When Sam Altman was abruptly removed from OpenAI on November 17, 2023, Microsoft quickly moved into crisis mode. During court testimony on Monday, Microsoft CEO Satya Nadella revealed that the company was prepared to absorb OpenAI’s top executives and much of its talent into a Microsoft-controlled organization if the situation had escalated further.
Nadella made the remarks while testifying on the final day of the Elon Musk v. OpenAI trial in federal court in Oakland, California. His testimony offered a closer look at how seriously Microsoft viewed the leadership crisis at OpenAI and how quickly the company acted to protect its massive AI investment.
According to Nadella, Microsoft created a backup plan almost immediately after Altman’s firing. Within 24 hours, the company had reportedly completed legal work to establish a new subsidiary that could hire Altman, OpenAI co-founder Greg Brockman, and potentially a large number of OpenAI employees if they decided to leave the company.
In the AI industry, compensation is heavily tied to stock value and future growth potential. Nadella testified that Microsoft estimated it could cost nearly $25 billion to bring Altman, his leadership team, and many OpenAI employees into Microsoft while matching the salaries, stock packages, and equity expectations they already had at OpenAI.
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The plan ultimately was never used because Altman returned as OpenAI’s CEO just days later. Once he was reinstated and most employees remained at the company, Microsoft no longer needed to move forward with the alternative structure.
Nadella also described the firing itself as deeply confusing, even for Microsoft, despite being OpenAI’s biggest investor and closest business partner. During testimony, he called Altman’s removal “amateurish.”
He explained that Microsoft’s first concern was whether there had been any major issue behind the decision, including financial misconduct, fraud, security risks, or ethical violations. However, Nadella said Microsoft never received a clear explanation from OpenAI’s board.
At the time, the board publicly stated only that Altman had not been “consistently candid” in his communications with directors. The vague explanation triggered widespread confusion across the tech industry and raised questions about why such a dramatic leadership change had happened so suddenly.
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Nadella’s testimony also shed light on the internal power struggle that followed Altman’s return to OpenAI. After the leadership crisis, OpenAI planned to rebuild its board of directors, and Microsoft suggested 13 to 14 possible candidates it believed could join the new board. However, none of Microsoft’s preferred candidates were initially selected.
During questioning, Nadella admitted that Microsoft had no formal authority over OpenAI’s nonprofit board structure. When asked what Microsoft could do if its recommendations were ignored, he answered, “None.” The statement highlighted the unusual relationship between the two companies, where Microsoft had invested billions but still lacked direct governance control.
At the same time, Nadella acknowledged that Microsoft did attempt to influence who could join the board by objecting to certain candidates. He testified that he opposed Diane Greene because of her ties to Google and opposed Bing Gordon because of his connections to Amazon. His comments suggested Microsoft was concerned about rival tech companies gaining influence within OpenAI.
Meanwhile, Musk’s legal team has argued that Microsoft was attempting to shape OpenAI’s governance structure in ways that aligned with Microsoft’s own business interests and increased its influence over the company.