<div dir="ltr">Hi Cherine<div><br></div><div>Thanks for these comments, a few thoughts in line which simply represent my own perspective on what you have written. I am a fairly direct person but please don't take that as meaning I don't appreciate the time you have put into these comments or the good intent behind them.</div><div class="gmail_extra"><br><div class="gmail_quote">On 7 July 2015 at 18:45, Cherine Chalaby <span dir="ltr"><<a href="mailto:cherine.chalaby@icann.org" target="_blank">cherine.chalaby@icann.org</a>></span> wrote:<br><blockquote class="gmail_quote" style="margin:0 0 0 .8ex;border-left:1px #ccc solid;padding-left:1ex"><div style="word-wrap:break-word">Dear Mathieu and the CCWG group,<div><br></div><div><div>In Buenos Aires, I attended most of the sessions on the CCWG proposal and made several comments. I wish to share these comments in writing with you and the accountability-cross-community group as you prepare for the F2F meeting in Paris. As I said in Buenos Aires, please do not take my comments as fierce criticism but more as constructive suggestions. </div><div><br></div></div></div></blockquote><div><br></div><div>Can I urge you, given your comment at the end of your note, to add to your constructive critique, constructive suggestions as to how your criticisms could be mitigated? I acknowledge this is not easy stuff, but we are three weeks away from trying to land a second full draft proposal, and specific improvements are very helpful for the group at this point.</div><div> </div><blockquote class="gmail_quote" style="margin:0 0 0 .8ex;border-left:1px #ccc solid;padding-left:1ex"><div style="word-wrap:break-word"><div><div></div><div>Let me start by saying that as a Director of the Board, I believe in (a) appropriate empowerment of the community within the multi-stakeholder model, (b) strengthening of the the bottom-up process, and (c) enhancing accountability without destabilising the security and stability of ICANN or introducing opportunities for capture.</div><div><br></div><div>In my personal capacity as a member of the community, I support the CWG proposal, but I have concerns that the CCWG draft proposal, discussed in Buenos Aires, could lead to three unintended consequences that could seriously damage ICANN in the long run. These unintended consequences apply to both the Membership model as well as the Designator (Hybrid) model. </div><div><br></div><div><u><b>Unintended Consequence 1: Weakening ICANN's Governance model</b></u></div><div><p class="MsoNormal"><span lang="EN-US">The CCWG has asserted that the “empowered community” will have control over the Board in the following areas: Strategic Plan, Operating Plan, Budget and Bylaws changes, fundamental or not. As a consequence, there will be no decision that the Board can make in those core fiduciary responsibilities that cannot be rejected or stopped by the proposed new community-empowerment mechanism.</span></p><p class="MsoNormal"><span lang="EN-US">T</span>he CCWG draft proposal indicates that the Board would always have the ability to exercise its own judgment after the community-empowerment mechanism makes its decisions. But the proposal also states that if the community-empowrment mechanism does not like what the Board has done, it can remove the Board individually or collectively. Hence, the new community-empowerment mechanism in fact has the ultimate power to control the activities of ICANN. While as a community member who believes in the bottom-up model, I support the principles behind this objective, I believe it is vitally important that these newly transferred powers are paired with the transfer of corresponding accountability. The CCWG proposal in effect creates two bodies – one that is empowered (the community) and a separate one that is accountable (the Board). This, in my view, breaches a fundamental principle of governance, weakens the overall structure of ICANN, and is not sustainable.</p></div></div></div></blockquote><div><br></div><div>The argument above is falsified by the successful operation across the globe, including in the United States, of membership based organisations or of companies owned by shareholders. In all of these organisations, the responsibilities of the Board and its accountability to its members or shareholders have to be juggled with wider social responsibilities. ICANN, post the NTIA contract, would be in a disturbingly unique situation in lacking such tensions if there were not a distribution of powers away from the Board.</div><div><br></div><div>Your analysis above, to be sustainable, would surely have to explain why all the other member or shareholder organisations in the world "breach a fundamental principle of governance" - I regard such proposals as fulfilling a basic principle, that being one of accountability in a true sense of the Board to its stakeholders.