<div dir="ltr"><div class="gmail_default" style="font-family:verdana,sans-serif"><div class="gmail_default" style="font-size:12.8px">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). </div><div class="gmail_default" style="font-size:12.8px"><br></div><div class="gmail_default" style="font-size:12.8px">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.</div><div class="gmail_default" style="font-size:12.8px"><br></div><div class="gmail_default" style="font-size:12.8px"><span style="font-size:12.8px">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.</span><br></div><div class="gmail_default" style="font-size:12.8px"><br></div><div class="gmail_default" style="font-size:12.8px">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."</div><div class="gmail_default" style="font-size:12.8px"><br></div><div class="gmail_default" style="font-size:12.8px">After that comes the question of whether the Board's exercise of fiduciary duty can be challenged in RfR, IAP, MEM, etc. </div><div class="gmail_default" style="font-size:12.8px"><br></div><div class="gmail_default" style="font-size:12.8px">Finally, the question comes whether this challenge would be significantly different if brought by the Sole Member vs. any other entity.</div><div class="gmail_default" style="font-size:12.8px"><br></div><div class="gmail_default" style="font-size:12.8px">I don't believe "enforceability" hinges primarily on whether there are explicit standards for fiduciary duty set forth in the bylaws. <span style="font-size:12.8px">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).</span></div><div class="gmail_default" style="font-size:12.8px"><span style="font-size:12.8px"><br></span></div><div class="gmail_default" style="font-size:12.8px"><span style="font-size:12.8px">I hope this helps inform the questions we need to ask counsel in this situation.</span></div><div class="gmail_default" style="font-size:12.8px"><span style="font-size:12.8px"><br></span></div><div class="gmail_default" style="font-size:12.8px"><br></div><div class="gmail_default" style="font-size:12.8px">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 <u>membership</u> 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.</div><div class="gmail_default" style="font-size:12.8px"><br></div><div class="gmail_default" style="font-size:12.8px">Greg</div><div class="" style="font-family:arial,sans-serif;font-size:12.8px"><div id=":1dw" class="" tabindex="0"><img class="" src="https://ssl.gstatic.com/ui/v1/icons/mail/images/cleardot.gif"></div></div></div></div><div class="gmail_extra"><br><div class="gmail_quote">On Fri, Oct 2, 2015 at 10:25 AM, Mathieu Weill <span dir="ltr"><<a href="mailto:mathieu.weill@afnic.fr" target="_blank">mathieu.weill@afnic.fr</a>></span> wrote:<br><blockquote class="gmail_quote" style="margin:0 0 0 .8ex;border-left:1px #ccc solid;padding-left:1ex">
<div bgcolor="#FFFFFF" text="#000000">
Hi Jorge, <br>
<br>
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.) ? <br>
<br>
This is certainly an aspect we need to clarify . <br>
<br>
Best<span class="HOEnZb"><font color="#888888"><br>
Mathieu</font></span><div><div class="h5"><br>
<br>
Le 02/10/2015 11:43, <a href="mailto:Jorge.Cancio@bakom.admin.ch" target="_blank">Jorge.Cancio@bakom.admin.ch</a> a écrit :<br>
<blockquote type="cite">
<div>
<p class="MsoNormal"><span lang="EN-US">Hi Mathieu,<u></u><u></u></span></p>
<p class="MsoNormal"><span lang="EN-US"><u></u> <u></u></span></p>
<p class="MsoNormal"><span lang="EN-US">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.<u></u><u></u></span></p>
<p class="MsoNormal"><span lang="EN-US"><u></u> <u></u></span></p>
<p class="MsoNormal"><span lang="EN-US">I’ve
tried to specify the question a bit more, and it would look
as follows:<u></u><u></u></span></p>
<p class="MsoNormal"><span lang="EN-US"><u></u> <u></u></span></p>
<p class="MsoNormal"><span lang="EN-US">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:<u></u><u></u></span></p>
<p style="margin-left:36.0pt">
