Microsoft Exits OpenAI Board Observer Role Amid Regulatory Examination

Microsoft has relinquished its observer seat on OpenAI’s board, a position that has faced regulatory scrutiny in both Europe and the US. This decision follows significant improvements in OpenAI’s governance over the past eight months, according to Microsoft.

The tech giant had assumed a non-voting observer role on OpenAI’s board in November, coinciding with Sam Altman’s return as CEO of the AI startup, which is known for developing the generative AI chatbot ChatGPT. This seat allowed Microsoft to attend board meetings and access confidential information without voting rights on critical decisions such as director elections.

Microsoft’s substantial investment of over $10 billion in OpenAI, along with the observer seat, has raised concerns among antitrust regulators in Europe, the UK, and the US about the extent of Microsoft’s control over OpenAI.

Microsoft justified its decision to forgo the observer seat by highlighting OpenAI’s progress, new partnerships, and growing customer base since Altman’s return. In a letter to OpenAI dated July 9, Microsoft stated, “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.”

EU antitrust regulators recently stated that the partnership does not fall under the bloc’s merger rules because Microsoft does not control OpenAI. However, they plan to seek third-party views on the exclusivity clauses in the agreement. In contrast, British and US antitrust authorities remain concerned about Microsoft’s influence over OpenAI and the latter’s independence.

Both Microsoft and OpenAI are striving to sell AI technology to enterprise customers, aiming to generate revenue and demonstrate their independence to regulators to alleviate antitrust concerns. Additionally, Microsoft is broadening its AI services on the Azure platform and has recruited Inflection’s CEO to lead its consumer AI division, a move seen as an effort to diversify beyond OpenAI.