OpenAI’s “Third Way”: Balancing Capital and Mission Through a Public-Benefit Corporate Model

TradingKey - On Thursday (U.S. Eastern Time), OpenAI announced it has reached a non-binding memorandum of understanding with its largest investor, Microsoft, to revise their partnership — marking a critical step toward transforming the company into a traditional for-profit entity. Following the announcement, Microsoft’s stock rose over 2% in after-hours trading.

Under this preliminary agreement, both parties will jointly advance OpenAI’s structural reform. The restructured company will be established as a “public-benefit corporation” — a special corporate structure under U.S. law that sits between a traditional for-profit company and a nonprofit organization. This model allows the company to pursue shareholder returns while also being legally obligated to consider broader social missions.

It will remain a for-profit entity, with shareholders and dividend rights. However, its board of directors, when fulfilling fiduciary duties, will no longer be required solely to maximize shareholder value. Instead, they must also uphold specific public-benefit goals — such as AI safety, social responsibility, and risk mitigation — which are codified in the company’s charter.

In terms of governance, the existing nonprofit parent entity is expected to retain ownership of equity valued at over $100 billion in the new company — approximately 20% of OpenAI’s targeted $500 billion valuation. According to reports, the $100 billion figure is just a floor, with the actual stake potentially increasing.

OpenAI Chair Bret Taylor emphasized:“OpenAI was founded as a nonprofit, remains one today, and will continue to be in the future. Our mission will always be guided by the nonprofit side.”

The driving force behind this restructuring is capital demand. As the AI race intensifies, OpenAI urgently needs to raise hundreds of billions of dollars to build data centers and secure computing power. Yet its current hybrid structure — originally designed with profit caps to preserve its nonprofit roots — has become a constraint in attracting large-scale private investment.

CEO Sam Altman believes that transitioning to a full for-profit model is essential to maintain long-term competitiveness.

Since investing a combined $10 billion in 2019 and 2023, Microsoft has held preferential rights to OpenAI’s technology. But as OpenAI grows, tensions have emerged: the two companies increasingly compete for clients, and OpenAI’s computing demands now exceed what Microsoft Azure can supply.

In recent months, Microsoft has relaxed certain restrictions, allowing OpenAI to pursue its own infrastructure projects — including the “Stargate” data center initiative — and even partner with competitors like Oracle and Google.

Despite this progress, the restructuring faces serious challenges. The Attorneys General of California and Delaware are jointly reviewing proposed changes to OpenAI’s governance and financial structure, particularly concerning the impact of AI products on children’s safety.

Earlier, Elon Musk filed a lawsuit alleging that OpenAI has strayed from its original mission to develop AI “for the benefit of humanity.” OpenAI has denied the claims, calling the lawsuit an attempt to hinder its growth.

Additionally, some nonprofit organizations have called on regulators to intervene.

These legal and regulatory headwinds mean that OpenAI’s path forward — though clearer than before — remains uncertain.