[CCWG-Accountability] Regarding Non-profit and public-benefit legal structure

[Carrie Devorah]

They are not a corporation. ICANN is a non-profit that jumped from over
$72,000,000 in 2012 reported to almost $250,000,000 in 2013 reported.

Where are you getting this "corporate" notion from? Is ICANN planning to
shift from non-profit to profit?

On Wed, Jan 7, 2015 at 11:06 PM, Edward Morris <emorris at milk.toast.net>
wrote:

> 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
> <https://community.icann.org/pages/viewpage.action?pageId=51416471>:
>
>
> 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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>>
>> --
>>
>> *****************************
>>
>> Mathieu WEILL
>>
>> AFNIC - directeur
>> général
>>
>> Tél: +33 1 39 30 83 06
>>
>> mathieu.weill at afnic.fr
>>
>> Twitter : @mathieuweill
>>
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-- 
Sincerely
CARRIE Devorah
 562 688 2883



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