Microsoft To No Longer Hold Observer Seat On OpenAI Board Amid Regulatory Concerns. Here's What It Means

Microsoft cited OpenAI’s new collaborations, innovative strides, and expanding customer base as reasons for stepping down from the observer position.

Microsoft has decided to relinquish its observer seat on OpenAI's board in a move to alleviate regulatory concerns. This decision comes after notable improvements in OpenAI's governance over the past eight months, reported Reuters. In November 2023, Microsoft assumed a non-voting observer role on OpenAI’s board, enabling it to attend meetings and access confidential information without influencing decisions. This move coincided with Sam Altman’s return as CEO of OpenAI, the company known for its generative AI chatbot, ChatGPT.

Microsoft's substantial investment of over $10 billion in OpenAI had raised antitrust alarms in Europe, Britain, and the United States regarding the extent of its control over the AI startup.

The Financial Times reported that Apple, which recently announced the integration of ChatGPT into its devices, was anticipated to take on the observer role but has decided against it. Apple has not provided any comments on this matter, as per Reuters.

New Strategy On Horizon

According to Reuters, an OpenAI spokesperson revealed that the company plans to adopt a new engagement strategy, involving regular stakeholder meetings with strategic partners such as Microsoft and Apple, along with investors like Thrive Capital and Khosla Ventures.

Microsoft cited OpenAI’s new collaborations, innovative strides, and expanding customer base as reasons for stepping down from the observer position. In a letter dated July 9, Microsoft expressed confidence in OpenAI's direction, stating, "Over the past eight months, we have witnessed significant progress by the newly formed board and are confident in the company's direction. Given all of this, we no longer believe our limited role as an observer is necessary."

Microsoft Remains Under Scanner

While EU regulators have stated that Microsoft's partnership with OpenAI does not fall under the bloc's merger regulations, they will seek third-party input on the exclusivity clauses within the agreement. Meanwhile, British and US antitrust authorities continue to scrutinise Microsoft’s influence over OpenAI and the startup's autonomy.

As competition to provide AI technology to enterprise customers heats up, Microsoft and OpenAI are striving to prove their independence and address regulatory concerns. Microsoft is also broadening its AI capabilities on its Azure platform and has appointed the CEO of Inflection to lead its consumer AI division, indicating a strategic move to diversify beyond OpenAI.