[CCWG-Accountability] Regarding Non-profit and public-benefit legal structure
Edward Morris
emorris at milk.toast.net
Thu Jan 8 04:06:17 UTC 2015
A few comments on some quite interesting posts:
1. I think it is important to acknowledge at the outset that the only way we
will be able to create and implement any type of membership based
organisational structure is if everyone 1) checks their egos at the door, 2)
actually listen to the concerns and needs of the other groups and 3)
understands there will have to be a lot of compromises to get to a product
we can all live with, if not completely agree with in every detail.
I'm as big a supporter of creating a membership based ICANN as you're likely
going to find in the noncommercial community yet Robin is right: I could
never sell an organisational scheme to my colleagues that is based upon what
we consider to be the unequal and biased representation scheme embedded in
the constituency model. Yet I realise the commercial community, registrars -
on down the line - all groups have their own needs, wants and desires. We're
going to have to be creative, perhaps, for example, by creating different
membership classes, while recognising that 1) we don't have the time to
re-fight past battles and 2) every group in ICANN will have to buy into the
final product or we will not succeed. There are a lot of people on the
outside who believe we are destined to fail: let's not prove them right.
2. I agree with Greg: it's too early to sort exactly what powers we want to
give to Members. That said, if we are to become a California Public Benefits
Corporation with members, there are two potent statutory provisions of the
California Corporations Code that are designed to make the Board accountable
to its Members:
a. California Corporations Code §5222 allows Members to remove Board
members without cause provided certain voting thresholds are met. The
general rule is that a majority vote would suffice for the removal, but the
statute has a number of provisions that makes things a bit more complex. The
threshold is generally not something we would decide, it's there in the
statute.
b. California Corporations Code §5710 allows for Members Derivative
Actions. A derivative action is perhaps the most potent accountability tool
available for Members / shareholders in any corporation: the right to sue on
behalf of the corporation those harming the corporation. Well, it's a bit
more complicated than that but that is the general idea. I'm a huge
supporter of derivative actions as a means of ensuring the ultimate
accountability of the Board. I realise, however, not everyone shares my
enthusiasm and this may be a lightening rod for those opposing the
membership scheme.
3. I just wanted to briefly note that California Corporations Code §5152
does provide for something called "delegates" which have "some or all of the
authority of members". This could be considered if we decide to go to a
membership type based organization but don't want to give all of the
statutory powers provided under California law to our members.
Thanks to everyone for contributing to such a lively and important
conversation.
Best,
Ed Morris
-----Original Message-----
From: Robin Gross <robin at ipjustice.org>
To: Accountability Cross Community
<accountability-cross-community at icann.org>
Date: Wed, 7 Jan 2015 11:44:28 -0800
Subject: Re: [CCWG-Accountability] Regarding Non-profit and public-benefit
legal structure
One of the concerns I have with this proposed model is how non-commercial
users as a whole would be treated. Non-commercial users had to fight for
many years simply to achieve parity in representation with commercial users
within the GNSO. My concern is that this type of model simply re-opens the
door for non-commercial users to go back to a model of inequality with
commercial users (if representation rights are given to "constituencies"
rather than "stakeholder groups"). NCSG has members who do not belong to
any constituency or who belong to more than one. So the devil is in the
details of how these models are created. The same old battles fought among
stakeholders for greater proportional representation will carry over to the
development of the "member" model. It isn't a simple solution when you get
into the specific details of precisely how representation is apportioned.
Details like whether it is to "constituencies" or to "stakeholder groups"
have a lot of impact and will be hard fought as a result. So this 1 example
illustrates the concern I have about how this model could impact the
stakeholder group I represent and perhaps not be quite as simple as it seems
at first glance. I'm sure other stakeholders might have similar concerns.
Who is a "member" and how much proportional representation is afforded will
present the same old battles, just in a new suit.
