OpenAI fired Sam Altman, its CEO-founder, the afternoon of November 17, 2023. In the corporate chaos that followed the company went through two acting CEOs within three days. By the end of the day on Monday, November 20, Altman and other key executives at OpenAI were hired by Microsoft. Immediately following this 700 employees – practically the whole company – signed a letter threatening to quit unless the Board resigns and Altman is reinstated.
It’s hard to imagine how this termination could have been handled more ineffectively. It is an exemplar of exactly how NOT to fire your CEO.
However, all the OpenAI Board members had to do was ask their own product – ChatGPT – how to go about terminating Altman. Here’s my query to ChatGPT-4, and it’s response –
PROMPT TO GPT:
I am on the Board of Directors of a closely held California-based corporation. We are considering terminating our CEO. Please tell me in
detail what steps we should take to prepare for and execute this termination. Take into consideration that my company is very high profile – we are a cutting-edge technology company that receives a lot of attention from the press and the technology industry. Our CEO is one of the founders of the company, and he is effectively “the face” of the company. He is frequently interviewed by the industry press and often appears at industry conferences and events to talk about our products. We have many partnerships with other companies and the CEO has been instrumental in forming those partnerships. While we are a bit unsure about this, we think that many of our key employees respect the CEO and may be loyal to him
CHATGPT-4 RESPONSE (my comments in italics and [brackets]):
Given the high-profile nature of your company and the CEO’s prominent role as a founder and the face of the company, the process of terminating the CEO requires additional layers of consideration and caution. Here are detailed steps tailored to your situation:
Preliminary Confidential Discussions: Initiate confidential discussions among the Board of Directors to thoroughly assess the reasons for considering termination and the potential impact on the company. Given the CEO’s prominence, it’s essential to evaluate the risks and benefits of this action carefully. [OpenAI board appears not to have done this]
Legal Consultation: Engage legal counsel experienced in high-profile executive terminations and corporate law. They can provide advice on contractual obligations, potential legal risks, and strategies for minimizing legal exposure, especially if the CEO is also a shareholder or has a significant stake in the company. [No information on whether Altman has an employment agreement with OpenAI or what its terms are. Note, however, that noncompete restrictions are not enforceable under California law, and therefore Altman and the other OpenAI employees cannot be prevented from going to work at Microsoft for this reason. There may, however, be trade secret issues in this fact pattern
Review Employment Agreement and Corporate Bylaws: Scrutinize the CEO’s employment contract and the corporation’s bylaws. These
documents will guide the legal and procedural aspects of the termination process, including any ‘for cause’ conditions, severance terms, and required board approvals. Conduct a risk assessment focusing on potential repercussions within the technology industry, impact on partnerships, employee morale, and public perception. This assessment should consider the possibility of the CEO’s departure affecting key relationships and projects. [The OpenAI board either failed to do this, or completely miscalculated]
Internal Alignment: Ensure alignment and consensus within the Board of Directors. Given the CEO’s foundational role in the company, board members must be unified in their decision and prepared for the subsequent steps. [Ilya Sutskever, one of the Board members that voted to terminate Altman on Nov. 17, signed the employee letter on Monday Nov. 20]
Plan for Succession and Transition: Develop a succession plan that includes identifying an interim CEO or a successor. This plan should address how to maintain continuity in leadership and reassure employees, partners, and stakeholders about the company’s stability and future direction. [OpenAI announced an interim CEO on Friday – Mira Murati – and on Monday replaced her with a person brought in from outside the company. Over a period of four days OpenAI had three CEOs]
Communications Strategy: Formulate a comprehensive communications strategy. This should include internal communication to employees, as well as external communication to the press, industry partners, and stakeholders. The message should be crafted to maintain the company’s reputation and market confidence. [Internal/external communications were almost nonexistent]
Managing Employee Sentiment: Prepare for potential fallout among employees who may be loyal to the CEO. This could involve individual discussions with key team members, departmental meetings, and ensuring that HR is equipped to handle any concerns or unrest. [Seems not to have been done at all]
Board Approval and Documentation: Formalize the decision with a board vote and document the process meticulously. This documentation is crucial for legal compliance and for maintaining a record of the decision-making process. [Outside of the board, no one seems to know why Altman was fired]
Executing the Termination: Plan the termination meeting with the CEO carefully, considering the timing, location, and who will be present. The conversation should be handled with respect and sensitivity, acknowledging the CEO’s contributions to the company. [Termination was done via Google Meet, a video service similar to Zoom]
Public Announcement: Coordinate the public announcement of the CEO’s departure with the communications strategy. This announcement should be respectful and align with the narrative agreed upon by the board. [The board didn’t have a narrative]
Post-Termination Steps: Monitor the company’s internal and external environment after the termination. Be prepared to manage any unforeseen consequences, including media inquiries, market reactions, and internal dynamics.
After the termination, review the company’s policies, leadership structure, and strategic direction. This is an opportunity to learn from the experience and strengthen the company’s governance and leadership practices.
Throughout this process, the key is to balance legal and procedural diligence with sensitivity to the human and cultural aspects of this significant change. The termination of a high-profile CEO can have far-reaching implications, and managing it effectively requires a thoughtful, strategic approach.
– end of GPT response –