[CCWG-ACCT] WG: question on fiduciary duties and their objectivity
parminder
parminder at itforchange.net
Mon Oct 5 10:45:00 UTC 2015
The group, unfortunately, as ever is diving thick into dealing with the
details and legalese when the real issue and contestation is a larger
political one.
First of all, and this I accept is bit of a de tour, though for me a
preface to the main point: a global governance body like the ICANN
should be a public body under public law and not a private body. That is
the main anomaly here, whose implications have been evident throughout
the process, but which key issue we have simply bypassed. As a 'global'
governance body it should of course be incorporated in international
law, which most developing countries have demanded, but that has been
given no consideration. In any case, as the second best option, pending
a shift to the appropriate international jurisdiction, in fact, I have
begun to think that, I may prefer it to be incorporated under an
appropriate US statute with sufficient safeguards, and means of global
representation in constituting ICANN and holding it accountable. Those
who think this will put it 'back' under US oversight should understand
that right now the same US legislature can at any time make any kind of
law establishing any kind of authority over ICANN and its work, in its
US non profit status. In fact, a well done statute could include better
safeguards and clearer processes to make such interference more rather
than less difficult. In any case, things no way become worse vis a vis
the authority of the state of the US on ICANN if such a statutory
incorporation route is employed - while it affirms the basic important
political point that 'governance is a public function', and not a matter
of private contracts, which the ICANN model is all about, and which for
me its biggest negative contribution to our political thinking and
landscape as we go forward. It then gets pushed into larger governance
of Internet relates issues, and then to governance overall, of all
issues and areas (in fact the latter strategic plan is mentioned in as
many words in a World Economic Forum document). This is the route to a
neoliberal privatisation of governance and political systems that this
exercise is centrally contributing to which is my greatest problem with it.
Coming back to the current point, now even if for whatever reasons we
are decided on a private body status for ICANN, if non profit, the key
and the prior issue we face is to choose between two forms, a
Board-based private body or a membership-based one. Obviously, it is the
latter which is relatively 'more public' than the former, which is
clearly 'more private'. So, the choice should obviously be of a
'membership based body'. But then we see fears being expressed that
members can go rouge (as if board members cannot, which would be so much
more calamitous) or that members can wrongly capture power... The way
forward then should be to improve the membership structure of ICANN, in
one go or progressively, rather than succumb to the 'fear of the public'
which most entities or people exercising unaccountable political power
normally do. This is what I see happening here as well. (Yes, 'public'
can be sometimes messy!)
What I would see to be the proper course at this stage is to first -
clearly and firmly - decide whether a Board mode is better or a
Membership model, and if the latter, which I really see is
preponderantly the view, go for it, and thrash out what kind of
membership model best serve the needs of the context. It is no one's
case that a membership model is impossible here, or the costs and/ or
dangers of it are so expressly huge to be able to largely negate the
logic of the higher political choice I spoke about earlier ('political'
as in systems and institutions concerned with location, flow and
distribution of power). Rather than taking this obvious and
straightforward route, one is seeing various kinds of matters of detail,
legalese and, sorry but, even trivia being thrown around, on the basis
of which then some 'decision' , or is it 'consensus', will be arrived
at, which by default decides the larger and higher political question -
without ever actually addressing it. This, as I have critiqued before,
has always been the primary and in my view the fatal flaw with the
process, which no amount of legal advice, and discussions about the
finer points of corporate governance, is ever going to cover up.
And then of course there are no prizes for guessing what would be the
nature of the final decision or model -- it will firmly lie within the
rather narrow confines of what has rather bluntly been stated to be
acceptable by the Board, and also the US government, which keeps making
all the soft but powerful noises about giving them a model with least
amount of change or possible confusion.
It is made no better if some people who have been entrusted with, what
is that rather fashionable word here, is it a, 'fiduciary duty' by the
global Internet community to come up with an ICANN oversight model that
best upholds global public interest, openly admit that there is no point
in coming up with a model that is not to the taste of the ICANN and the
US gov and therefore they would/ may not do so. Dont they know that
whatever they present will be called as a community consensus model
arrived at through a long transparent and participatory process,
inclusive of the global community. Behold, democracy has triumphed!!
