Leadership in flux: Lessons from OpenAI on corporate communication and governance

Over the past week, the public has been closely following Sam Altman, the co-founder of OpenAI, who was suddenly removed from his position as Chief Executive Officer, only to be reinstated five days later. This dramatic sequence of events, which unfolded in the public eye, serves as a compelling case study on the crucial importance of consistent corporate communication and governance.

On November 17th, OpenAI's board announced Altman's termination, citing a lack of confidence in his ability to lead OpenAI and inconsistent communication with the board as the principal drivers for his dismissal.

Coverage from this week’s events have led to a media hailstorm that companies and c-suite executives would consider troubling. Headlines like "The Unsettling Lesson of the OpenAI Mess" and "Chaos at OpenAI" reflect the public sentiment that the handling of Altman’s dismissal was less than ideal.

This incident has put a spotlight on the importance of clear, concise, and consistent communications to stakeholders in times of change.

Prioritizing people

Altman’s dismissal seems to have been made public before employees were properly informed of the news and succession plan, leading to widespread discontent and threats of mass resignations. While OpenAI scheduled an emergency all-hands meeting on Friday afternoon to discuss the news with its employees, it was reported that the announcement blindsided employees, many of whom learned of the leadership change from an internal announcement and the company’s public facing blog.

While it is difficult to know whether employees would have acted differently if the board’s decision was communicated in person or via call prior to the news being made public, their reaction underscores the vital need for boards to prioritize clear, transparent, and timely communication with employees.

Fostering a culture of open communication can help maintain trust, promote morale, and mitigate misunderstandings that can potentially escalate into crises.

Preparing stakeholders for change

The impact of the board's decision reached beyond OpenAI’s boundaries, and the news of Altman's departure led to a dip in Microsoft's stock prices.

Based on reports, Microsoft, which has invested approximately $13 billion in OpenAI, was not consulted, or informed prior to the board's decision. Satya Nadella, CEO of Microsoft, publicly expressed his dissatisfaction with the board's handling of the situation, stating on a podcast “that as a partner… it does deserve you to be consulted on big decisions."

Investor confidence, crucial for any organization, can be severely impacted by abrupt leadership changes and perceived instability. Indeed, the breakdown in confidence played out publicly in the days following the Altman’s dismissal.

On November 19, Microsoft announced that it had hired Sam Altman as head of a new advanced AI research team, and that they would welcome any OpenAI employee to the team. Only three days later, OpenAI announced that an agreement was reached in principle for Sam Altman to return as CEO with a new set of board of directors, with Microsoft being one of the key voices calling for the governance structure of the company to change.

This illustrates the necessity of proactive communication with major stakeholders prior to significant changes in order to mitigate potential damage to relationships.

Mitigating reputational risk

This rapid change of direction raised further questions about the board's consistency in communication and decision-making. As seen from the coverage of the events and public discourse, such inconsistency can undermine trust and confidence in the leadership of an organization.

The termination of Altman and the vague reasoning for the decision invited public speculation about the board’s motives. Across all social media platforms, memes were being shared painting Altman as a hero and the villainizing the board.

This highlights how quickly news and speculation can spread in our digital age, potentially impacting a company's reputation. Companies should be prepared to manage the spread of information on social media, which can greatly influence public perception.

Key learnings

As OpenAI continues to navigate the aftermath of these events, it serves as a lesson for other companies about the pivotal role of effective corporate communication and robust governance.

Boards and leadership must prioritize clear, transparent, and consistent communication to maintain trust and confidence among employees, investors, and partners. Further robust corporate governance practices are required to ensure the smooth functioning of the company as proactive communication can help safeguard a company's reputation during times of crisis.