<span style="font-size:12.0pt;font-family:Symbol" lang="EN-US"><span>·<span style="font:7.0pt "Times New Roman"">
</span></span></span><span lang="EN-US">concretizing
these fiduciary duties in the Bylaws;</span><span lang="EN-US"><u></u><u></u></span></p>
<p style="margin-left:36.0pt">
<span style="font-size:12.0pt;font-family:Symbol" lang="EN-US"><span>·<span style="font:7.0pt "Times New Roman"">
</span></span></span><span lang="EN-US">subjecting
their correct interpretation to arbitration;</span><span lang="EN-US"><u></u><u></u></span></p>
<p style="margin-left:36.0pt">
<span style="font-size:12.0pt;font-family:Symbol" lang="EN-US"><span>·<span style="font:7.0pt "Times New Roman"">
</span></span></span><span lang="EN-US">imposing
special requirements on the rationale needed to be provided
if they are used to override community decisions;</span><span lang="EN-US"><u></u><u></u></span></p>
<p style="margin-left:36.0pt">
<span style="font-size:12.0pt;font-family:Symbol" lang="EN-US"><span>·<span style="font:7.0pt "Times New Roman"">
</span></span></span><span lang="EN-US">imposing
extra-supermajorities in the Board in order to being able to
invoke such duties?</span><span lang="EN-US"><u></u><u></u></span></p>
<p class="MsoNormal"><span lang="EN-US"><u></u> <u></u></span></p>
<p class="MsoNormal"><span lang="EN-US">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.<u></u><u></u></span></p>
<p class="MsoNormal"><span lang="EN-US"><u></u> <u></u></span></p>
<p class="MsoNormal"><span lang="EN-US">Please let me know if you can proceed with
this.<u></u><u></u></span></p>
<p class="MsoNormal"><span lang="EN-US"><u></u> <u></u></span></p>
<p class="MsoNormal"><span>Regards<u></u><u></u></span></p>
<p class="MsoNormal"><span><u></u> <u></u></span></p>
<p class="MsoNormal"><span>Jorge<br>
<br>
</span><span style="color:#1f497d"><u></u><u></u></span></p>
<p class="MsoNormal"><span style="color:#1f497d"><u></u> <u></u></span></p>
<div>
<div style="border:none;border-top:solid #e1e1e1 1.0pt;padding:3.0pt 0cm 0cm 0cm">
<p class="MsoNormal"><b><span style="color:windowtext" lang="DE">Von:</span></b><span style="color:windowtext" lang="DE"> Mathieu Weill [<a href="mailto:mathieu.weill@afnic.fr" target="_blank">mailto:mathieu.weill@afnic.fr</a>]
<br>
<b>Gesendet:</b> Freitag, 2. Oktober 2015 11:06<br>
<b>An:</b> Cancio Jorge BAKOM
<a href="mailto:Jorge.Cancio@bakom.admin.ch" target="_blank"><Jorge.Cancio@bakom.admin.ch></a>;
<a href="mailto:accountability-cross-community@icann.org" target="_blank">accountability-cross-community@icann.org</a><br>
<b>Cc:</b> <a href="mailto:leonfelipe@sanchez.mx" target="_blank">leonfelipe@sanchez.mx</a>; <a href="mailto:thomas@rickert.net" target="_blank">thomas@rickert.net</a><br>
<b>Betreff:</b> Re: question on fiduciary duties and
their objectivity<u></u><u></u></span></p>
</div>
</div>
<p class="MsoNormal"><span lang="EN-US"><u></u> <u></u></span></p>
<p class="MsoNormal"><span lang="EN-US">Dear Jorge, <br>
<br>
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. $<br>
<br>
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 :<br>
<br>
</span><span style="font-size:12.0pt" lang="EN-US"><u></u><u></u></span></p>
<blockquote style="margin-top:5.0pt;margin-bottom:5.0pt">
<p style="margin-left:72.0pt"><span lang="EN-US">o</span><span style="font-size:7.0pt" lang="EN-US">
</span><span lang="EN-US">Clarifying understanding of the
fiduciary duties of Board Directors and related
expectations concerning Director behavior for the Board.</span><span lang="EN-US"><u></u><u></u></span></p>
</blockquote>
<p class="MsoNormal" style="margin-bottom:12.0pt"><span><br>
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 (<a href="https://community.icann.org/download/attachments/52890082/Combined%20CCWG%20Cover%20Memo%20and%20Templates.pdf?version=3&modificationDate=1428797461000&api=v2" target="_blank">https://community.icann.org/download/attachments/52890082/Combined%20CCWG%20Cover%20Memo%20and%20Templates.pdf?version=3&modificationDate=1428797461000&api=v2</a>)
which addresses the balance between accountability and
decision making authority.