History is written by the powerful. There will be no footnote anywhere
that the model was presented because it was all that ICANN and the US
was ready to accept. (Btw, a question, is CCWG meaning to append such a
footnote to its final proposal, just for the sake of transparency and
full disclosure?).
No personal affront to anyone intended, but this process in my view has
at this point sunk too low to be worthy of participation. But then I
work with people whose interests are affected by what gets done here,
and that gives me the justification to state my dissatisfaction and
disappointment. And this process is being carried out in the name of all
these people.
parminder
On Monday 05 October 2015 11:44 AM, Jorge.Cancio at bakom.admin.ch wrote:
>
> Dear Co-Chairs,
>
>
>
> May you please kindly confirm that this question will be certified to
> our lawyers?
>
>
>
> Thanks and best regards
>
>
>
> Jorge
>
>
>
> *Von:*Cancio Jorge BAKOM
> *Gesendet:* Freitag, 2. Oktober 2015 17:02
> *An:* Greg Shatan <gregshatanipc at gmail.com>
> *Cc:* Mathieu Weill <Mathieu.Weill at afnic.fr>;
> accountability-cross-community at icann.org; Thomas Rickert
> <thomas at rickert.net>
> *Betreff:* Re: [CCWG-ACCT] question on fiduciary duties and their
> objectivity
>
>
>
> I feel Greg captures and explains (much more eloquently) the issues I
> think we should be clarifying.
>
>
>
> Thanks!
>
>
>
> Jorge
>
> Von meinem iPhone gesendet
>
>
> Am 02.10.2015 um 16:52 schrieb Greg Shatan <gregshatanipc at gmail.com
> <mailto:gregshatanipc at gmail.com>>:
>
> I am quite confident that there are standards (objective or
> otherwise) for the definition and exercise of "fiduciary duty" by
> directors, both in the statutes and in case law, as well as in
> commentary (i.e., books and articles) and legal advice. Of
> course, the advice that the Board has received over the years in
> applying "fiduciary duty" as an ICANN Board member almost
> certainly takes a particular view of the legal standards and their
> application. Our counsel may well take a different view. We
> should get our counsel's view (and if possible, our counsel's view
> on ICANN's counsel's view).
>
>
>
> As a general matter, Boards are bound to to make all their
> decisions consistent with their fiduciary duties. This does not
> need to be set out in any document. It's a legal duty. Our
> issues don't focus on this overall exercise of fiduciary duty;
> rather, I think our primary concern is when the Board invokes
> fiduciary duty as a reason not to accept the recommendations,
> advice or decisions of the community or any part thereof.
>
>
>
> After that comes the question of whether and how to bind the ICANN
> Board to specific and explicit standards or interpretations for
> fiduciary duty, rather than relying on an unstated interpretation
> based on the advice of counsel.
>
>
>
> Then comes the questions of whether the Bylaws can include any
> specific requirements (e.g., extended rationale, supermajority)
> when the Board goes against the decisions of the Community and
> does so based on "fiduciary duty."
>
>
>
> After that comes the question of whether the Board's exercise of
> fiduciary duty can be challenged in RfR, IAP, MEM, etc.
>
>
>
> Finally, the question comes whether this challenge would be
> significantly different if brought by the Sole Member vs. any
> other entity.
>
>
>
> I don't believe "enforceability" hinges primarily on whether there
> are explicit standards for fiduciary duty set forth in the bylaws.
> As noted above, it is an inherent duty. If a Board violates its
> fiduciary duty, a party with standing (i.e., affected by the
> outcome) and the capacity to sue (i.e., legal personhood) can
> challenge that in court. However, explicit standards may make
> "enforceability" easier, since the complainant could point to
> specific bylaws that have been violated, rather than challenging
> the board's interpretation of fiduciary duty. Since there are a
> range of interpretations of fiduciary duty, and the Board has
> broad (but not boundless) discretion to interpret fiduciary duty,
> it becomes more difficult to challenge -- but not impossible,
> since some actions objectively violate fiduciary duty based on
> existing legal standards (e.g., if the Board exhausts its reserve
> fund to pay for trip to Las Vegas, any claim that this is
> consistent with their fiduciary duty is likely to fail).