Thanks,
Robin
On Jan 7, 2015, at 11:08 AM, Steve DelBianco wrote:
Some clarifications about the Member concept, as described on the Work Area
2 inventory:
Members are not outside of ICANN — they are designated by their respective
AC/SO/Constituencies. So not sure there is much risk that a majority of
these Members could be captured.
Members would be given only these enumerated powers:
Appoint members of Affirmation Review teams
Review [and perhaps reverse] any board decision. Non-approval would send
decision back to bottom-up policy development process.
Approve proposed changes to ICANN Bylaws or Articles of Incorporation.
Approve annual proposed budget
Members could not re-write contracts or budgets or bylaws. If a bottom-up
consensus process generated a bylaws change that was rejected by the board,
the Members could reverse that decision, however.
Steve DelBianco
From: Greg Shatan <gregshatanipc at gmail.com>
Date: Wednesday, January 7, 2015 at 12:45 PM
Cc: "accountability-cross-community at icann.org"
<accountability-cross-community at icann.org>
Subject: Re: [CCWG-Accountability] Regarding Non-profit and public-benefit
legal structure
I would not rush to the conclusion that a membership group is per se prone
to capture. A poorly designed membership group, yes. The devil is in the
details -- who are the members? if they are individuals, who do they
represent? how do they act? when can they act, and how quickly? how many of
them are there? what are their powers? who is excluded? are there classes of
members? is voting weighted?
Also, I'm not sure if (or why) the community accountability mechanism needs
to be "outside" (depending on what that means). Members in a membership
corporation are not really outside, unless I am not getting the sense of the
word as used here.
As for the dispute resolution mechanism, that will depend on the other two
factors (among other things). If the members have the "last word" on
something, and the board fails to act, binding arbitration (or litigation)
would be a reasonable step (although some escalation mechanisms might be
appropriate before getting there).
Greg Shatan
On Wed, Jan 7, 2015 at 10:37 AM, Paul Rosenzweig
<paul.rosenzweig at redbranchconsulting.com> wrote:
I think that the potential for capture of the outside member group is the
reason that the accountability system probably needs to be linked to an
independent judicial/arbitral function to resolve disputes. [Of course
that institution, too, could be captured … but at some point we have to
end the “who guards the guardians?” question]. And that, in turn
emphasizes why it is necessary as part of the transition to define the
Board’s/ICANN’s scope of authority. A judicial/arbitral function can
only resolve disputes and cabin capture/abuse if it has an articulated
standard against which to measure the dispute. In the absence of such
pre-existing guidance the judiciary/arbiter is simply substituting
his/her/its own judgment for the Board and the Community, which is not a
good thing.
Hence the bottom line: We need a) an outside accountability mechanism
representing the community; b) an independent dispute resolution mechanism;
and c) clearly articulated standards against which to measure and resolve
any dispute
Paul
From: Mathieu Weill [mailto:mathieu.weill at afnic.fr]
Sent: Wednesday, January 7, 2015 9:04 AM
To: accountability-cross-community at icann.org
Subject: Re: [CCWG-Accountability] Regarding Non-profit and public-benefit
legal structure
Dear Colleagues,
Many thanks for this very valuable discussion.
While it confirms that our initial orientation towards the ability to,
somehow, oversee the Board, is relevant and worth exploring, the latest
comments (regarding risk of capture) highlight that we should also
anticipate on the accountability of the overseeing mechanism itself.
If "the community" (through a mechanism yet to be determined) oversees Board
and staff, can we ensure all stakeholders, especially those who are less
familiar with Icann, that "the community", in turn, is accountable (ie has
the relevant independent checks and balances, review and redress mechanisms)
? A significant challenge, but I'm confident our group can address that.
This aspect might, however, need to be addressed in our definition of WS1,
if there is agreement that is a necessary element for the transition to take
place.