<br>
<br>
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) ?
<br>
<br>
Best<br>
Mathieu<br>
<u></u><u></u></span></p>
<div>
<p class="MsoNormal"><span>Le
01/10/2015 10:41,
<a href="mailto:Jorge.Cancio@bakom.admin.ch" target="_blank">Jorge.Cancio@bakom.admin.ch</a>
a écrit :<u></u><u></u></span></p>
</div>
<blockquote style="margin-top:5.0pt;margin-bottom:5.0pt">
<p class="MsoNormal"><span lang="EN-US">Dear all,<u></u><u></u></span></p>
<p class="MsoNormal"><span lang="EN-US"> <u></u><u></u></span></p>
<p class="MsoNormal"><span lang="EN-US">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.<u></u><u></u></span></p>
<p class="MsoNormal"><span lang="EN-US"> <u></u><u></u></span></p>
<p class="MsoNormal"><span lang="EN-US">This is whether there
are any means to subject the exercise of “fiduciary
duties” (by the Board) to objective standards.<u></u><u></u></span></p>
<p class="MsoNormal"><span lang="EN-US"> <u></u><u></u></span></p>
<p class="MsoNormal"><span lang="EN-US">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.<u></u><u></u></span></p>
<p class="MsoNormal"><span lang="EN-US"> <u></u><u></u></span></p>
<p class="MsoNormal"><span lang="EN-US">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.<u></u><u></u></span></p>
<p class="MsoNormal"><span lang="EN-US"> <u></u><u></u></span></p>
<p class="MsoNormal"><span lang="EN-US">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.<u></u><u></u></span></p>
<p class="MsoNormal"><span lang="EN-US"> <u></u><u></u></span></p>
<p class="MsoNormal"><span lang="EN-US">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?)
<u></u><u></u></span></p>
<p class="MsoNormal"><span lang="EN-US"> <u></u><u></u></span></p>
<p class="MsoNormal"><span lang="EN-US">Hope this helps,<u></u><u></u></span></p>
<p class="MsoNormal"><span lang="EN-US"> <u></u><u></u></span></p>
<p class="MsoNormal"><span lang="EN-US">Regards<u></u><u></u></span></p>
<p class="MsoNormal"><span lang="EN-US"> <u></u><u></u></span></p>
<p class="MsoNormal"><span lang="EN-US">Jorge <u></u><u></u></span></p>
</blockquote>
<p class="MsoNormal"><span><br>
<br>
<u></u><u></u></span></p>
<pre>-- <u></u><u></u></pre>
<pre>*****************************<u></u><u></u></pre>
<pre>Mathieu WEILL<u></u><u></u></pre>
<pre>AFNIC - directeur général<u></u><u></u></pre>
<pre>Tél: <a href="tel:%2B33%201%2039%2030%2083%2006" value="+33139308306" target="_blank">+33 1 39 30 83 06</a><u></u><u></u></pre>
<pre><a href="mailto:mathieu.weill@afnic.fr" target="_blank">mathieu.weill@afnic.fr</a><u></u><u></u></pre>
<pre>Twitter : @mathieuweill<u></u><u></u></pre>
<pre>*****************************<u></u><u></u></pre>
</div>
</blockquote>
<br>
<pre cols="72">--
*****************************
Mathieu WEILL
AFNIC - directeur général
Tél: <a href="tel:%2B33%201%2039%2030%2083%2006" value="+33139308306" target="_blank">+33 1 39 30 83 06</a>
<a href="mailto:mathieu.weill@afnic.fr" target="_blank">mathieu.weill@afnic.fr</a>
Twitter : @mathieuweill
*****************************
</pre>
</div></div></div>
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