</div><div><br></div><div>Is the end consequence of your analysis a logic that says: to preserve its current role, ICANN's board cannot sustain the relocation of authority within the ICANN system to the broader community?</div><div> </div><blockquote class="gmail_quote" style="margin:0 0 0 .8ex;border-left:1px #ccc solid;padding-left:1ex"><div style="word-wrap:break-word"><div><div><p class="MsoNormal"> </p><div><u><b>Unintended Consequence 2: Threatening ICANN's financial stability </b></u></div><p class="MsoNormal"><span lang="EN-US">The CCWG draft proposal gives the community the right to reject the Board approved budget. I have not yet seen proposed mechanisms to prevent the following from happening: <u></u><u></u></span></p><p class="MsoNormal"><span lang="EN-US">(a) Budget paralysis, whereby members of the community will vote against each other rather than be accountable to each other. </span><span lang="EN-US">For example, given budget limitations, what will stop members from voting against funding projects that do not facilitate their personal interest. This could lead to a situation where the budget is never adopted or takes too long to adopt, therefore jeopardising ICANN’s ability to deliver on key commitments such as contractual compliance enforcement , including issues relating to enhanced consumer protections and enhanced IP and rights protections, and other initiatives important to the community. </span>This budget paralysis could also risk the stable and continued funding of the IANA functions. That is why I suggested in Buenos Aires that a commitment to fund the IANA functions should be separated from this budgetary process and embodied in the ICANN Bylaws.</p></div></div></div></blockquote><div><br></div><div>The "members" or "designators" don't have any personal interests to advance. They are too diverse for that internally. And because of the proposed thresholds which require high levels of support across SOs and ACs to force the return of the Budget to the Board, the chances of coordination of a coalition of particular demands, and then imposing them on the Board, seems limited in the extreme. Not least because the Board would rightly call attention to such an approach, and in doing so lead in all likelihood to a dissolution of critical elements of any such coalition.</div><div><br></div><div>I'd also add that since the Board itself is elected by the community, albeit over time, it faces the same sort of risks over time.</div><div><br></div><div>In terms of the paralysis part, we have to work the process out so that certainly a single rejection does not have the impact you envision. Improving the consultation part of the budget process so as to further reduce the already highly remote prospect of such a power being used is a WS2 issue - no time to sort that before transition.</div><div><br></div><div>Finally, on the separate treatment of the IANA Budget - do you have a concrete proposal as to how this might be done?</div><div><br></div><blockquote class="gmail_quote" style="margin:0 0 0 .8ex;border-left:1px #ccc solid;padding-left:1ex"><div style="word-wrap:break-word"><div><div><p>(b) Threat to the stability of the business environment in which many have invested and rely on ICANN’s ability to maintain, as under the new proposal, members of the community will have the right to reject the budget, but not a single member of the community will be accountable for the budget bottom line. </p></div></div></div></blockquote><div><br></div><div>The Board remains accountable for that. It would be in breach of its duties to propose a budget that did not meet basic standards of responsibility. Nothing the CCWG has proposed changes this. </div><div><br></div><blockquote class="gmail_quote" style="margin:0 0 0 .8ex;border-left:1px #ccc solid;padding-left:1ex"><div style="word-wrap:break-word"><div><div><p><span lang="EN-US">(c) Unfairness, where the financial needs of the minority will seldom be fulfilled because final budget decisions will be made as a result of a majority voting by </span><span lang="EN-US">members of the community who do not have an obligation to act in the collective interest of all stakeholders.</span></p></div></div></div></blockquote><div><br></div><div>This isn't part of the CCWG proposal. The staff generate the budget as today, and the Board proposes and approves it as today. All that is being contemplated is the right, where the community is seriously concerned in a way that cannot be resolved, to send it back. This does not give rise to the concern you identify, any more than today's process of a majority of Board members being able to approve a budget, does. If it does, I have not understood why, from what you have written.