulting in their current observer role on OpenAI’s board.