[CCWG-ACCT] Recommendation 4 - Board Removal Liability - Proposed Indemnification Language

Thu Feb 4 21:06:17 UTC 2016

Dear Holly, Dear Sam,

The current status on this waiver / indemnification language is :

-          The Board  heard the concerns raised by the CCWG and has agreed 
in principle to indemnification but is still in objection to a waiver

-          Icann Legal and CCWG Independent Legal Advisors obviously have 
different perspectives on the indemnification, the relevant causes of 
action, level of protection, etc.

Our group will have to come to a conclusion, at the requirement level at 
least, during our next meeting on Tuesday. Until then, can Icann Legal and 
Sidley and/or Adler coordinate to try and resolve their differences ahead of 
the call ? At the very least, jointly highlighting in advance of the meeting 
which requirement questions should be addressed by the CCWG would be very 
helpful to a constructive discussion.

Best regards,

Mathieu

De : Gregory, Holly [mailto:holly.gregory at sidley.com]
Envoyé : jeudi 4 février 2016 15:00
À : thomas at rickert.net; mathieu.weill at afnic.fr; 'León Felipe Sánchez Ambía'; 
'Accountability Cross Community'; 'ACCT-Staff'
Cc : icann at adlercolvin.com; Sidley ICANN CCWG; 'Samantha Eisner'; Kevin 
Espinola
Objet : Recommendation 4 - Board Removal Liability - Proposed 
Indemnification Language

Dear Co-Chairs, Members, Participants and Staff,

We have reviewed the proposed language sent by ICANN Legal  yesterday 
regarding a new indemnification bylaw designed at protecting certain 
participants in efforts to remove directors or recall the full Board from 
legal claims.   We have also reviewed the sample Guidelines for Due 
Diligence in Board Removal Discussions that ICANN Legal provided.   We have 
the following concerns and observations:

1.  The  indemnification language in the current ICANN bylaws (pasted below 
for your reference) largely tracks the statutory limits and standards for 
indemnification for a California nonprofit public benefit corporation and is 
broader – and therefore more protective to the covered persons – than the 
proposed new additional provision.   Under the new additional provision 
proposed by ICANN Legal covered persons would have less protection with 
respect to claims resulting from efforts to remove directors and recall the 
full Board than would be provided under the current provision  to protect 
covered persons from claims.  In our view, the concerns raised by the 
CCWG-Accountability about protection from claims brought by directors is 
better served by relying on the current bylaw provision (with some minor 
clarifications explained below).  The current bylaw already provides 
significant indemnification from legal claims:

ARTICLE XIV: INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER 
AGENTS

ICANN shall, to maximum extent permitted by the CNPBCL, indemnify each of 
its agents against expenses, judgments, fines, settlements, and other 
amounts actually and reasonably incurred in connection with any proceeding 
arising by reason of the fact that any such person is or was an agent of 
ICANN, provided that the indemnified person's acts were done in good faith 
and in a manner that the indemnified person reasonably believed to be in 
ICANN's best interests and not criminal. For purposes of this Article, an 
"agent" of ICANN includes any person who is or was a Director, Officer, 
employee, or any other agent of ICANN (including a member of any Supporting 
Organization, any Advisory Committee, the Nominating Committee, any other 
ICANN committee, or the Technical Liaison Group) acting within the scope of 
his or her responsibility; or is or was serving at the request of ICANN as a 
Director, Officer, employee, or agent of another corporation, partnership, 
joint venture, trust, or other enterprise. The Board may adopt a resolution 
authorizing the purchase and maintenance of insurance on behalf of any agent 
of ICANN against any liability asserted against or incurred by the agent in 
such capacity or arising out of the agent's status as such, whether or not 
ICANN would have the power to indemnify the agent against that liability 
under the provisions of this Article.

We recommend that, rather than adding the proposed new provision that would 
provide less protection for claims  relating to efforts to remove directors 
or recall the full Board, this current language be clarified to add in the 
list of covered persons / entities   in the first parenthetical, “any person 
acting in his or her capacity as a representative of the Empowered 
Community,” thereby clarifying that the Empowered Community and its 
representatives are indemnified agents.  We also recommend clarifying that 
an indemnified agent includes any person who is or was serving as an 
appointed member of an ICANN body (such as a member of a cross-community 
working group or a Review Team).

2.  If a new provision is added – which as indicated above would not be our 
preference – we recommend broadening that new provision to include all 
causes of action and removing the qualifications contained in paragraphs 2-5 
(see the attached markup).  The indemnification process in this section 
should be parallel to that applicable to ICANN officers and directors; for 
example, an SO/AC chair who is sued for defaming a director should not have 
to jump through more hoops than an ICANN officer would if they were sued for 
defaming an SO/AC chair.  Note also that  if an agent has been successful on 
the merits in defending a suit brought by a director,  he or she would be 
entitled to indemnification related to the expenses associated with that 
defense  pursuant to Section 5238(d) of the California Corporations Code 
regardless of the bylaw; any attempt to impose additional qualifications in 
the Bylaws in that scenario would not be valid.

3.  We note that providing Guidelines for expected behavior of community 
participants may have positive benefits but care must be taken that they are 
not drafted to discourage community participants from taking action in a 
specific area.  To avoid any potential chill on efforts to seek removal of 
directors or recall the full Board – and in the interests of encouraging 
positive behavior from community participants generally – consider whether 
it would be  beneficial to have the Guidelines (as may be revised by 
CCWG-Accountability after due consideration) apply to  all discussions 
within ICANN, not just a carved-out set of circumstances where the community 
is participating in the director  removal or  Board recall  processes.

Kind regards,

Holly and Rosemary

HOLLY J. GREGORY
Partner and Co-Chair
Global Corporate Governance & Executive Compensation Practice

Sidley Austin LLP
+1 212 839 5853
holly.gregory at sidley.com

From: Samantha Eisner [mailto:Samantha.Eisner at icann.org]
Sent: Wednesday, February 03, 2016 7:06 AM
To: accountability-cross-community at icann.org
Cc: icann at adlercolvin.com; Sidley ICANN CCWG
Subject: Recommendation 4 - Board Removal Liability - Proposed 
Indemnification Language

Dear CCWG -

To further the discussion on Recommendation 4, Board Removal Liability, I am 
providing two documents on behalf of ICANN.

First is a proposed addition to ICANN’s Bylaws that specifically allows for 
indemnification for statements made in the Board removal process (in 
initiation of the Community Forum, during the Community Forum, or in written 
rationale) that were made in good faith and with due diligence as to 
veracity.  This language reflects the CCWG’s suggestions made during the 26 
January call that limiting indemnification only to written rationale was 
probably not enough.

Second, we are providing some thoughts on how we can assist community 
members participating in a removal process in assessing the good faith 
nature of their assertions as they are participating.  We think that 
developing some guidelines will give participants confidence in working 
through the Board removal process.

Thanks,

Sam Eisner

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