Anthropic’s elaborate plan to keep Wall Street at bay

Anthropic wants to have it both ways. With its impending IPO, it wants to tap the vast riches of the public markets and insists it doesn’t want to compromise its core mission of developing AI safely and for the benefit of humanity. But greater model capabilities bring greater risks, and shareholders eager for returns may have little patience for costly safety measures that slow products on their way to market.

Sam Altman, the CEO of Anthropic’s archrival, OpenAI, has cited investor pressures as one reason the company is not pursuing an IPO this year. Anthropic hopes it can resist investor pressures with a mind-boggling governance structure.

University of Pennsylvania law professor Elizabeth Pollman told The Verge that Anthropic has proposed going public with a “unique and complicated governance structure that has not been used before” and that has been “creatively designed for this founder-led and mission-driven company.” Experts say it should give Anthropic freedom to pursue profits without letting shareholders force it to cut corners on safety or rush systems out before they’re adequately tested. But even the strongest legal protections can only go so far, and no corporate structure, no matter how well designed, can completely insulate a public company from the demands of the market.

Foremost, Anthropic is a public benefit corporation. Simply put, it is legally required to focus on more than just maximizing shareholder returns, balancing these with its stated social mission and the interests of stakeholders, such as employees and specific communities. Patagonia and Kickstarter are among the better-known examples, with missions centered on environmental conservation and supporting creative communities, respectively.

Another key safeguard aims to protect Anthropic’s mission by limiting shareholder influence over one of the biggest levers of corporate power: the company’s board of directors. Directors oversee the company and appoint its leadership, including the CEO. Directors can also hold executive roles, as is the case with Anthropic, with CEO Dario Amodei and president Daniela Amodei both sitting on the board.

Shareholders typically have considerable sway over who sits on the board, giving them a means to replace directors or push for changes if they are unhappy with how the company is being run. For example, if shareholders are unhappy at what they perceive as unnecessary delays to market for optional safety testing, they may remove directors and replace them with ones more aligned with their interests, such as making money and being less cautious.

Under Anthropic’s proposed governance structure, ordinary shareholders won’t have much of a say over who is on the board at all. Instead, four of the board’s seven directors will be chosen by a special body called the long-term benefit trust, explains Jens Dammann, a professor in business and commercial law at the University of Texas School of Law. It is a highly unusual setup for a major technology company.

The trust is made up of “five financially disinterested voting trustees” with expertise in “AI safety, national security, public policy, and social enterprise.” Through a special class of share called Class T stock, the trustees can appoint or remove directors in pursuit of their stated purpose: ensuring “that Anthropic responsibly balances the financial interests of stockholders with the interests of those affected by Anthropic’s conduct and our public benefit purpose.” The trust is designed to operate independently of the company’s commercial pressures, allowing it, in theory, to put Anthropic’s mission first.

Ordinary shareholders technically have a say in the board’s three remaining seats. However, Anthropic has created another safeguard that keeps power firmly in the hands of its founders, called “Founder LLC,” which will control 50.1 percent of the voting power on shareholder matters. Given that many shareholder votes are decided by a simple majority, Founder LLC basically gives Anthropic’s founders the ability to block or force through decisions, regardless of how other shareholders vote. This means that they will effectively choose the remaining three directors, Columbia Law School professor Dorothy Lund told The Verge.

The prospectus says Founder LLC will “initially” be seven of Anthropic’s founders: Dario Amodei, Daniela Amodei, Tom Brown, Jack Clark, Jared Kaplan, Sam McCandlish, and Christopher Olah. “Our seven co-founders will initially be the sole members.” Notably absent is another cofounder, Ben Mann, who co-leads the company’s experimental Anthropic Labs arm, as reported by The San Francisco Standard.

All in all, the arrangements would give Anthropic’s founders and the trust “tremendous power” over the company’s direction, shielding it from many of “the pressures associated with being a public company,” Dammann told The Verge. “Given the unusual governance structure Anthropic has chosen, I don’t see how going public, by itself, would undermine its ability to prioritize safety over commercial interests.”

Ann Lipton, a professor at the University of Colorado Law School, agreed, telling The Verge that, legally speaking, “Anthropic is entirely insulated from profit seeking pressures, in the sense that ordinary shareholders have no ability to select the board or make business decisions.” But Lipton cautioned that the founders themselves have financial stakes in the company, which could influence their decisions.

And there’s a big difference between legal protections and immunity from market pressures. Anthropic, like all AI companies, “desperately needs capital,” Lipton said. “It’s not clear to me that any governance structure will protect against the market reality that unless Anthropic takes advantage of profit making opportunities at a faster pace than its competitors, it will not be able to fund its operations.” Lund expressed similar concerns. Anthropic will still “need to stay in the good graces of their investors,” she said, adding that “competitive pressure and capital needs can erode safety commitments over time.” Anthropic did not respond to The Verge’s request for comment on whether it felt the company could actually resist shareholder pressure to massively accelerate AI at the cost of safety.

Another potential vulnerability emerges if Anthropic’s founders start leaving. In its prospectus, the company says its success is “highly dependent on the continued service” of its senior team, particularly its founders. Dario and Daniela are singled out as being especially “critical” to advancing the company’s research and mission. But beyond the loss of leadership, their departure could trigger significant changes in how the company is structured, potentially stripping away some of the safeguards preventing Anthropic from pursuing profit over safety.

Under the proposed structure, Founder LLC would “sunset” if a majority of its members leave or the group chooses to dissolve it. Once that happens, ordinary shareholders could gain the power to weaken the trust’s protections, even against the wishes of the trustees, and without the support of the founders or employees, who hold different classes of stock, Dammann told The Verge. Other means of subverting the trust also exist, he explained, including coordinated action by the public shareholders, employee stockholders, and founders.

For now, it seems, Anthropic can probably have it both ways. But the protections designed to preserve its commitment to AI safety are far from ironclad, and much depends on market pressures, whether its founders stick around, and directions of the trust. Dammann said he sees a “fundamental dilemma that cannot be resolved in a fully satisfactory way” between Anthropic’s mission and investor demands. As long as things are going well, this tension may be manageable. “Investors may not mind their lack of voice as long as things go well,” Dammann said. “But if things go sour, they may become quite frustrated.”