</div><blockquote class="gmail_quote" style="margin:0 0 0 .8ex;border-left:1px #ccc solid;padding-left:1ex"><div style="word-wrap:break-word"><div><div><p>it is worth noting that the current budget process is robust and transparent and ensures that none of the above consequences can occur. It also ensures community participation and it can always be improved. </p></div></div></div></blockquote><div><br></div><div>I agree it can be improved; I think your statement that the current process ensures none of the above can occur is at best a stretch.</div><div> </div><blockquote class="gmail_quote" style="margin:0 0 0 .8ex;border-left:1px #ccc solid;padding-left:1ex"><div style="word-wrap:break-word"><div><div><div><b><u>Unintended Consequence 3: Dysfunctional Board</u></b></div><div><span lang="EN-US"><br></span></div><div><span lang="EN-US">The CCWG draft proposal gives the community the right to remove an individual board member. The CCWG proposed mechanism for implementing this right will in my view lead to t</span>he creation of two classes of board members. Those that will act in sole the interest of the SO/AC that has elected them, and the others who will be free to act in the collective interest of all stakeholders. </div></div></div></div></blockquote><div><br></div><div>Would you be able to clarify please how it does this? Are the latter category those who are appointed by the NomCom in your view?</div><div> </div><blockquote class="gmail_quote" style="margin:0 0 0 .8ex;border-left:1px #ccc solid;padding-left:1ex"><div style="word-wrap:break-word"><div><div><div>The threat of removal without significant justification runs the risk of having individual Board members fear the loss of their seats if they do not adhere to the wishes of the constituency from which they come. This could turn the Board into a representative body, or a parliament, i.e. a place where opposing interests clash and are reconciled, rather than the present situation in which all Board members are obligated to act as a body in the best interests of the overall organization.</div></div></div></div></blockquote><div><br></div><div>No change to that obligation is contemplated. That responsibility applies to all directors of an organisation whether it has members with removal rights or designators with the same, or whether it doesn't. It is simply a responsibility of mature corporate governance that directors give effect to those responsibilities knowing that in the end, they can be removed if they are not serving the community which elected them - in the broadest sense. Again, the high thresholds involved in the CCWG's proposals militate against trivial action in this regard.</div><div><br></div><div>If this would ruin ICANN governance as a necessary consequence of the structure, by definition then all organisations that have members or shareholders must face the same problem. In fact they do not. </div><div> </div><blockquote class="gmail_quote" style="margin:0 0 0 .8ex;border-left:1px #ccc solid;padding-left:1ex"><div style="word-wrap:break-word"><div><div><div><span lang="EN-US"></span></div><div><br></div><div><span lang="EN-US">Furthermore, B</span>oard deliberations and decisions would be at risk of being driven to a large extent by subjective goals and personal compromise.</div><div><br></div></div></div></div></blockquote><div><br></div><div>It is not clear why this suddenly occurs. It doesn't happen in my organisation, which is membership based. It doesn't appear to happen in most well-governed organisations. </div><div><br></div><div>It does happen where Boards have poor or dysfunctional cultures, or where the realities of governance are not well understood among those that select Board members. </div><div><br></div><div>From my observation as a relative newcomer, ICANN has some work to do in that regard, no matter what happens with the CCWG proposal.</div><div><br></div><blockquote class="gmail_quote" style="margin:0 0 0 .8ex;border-left:1px #ccc solid;padding-left:1ex"><div style="word-wrap:break-word"><div><div><div></div><div><br></div><div>I do not have concrete suggestions to prevent these unintended consequences from happening, but I sincerely hope that the CCWG takes my concerns into account when it prepares its 2nd draft proposal at its F2F meeting in Paris. </div></div></div></div></blockquote><div><br></div><div>I would once more urge you, as at the start, to propose if you are able some concrete ways the CCWG proposals could take account of you concerns?</div><div><br></div><div>best</div><div>Jordan</div><div><br></div></div>-- <br><div class="gmail_signature"><div dir="ltr"><div><div dir="ltr">Jordan Carter<br><br>Chief Executive <br><b>InternetNZ</b><br><br>04 495 2118 (office) | +64 21 442 649 (mob)<br><a href="mailto:jordan@internetnz.net.nz" target="_blank">jordan@internetnz.net.nz</a> <br>Skype: jordancarter<br><br><i>A better world through a better Internet </i><br><br></div></div></div></div>
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