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The writer is an anthropologist and author of ‘In Chocolate We Trust’

OpenAI is preparing for what could be one of the largest initial public offerings in history — and one of the oddest. When the world’s most valuable AI start-up goes public it will be under the control of an American charity.

Following a contentious restructuring last year, OpenAI converted its for-profit arm into a public benefit corporation. This is controlled by the OpenAI Foundation charity, which despite owning only about 26 per cent of the company has special governance rights, including the power to appoint and remove directors. The foundation’s stake makes it one of America’s wealthiest non-profits, larger than the Gates Foundation’s endowment.

American tax law discourages private foundations from controlling businesses. But OpenAI is structured as a public charity — a different legal form with greater leeway.

There is no reason a charity-controlled company cannot succeed for shareholders and the public alike. On paper, the charity’s mission to create safe artificial general intelligence will come ahead of business priorities. But the OpenAI Foundation board is made up of mostly the same people as the company’s board, including co-founder Sam Altman.

There is, however, an external complication: in the US, state attorneys-general are responsible for supervising how charities use their tax-exempt assets.

This supervision can unfold in unpredictable ways. For the closest American analogue consider the Hershey Company — yes, the chocolate company.

For more than a century, Hershey has been controlled by a charitable trust in Pennsylvania, grandfathered into tax law, that funds a boarding school for disadvantaged children. Two decades ago Hershey was swept into state politics in a way that destroyed billions in expected shareholder value. In 2002, the trust announced plans to diversify its assets by selling its controlling stake — a move that would have boosted the stock and delivered a windfall for the school. Shares jumped 25 per cent.

But in the town of Hershey, fears about selling the company sparked outrage. The Pennsylvania attorney-general — then running for governor — sued the trust for violating its charitable mission and won. The sale collapsed and stock gains evaporated.

The lesson for investors is that when a charity controls a public company, business logic can be overridden by political logic — and the state, not the market, may ultimately shape outcomes.

On the upside, Hershey has rewarded patient capital, outperforming industry peers while generating an eye-popping $23bn endowment for its school. The success of “enterprise foundations” like Hershey can be attributed to the charity’s control, something that encourages directors to prioritise long-term performance over short-term gains.

OpenAI has explicitly embraced this upside. Its chief financial officer has cited the Novo Nordisk Foundation as a model worth emulating. The Danish non-profit controls the maker of Ozempic and has funded world-class research for decades.

Even Novo, however, has not been immune to governance tensions. During a recent downturn, the foundation intervened directly, over-ruling the objections of minority shareholders.

The risk of intervention at OpenAI is significant. California’s attorney-general, Rob Bonta, has been unusually hands-on since the start-up’s 2023 board crisis, co-ordinating with Delaware, where OpenAI is incorporated, to ensure the foundation adheres to its charitable purpose. “We’ll be keeping a close eye on OpenAI,” he announced after the company’s recapitalisation last October.

Bonta, who is up for re-election this year, faces pressure from civic coalitions who are concerned about the social risks of AI. A recent Carnegie Endowment survey of Californians concluded that a majority favoured safety over innovation — a view he cannot easily ignore.

Meanwhile, OpenAI’s rival Anthropic is also racing towards a blockbuster IPO. Like OpenAI’s operating company, it is a public benefit corporation with a governance structure designed to lock in its mission. Its Long-Term Benefit Trust is composed of independent trustees with no financial stake who will eventually elect a majority of the board. But the trust, meant to shield directors from short-term pressures, is a private arrangement. There is no charity — and therefore no charitable oversight.

As OpenAI’s IPO draws closer, investors should watch the relationship between the start-up and its charitable watchdogs closely. For many investors this is uncharted territory.