Are you following Elon Musk’s lawsuit against Sam Altman and OpenAI, the corporate owner of ChatGPT? If you’re doing so, you may have noticed an interesting AI battle that is emerging between two competing corporate structures.
Musk, leader of the AI platform Grok, is accusing Altman of “stealing a charity.” According to Musk, when OpenAI converted from a nonprofit structure to a for-profit corporation, Altman and his colleagues essentially “enriched themselves by creating a for-profit subsidiary that now effectively controls the nonprofit.”
What did OpenAI do? They created a Public Benefit Corporation (PBC). PBCs are special for-profit structures that are required to balance socially advantageous motives with traditional profit generation goals.
The vast majority of all states in the United States have legalized the option of creating PBCs or similarly named entities (such as Benefit Corporations or Social Purpose Corporations). And organizations that operate in the few states that haven’t done so can always incorporate in a state that does offer the option.
Furthermore, a traditional C corporation (C Corp) in a state that does not offer a PBC (or similar option) can always modify its bylaws to reflect the terms of a PBC. It can then apply to a private sector credentialing organization called B Lab for certification as a Certified B Corp.
Meanwhile, Dario and Daniela Amodei likewise created Anthropic as a PBC. That firm owns the AI platform Claude, a prominent competitor of both Grok and ChatGPT.
Ironically, Musk himself first created Grok’s corporate owner as a PBC, but he later decided to drop that designation as he transferred ownership to his C Corp SpaceX. Although Musk would undoubtedly argue that he never abandoned a nonprofit structure as OpenAI did, it is nevertheless true that (of the three AI platforms) Musk’s Grok is the only one that is not currently owned by a PBC.
There’s certainly nothing wrong with ownership of an AI platform by a traditional C Corp. Gemini and Copilot, for instance, are respectively owned by Google and Microsoft, two of the largest traditional C Corps in the world. Indeed, the C Corps Grok, Gemini, and Copilot are all ferociously competing with the PBCs OpenAI and Anthropic for current market share and for the capital resources to fund future developmental needs.
Investors in the AI sector, though, should be familiar with the underlying differences between PBCs and C Corps, the two corporate structures that are battling for dominance in the industry. After all, these differences may significantly impact the financial returns of their capital allocation decisions.
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