Best,
Mathieu
Le 07/01/2015 09:07, Dr Eberhard W Lisse a écrit :
I am not interested much in the details, interesting as they are :-)-O, but
would like to pick up on Bruce's last paragraph, because in my view, the
"membership supervision" is not going to help much as it is prone to
capture, quite the opposite of the accountability we want.
greetings, el
Sent from Dr Lisse's iPad mini
On Jan 7, 2015, at 02:40, Greg Shatan <gregshatanipc at gmail.com> wrote:
What Bruce has set forth is close to correct. However, I can't help but do
a little legal nit-picking.
"Public benefit corporation" is a term used in California (among other
places) as a term for non-profit corporations generally. (In New York
State, we use the term "not-for-profit corporation" to mean basically the
same thing as a California "public benefit corporation" (and we use the term
"public benefit corporation" to mean something quite different -- a
quasi-public corporation like the Metropolitan Transport Authority).)
California public benefit corporations are not really "chartered by the
state" (though New York ones like the MTA are chartered by the state).
[Wikipedia isn't always a great source....]
In California, public benefit corporations may be created with or without
members, or may convert from member to non-member and vice versa. However,
a public benefit corporation with members is still a public benefit
corporation.
(California also has "mutual benefit corporations" which are non-profit but
never charitable (and are also not tax-exempt). Mutual benefit corporations
are run for the benefit of their members, and not for the benefit of the
general public.)
The term "member" can also be used to mean people (or organizations) who
aren't really members. For instance, when you become a "member" of a
museum, you are not becoming a member of the corporation (i.e., what some in
ICANN-land have termed a "statutory member"). These non-statutory
"memberships" are more for marketing purposes and have no governance role.
"Statutory members" on the other hand, have a role in governance (which can
vary markedly depending on the by-laws of the particular corporation.
Hope this helps.
Best regards,
Greg Shatan
(Speaking for myself, and not giving legal advice as I am not a member of
the California Bar)
On Tue, Jan 6, 2015 at 6:54 PM, Bruce Tonkin
<Bruce.Tonkin at melbourneit.com.au> wrote:
Hello Phil,
>> I would envisage the Board having to be compliance with all Corporate
Governance Codes specific to Companies Law in the country of incorporation,
subject to a community consensus override. But what is its corporate status
- not for profit or for profit - as different codes would apply ?
The legal status of ICANN is as specified in its articles of incorporation:
https://www.icann.org/resources/pages/articles-2012-02-25-en
"This Corporation is a non-profit public benefit corporation and is not
organized for the private gain of any person. It is organized under the
California Non-profit Public Benefit Corporation Law for charitable and
public purposes. The Corporation is organized, and will be operated,
exclusively for charitable, educational, and scientific purposes within the
meaning of § 501 (c)(3) of the Internal Revenue Code of 1986, as amended
(the "Code"), or the corresponding provision of any future United States tax
code. Any reference in these Articles to the Code shall include the
corresponding provisions of any further United States tax code."
Also from:
http://en.wikipedia.org/wiki/Public-benefit_nonprofit_corporation
"A public-benefit non-profit corporation is a type of non-profit
corporation chartered by a state government, and organized primarily or
exclusively for social, educational, recreational or charitable purposes by
like-minded citizens. Public-benefit nonprofit corporations are distinct in
the law from mutual-benefit nonprofit corporations in that they are
organized for the general public benefit, rather than for the interest of
its members."
I believe it was deliberately set up as public benefit rather than a member
organization - to avoid the situation where the members become limited to
say gTLD registries and registrars and hence it ends up operating primarily
for the benefit of the domain name registration industry.
Any move away from a public-benefit corporation to a membership corporation
- would need to carefully consider how to ensure that the members are
reflective of the broader Internet community and don't become limited to a
few members as interest in "ICANN" drops over time. I.e. a failure
scenario of membership organisation is what happens to the membership base
over time and how it can be protected from capture. I have seen some
membership based ccTLDs get into problems when their membership becomes
dominated by domain name investors for example.
Regards,
Bruce Tonkin
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