OpenAI is currently facing a lawsuit filed by Elon Musk regarding its employee compensation practices. Musk’s legal action names OpenAI, Microsoft, and Reid Hoffman—a board member of Microsoft and a former board member of OpenAI.
Musk claims that these companies are engaging in anticompetitive behavior by offering “lavish compensation” to dominate the generative AI market. He states that OpenAI spends approximately $1.5 billion (around Rs 12,450 crore) annually on its 1,500 employees. The average compensation for these employees is $534,197 (approximately Rs 4.43 crore) per year, with software engineers earning a median salary of $810,000 (around Rs 6.72 crore). This is significantly higher than the average tech worker salary in San Francisco, which is $257,500 (approximately Rs 2.13 crore). Furthermore, some top-level employees receive compensation as high as $1.3 million (approximately Rs 10.8 crore) per year.
In addition, Musk criticizes OpenAI for moving away from its nonprofit roots. He alleges that the company now prioritizes profit over its original mission of developing AI for the greater good. OpenAI adopted a capped-profit model in 2019 and is gradually transitioning to a fully for-profit structure.
The lawsuit has evolved since its initial filing. Musk first sued OpenAI in March 2024, accusing the company of violating its founding agreements by partnering with Microsoft, which has invested nearly $14 billion, including a $10 billion commitment in 2023. Musk dropped the lawsuit in June, but he refilled it in August, escalating his accusations. He now claims he was “deceived” into cofounding OpenAI, arguing that the company’s focus on profit harms competitors and limits access to top AI talent.
Despite the lawsuit, OpenAI continues to lead the rapidly growing generative AI field. The company offers high salaries and job security, even as other tech companies are experiencing layoffs. Musk’s legal challenge highlights concerns about the ethical and competitive implications of OpenAI’s rapid growth.