>
>
>
> I hope this helps inform the questions we need to ask counsel in
> this situation.
>
>
>
>
>
> There is also a second question arising from Jorge's email, which
> is: What are the duties and obligations that must be considered
> when the _membership_ makes a decision. Are the decisions of
> membership (in a California public benefit corp.) utterly
> arbitrary and without regard to any standard, or are they limited
> by some legal standards or duties? If so, what are those
> standards and duties? If there is no legal standard for member's
> decisions, how can these decision-making powers be constrained,
> e.g., in the Articles/Bylaws of the corporation, and what
> standards and mechanisms would typically be used to do so? This
> should be explored as well.
>
>
>
> Greg
>
>
>
> On Fri, Oct 2, 2015 at 10:25 AM, Mathieu Weill
> <mathieu.weill at afnic.fr <mailto:mathieu.weill at afnic.fr>> wrote:
>
> Hi Jorge,
>
> Thanks for providing these additional thoughts and
> refinements. The way I read these is that you are not only
> looking for clarity of what fiduciary duties imply, but also
> on potentialoptions to make them enforceable (by specifying
> them in the Bylaws, etc.) ?
>
> This is certainly an aspect we need to clarify .
>
> Best
> Mathieu
>
>
>
> Le 02/10/2015 11:43, Jorge.Cancio at bakom.admin.ch
> <mailto:Jorge.Cancio at bakom.admin.ch> a écrit :
>
> Hi Mathieu,
>
>
>
> After reviewing the legal memo you just sent and what it
> says about fiduciary duties, I feel that the question I’m
> presenting is not tackled in that Memo and that we still
> would largely benefit right now from a better
> understanding of the question I was proposing.
>
>
>
> I’ve tried to specify the question a bit more, and it
> would look as follows:
>
>
>
> Is there any means under Californian Law that would allow
> to subject the exercise of fiduciary duties to objective
> and controllable standards? For example, could the
> following or similar means be acceptable and usable under
> Californian law:
>
> · concretizing these fiduciary duties in the Bylaws;
>
> · subjecting their correct interpretation to
> arbitration;
>
> · imposing special requirements on the rationale
> needed to be provided if they are used to override
> community decisions;
>
> · imposing extra-supermajorities in the Board in
> order to being able to invoke such duties?
>
>
>
> The underlying idea is IMHO very relevant to our present
> discussions on the Model, especially for those of us who
> are not experts in Californian Corporate Law: i.e. is
> there a legal means to subject those fiduciary duties to
> specific and objective standards and/or third-party
> control? If there are, could we use those means (if they
> exist) to develop our model? If they do not exist, or are
> too limited, this might speak for a membership structure.
>
>
>
> Please let me know if you can proceed with this.
>
>
>
> Regards
>
>
>
> Jorge
>
>
>
> *Von:*Mathieu Weill [mailto:mathieu.weill at afnic.fr]
> *Gesendet:* Freitag, 2. Oktober 2015 11:06
> *An:* Cancio Jorge BAKOM <Jorge.Cancio at bakom.admin.ch>
> <mailto:Jorge.Cancio at bakom.admin.ch>;
> accountability-cross-community at icann.org
> <mailto:accountability-cross-community at icann.org>
> *Cc:* leonfelipe at sanchez.mx
> <mailto:leonfelipe at sanchez.mx>; thomas at rickert.net
> <mailto:thomas at rickert.net>
> *Betreff:* Re: question on fiduciary duties and their
> objectivity
>
>
>
> Dear Jorge,
>
> You are rightly pointing out one of the key areas where a
> shared understanding of the concept and consequences has
> not been achieved so far. $
>
> Our 2nd report highlighted this issue for further
> investigation during WS2, but I note that some comments
> mentioned that this should not be clarified as part of
> WS1. The exact wording of our work item was :
>
> o Clarifying understanding of the fiduciary duties
> of Board Directors and related expectations concerning
> Director behavior for the Board.
