[CCWG-ACCT] question on fiduciary duties and their objectivity

Fri Oct 2 15:06:06 UTC 2015

I believe the business judgment rule gets interpreted somewhat differently
in the non-profit context, since the duties of a non-profit director are
not solely to the corporation, but need to take into account the public
benefit for which the corporation was established.  It's all part of the
bigger question about fiduciary duty.

The idea of independent counsel for board members is an interesting one.
It's not uncommon in the corporate governance world, as far as I understand.

Greg

On Fri, Oct 2, 2015 at 10:43 AM, Rubens Kuhl <rubensk at nic.br> wrote:

>
> Mathieu,
>
> I think Jorge might be wanting the opposite of what you described, which
> is imposing constraints in fiduciary duties trumping community interests.
> Either way, it could also be interesting to understand if under California
> law the "business judgment rule" (
> https://en.wikipedia.org/wiki/Business_judgment_rule) could allow a board
> member to choose a course of action that contradicts the corporation
> interests, as long as it follows community interests. Even though the
> Bylaws already contain deference to such community interests, in real life
> a board member might feel under pressure of the corporate machine to follow
> such a direction...
>
> ... I also wonder whether what the CCWG has, independent Legal Counsel,
> also could be useful to board members so they can be assured that they can
> vote with the community best interest in mind, when the corporation starts
> pushing toward a direction that does not fit the community or his/her own
> beliefs of where global public interest would be.
>
>
> Rubens
>
>
>
> Em 2 de out de 2015, à(s) 11:25:000, Mathieu Weill <mathieu.weill at afnic.fr>
> escreveu:
>
> Hi Jorge,
>
> 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.) ?
>
> This is certainly an aspect we need to clarify .
>
> Best
> Mathieu
>
> Le 02/10/2015 11:43, Jorge.Cancio at bakom.admin.ch a écrit :
>
> Hi Mathieu,
>
> 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.
>
> I’ve tried to specify the question a bit more, and it would look as
> follows:
>
> 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:
>
> ·         concretizing these fiduciary duties in the Bylaws;
>
> ·         subjecting their correct interpretation to arbitration;
>
> ·         imposing special requirements on the rationale needed to be
> provided if they are used to override community decisions;
>
> ·         imposing extra-supermajorities in the Board in order to being
> able to invoke such duties?
>
> 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.
>
> Please let me know if you can proceed with this.
>
> Regards
>
> Jorge
>
>
> *Von:* Mathieu Weill [mailto:mathieu.weill at afnic.fr
> <mathieu.weill at afnic.fr>]
> *Gesendet:* Freitag, 2. Oktober 2015 11:06
> *An:* Cancio Jorge BAKOM <Jorge.Cancio at bakom.admin.ch>
> <Jorge.Cancio at bakom.admin.ch>; accountability-cross-community at icann.org
> *Cc:* leonfelipe at sanchez.mx; thomas at rickert.net
> *Betreff:* Re: question on fiduciary duties and their objectivity
>
> Dear Jorge,
>
> 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.
> $
>
> 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 :
>
> o   Clarifying understanding of the fiduciary duties of Board Directors
> and related expectations concerning Director behavior for the Board.
>
>
> 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 (
> https://community.icann.org/download/attachments/52890082/Combined%20CCWG%20Cover%20Memo%20and%20Templates.pdf?version=3&modificationDate=1428797461000&api=v2)
> which addresses the balance between accountability and decision making
> authority.
>
> 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) ?
>
> Best
> Mathieu
>
> Le 01/10/2015 10:41, Jorge.Cancio at bakom.admin.ch a écrit :
>
> Dear all,
>
> 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.
>
> This is whether there are any means to subject the exercise of “fiduciary
> duties” (by the Board) to objective standards.
>
> 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.
>
> 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.
>
> 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.
>
> 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?)
>
> Hope this helps,
>
> Regards
>
> Jorge
>
>
>
> --
>
> *****************************
>
> Mathieu WEILL
>
> AFNIC - directeur général
>
> Tél: +33 1 39 30 83 06
>
> mathieu.weill at afnic.fr
>
> Twitter : @mathieuweill
>
> *****************************
>
>
> --
> *****************************
> Mathieu WEILL
> AFNIC - directeur général
> Tél: +33 1 39 30 83 06mathieu.weill at afnic.fr
> Twitter : @mathieuweill
> *****************************
>
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