OpenAI is facing a lawsuit filed by Elon Musk over its employee-compensation practices. Musk’s legal action names OpenAI, Microsoft, and Reid Hoffman, a board member of Microsoft and former board member of OpenAI.
Musk claims these companies are engaging in anticompetitive behaviour by offering “lavish compensation” to dominate the generative AI market.
He argues that OpenAI spends around $1.5 billion (approximately Rs 12,450 crore) annually on its 1,500 employees. The average compensation is $534,197 (approximately Rs 4.43 crore) per year, with software engineers earning a median salary of $810,000 (approximately Rs 6.72 crore). This is significantly higher than the $257,500 (approximately Rs 2.13 crore) average salary for tech workers in San Francisco. Some top-level employees receive compensation as high as $1.3 million (approximately Rs 10.8 crore) annually.
In addition, Musk criticises OpenAI for moving away from its nonprofit roots. He claims the company now prioritises profit over its original mission to develop 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 refiled in August, escalating his accusations. He now claims he was “deceived” into cofounding OpenAI, arguing the company’s focus on profit harms competitors and limits access to top AI talent.
Despite the lawsuit, OpenAI continues to lead the growing generative AI field. The company offers high salaries and job security, even as other tech companies face layoffs. Musk’s legal challenge underscores concern about the ethical and competitive consequences of OpenAI’s rapid growth.