>
>
> Past work on the topic include several mentions in legal
> memos. Most notable is on page 4 of one of the initial
> memos from our Counsel dated 12 april
> (https://community.icann.org/download/attachments/52890082/Combined%20CCWG%20Cover%20Memo%20and%20Templates.pdf?version=3&modificationDate=1428797461000&api=v2)
> which addresses the balance between accountability and
> decision making authority.
>
> If we were to pursue this at this stage, we probably
> should flesh out some questions to direct work from our
> Counsel. What would be the type of questions you would
> raise Jorge ? (or others) ?
>
> Best
> Mathieu
>
>
> Le 01/10/2015 10:41, Jorge.Cancio at bakom.admin.ch
> <mailto:Jorge.Cancio at bakom.admin.ch> a écrit :
>
> Dear all,
>
>
>
> During the debates we had on the last conference call
> I put forward a question which I feel could be
> important to better understand under Californian
> corporate law.
>
>
>
> This is whether there are any means to subject the
> exercise of “fiduciary duties” (by the Board) to
> objective standards.
>
>
>
> As I have understood the discussion so far, the
> membership model allows the member to override
> “fiduciary duties” of the Board. However the member
> itself has no fiduciary duties vis-à-vis the organization.
>
>
>
> On the other hand, fiduciary duties are apparently a
> useful tool within corporate law, as it imposes a duty
> to care for the welfare of the whole of the organization.
>
>
>
> The argument which is made by some, as far as I
> understand it, is that there is however a problem in
> the exercise of “fiduciary duties” as it would provide
> the Board with an “arbitrary” power, e.g. to override
> community decisions (in exercise of community powers)
> without being bound to any objective standards.
>
>
>
> Considering all this, my question (to the Lawyers, if
> this is certified as a question to them) would be: is
> there any means under Californian Law (or other US
> jurisdictions
) that would allow to subject the
> exercise of fiduciary duties to objective standards?
> (e.g. be it through concretizing these duties in the
> Bylaws, subjecting them to arbitration, imposing
> special requirements on the rationale needed to be
> provided if they are used to override community
> decisions, or, for instance, imposing
> extra-supermajorities in the Board in order to being
> able to invoke such duties?)
>
>
>
> Hope this helps,
>
>
>
> Regards
>
>
>
> Jorge
>
>
>
> --
>
> *****************************
>
> Mathieu WEILL
>
> AFNIC - directeur général
>
> Tél: +33 1 39 30 83 06 <tel:%2B33%201%2039%2030%2083%2006>
>
> mathieu.weill at afnic.fr <mailto:mathieu.weill at afnic.fr>
>
> Twitter : @mathieuweill
>
> *****************************
>
>
>
> --
>
> *****************************
>
> Mathieu WEILL
>
> AFNIC - directeur général
>
> Tél: +33 1 39 30 83 06 <tel:%2B33%201%2039%2030%2083%2006>
>
> mathieu.weill at afnic.fr <mailto:mathieu.weill at afnic.fr>
>
> Twitter : @mathieuweill
>
> *****************************
>
>
> _______________________________________________
> Accountability-Cross-Community mailing list
> Accountability-Cross-Community at icann.org
> <mailto:Accountability-Cross-Community at icann.org>
> https://mm.icann.org/mailman/listinfo/accountability-cross-community
>
>
>
>
>
> _______________________________________________
> Accountability-Cross-Community mailing list
> Accountability-Cross-Community at icann.org
> https://mm.icann.org/mailman/listinfo/accountability-cross-community
-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://mm.icann.org/pipermail/accountability-cross-community/attachments/20151005/17547f78/attachment.html>
More information about the Accountability-Cross-Community
mailing list