[bc-gnso] ICANN Board approved resolution to replenish Reserve Fund (incl $36 million from auction proceeds)

Thu Oct 25 09:58:16 UTC 2018

Here’s the scribe feed from today’s board meeting in Barcelona, regarding replenishment of the ICANN Reserve Fund.

THE NEXT RESOLUTION, ITEM 2. E, RESERVE FUND REPLENISHMENT STRATEGY, RON da SILVA.  RON.
>>RON DA SILVA:  THANK YOU, CHERINE.  ONE OF THE KEY RESPONSIBILITIES OF THE BOARD IS FIDUCIARY OVERSIGHT AND THE OPERATING RESERVES FALLS DIRECTLY INTO THIS REMIT.  IN RECENT YEARS, WE HAD -- WE MADE A SIGNIFICANT WITHDRAWAL FROM THE RESERVE FUND TO FINANCE THE TRANSITION.  ALSO, WE HAD SIGNIFICANT INCREASES IN BOTH FUNDING AND EXPENSES LEADING UP TO THAT TRANSITION.
AS WE LOOKED AT REPLENISHING THE RESERVES, IT WAS A NATURAL OPPORTUNITY TO REVIEW THE APPROPRIATE LEVEL AND TO IDENTIFY MECHANISMS TO MEET THAT OBJECTIVE.
WE ENTERED INTO AN ITERATIVE EFFORT WITH THE COMMUNITY AND ASSESSED THE INDUSTRY NORMS AND COMPARATIVES FOR BEST PRACTICES.  THROUGH THIS CONSULTATIVE PROCESS, WE CONCLUDED ON AN APPROPRIATE LEVEL TO BE SET AT ONE YEAR OF OPERATING EXPENSES COMPARED TO THE CURRENT BUDGET, THAT WOULD PUT US AT AN OBJECTIVE OF AROUND $138 MILLION.  WITH THE RESERVE BALANCE AROUND $70 MILLION, THAT IDENTIFIED A SHORTFALL OF 68 MILLION.
WE SIMILARLY INVITED THE COMMUNITY INPUT AS WE ASSESSED SEVERAL MECHANISMS TO MEET THAT $68 MILLION SHORTFALL.  THERE WAS VERY LITTLE SUPPORT FOR RAISING FEES, EITHER FOR  ONE-TIME PURPOSE OR BROADLY ACROSS SERVICES.  WE LISTENED TO THIS AND RECOMMEND TO LOOK AT OTHER MECHANISMS.
ANOTHER OPTION WAS TO CONSIDER THE LATEST ROUND OF gTLD  FUNDS.  THERE WAS SOME INTEREST IN CONSIDERING THIS FROM THE COMMUNITY BUT ALSO BROAD OBJECTIONS, BESIDES THERE ARE STILL EXPENSES RELATED TO THIS PROGRAM AND WE AREN'T PREPARED TO CONSIDER THAT UNTIL ANY LITIGATION RISKS ARE BOUNDED AND ANY REMAINING CONTENTION STRINGS ARE RESOLVED.  BECAUSE OF THESE REASONS, WE ARE RECOMMENDING THE BOARD NOT TO CONSIDER THIS AS A MECHANISM TO REPLENISH THE  RESERVES EITHER.
SO THAT LEAVES TWO OPTIONS.  EITHER FROM THE AUCTION PROCEEDS OR FROM THE OPERATING  EFFICIENCIES.  WE DISCUSSED A LOT SOCIALIZING USING THE $36 MILLION FROM THE AUCTION PROCEEDS, AND REALLY THAT'S TO MATCH THE AMOUNT THAT WAS WITHDRAWN FOR THE COST OF THE TRANSITION.  THAT LEAVES A SIMILAR BALANCE THEN OF $32 MILLION AS A TASK TO THE CEO TO IDENTIFY FROM OPERATIONS.  AND BOTH OF THESE OPTIONS, THERE WAS BROUGHT SUPPORT FROM THE COMMUNITY BOTH FROM AUCTION PROCEEDS AND FROM OPERATIONS.  AND WE BELIEVE THIS BALANCED APPROACH BEST ALIGNS WITH THAT INPUT AND IS PRUDENT TO AADDRESS THE SHORTFALL OF THE RESERVES.  IN FACT, IN FY18, WE JUST APPROVED $3 MILLION OF OPERATING FUNDS TO BE DEPOSITED INTO THE RESERVES.  AND SIMILARLY IF YOU RECALL IN FY17, AN AMOUNT OF $5 MILLION.  THAT'S 8 MILLION OVER THE PAST TWO YEARS  PRIMARILY FROM LIMITED STAFF GROWTH AND FINDING OPERATIONAL EFFICIENCIES BUT WITHOUT  IMPACTING THE ABILITY TO DELIVER ON OUR MISSION.
THUS, ASKING THE CEO TO ACCOMMODATE A SIMILAR DISCIPLINE ANNUALLY MEANS WE WILL HIT THAT $32 MILLION OBJECTIVE BY AT MOST EIGHT YEARS.  WE IMMEDIATELY -- WILL IMMEDIATELY MOVE THE $36 MILLION FROM THE AUCTION PROCEEDS AND THEREBY HAVE A PLAN TO CLOSE THE REMAINING GAP IN THE YEARS AHEAD.
THIS IS GOING TO REQUIRE REGULAR AND ONGOING PRIORITIZATION.  THIS IS A THEME I THINK WE'RE HEARING OVER AND OVER.  THIS HAS GOT TO BE COLLABORATIVE.  AND FOCUSING ON PART OF THE ORGANIZATION AND THE COMMUNITY TO ACHIEVE THAT.
THIS WILL ALIGN NICELY -- WE'VE TALKED ABOUT THIS THROUGHOUT THE WEEK -- WITH THE FIVE-YEAR STRATEGIC PLAN, CORRESPONDING FIVE-YEAR OPERATING PLAN, AND A FIVE-YEAR FINANCIAL PLAN.  WITH ONGOING DISCIPLINE AND PRUDENCE, THIS IS GOING TO HELP US FOCUS ON THE CORE MISSION AND MEET THE RESERVE FUND OBJECTIVE FOR FINANCIAL SECURITY.
AS A RECAP, I'LL READ THROUGH THE WHEREASES AND THEN OPEN IT FOR DISCUSSION.
WHEREAS, THE BOARD CONFIRMED BY PREVIOUS DECISION THAT THE TARGET LEVEL OF THE ICANN RESERVE FUND SHOULD BE AT A MINIMUM EQUIVALENT TO 12 MONTHS OF OPERATING EXPENSES.
WHEREAS, THE CURRENT LEVEL OF THE RESERVE FUND IS APPROXIMATELY $70 MILLION AS OF JUNE 30, 2018, REFLECTING A SHORTFALL COMPARED TO THE MINIMUM TARGET LEVEL OF APPROXIMATELY $68 MILLION.
WHEREAS, ICANN ORGANIZATION POSTED FOR PUBLIC COMMENT A PROPOSED STRATEGY TO REPLENISH THE RESERVE FUND AND THE BOARD TOOK ALL COMMENTS SUBMITTED INTO ACCOUNT TO DETERMINE THE FINAL RESERVE FUND REPLENISHMENT STRATEGY.
WHEREAS, THE PROPOSED REPLENISHMENT STRATEGY ENTAILS ALLOCATING THE RESERVE FUND, (I) ANNUALLY, FROM ANNUAL  OPERATIONAL EXCESS OF FUNDING OVER EXPENSES FOR A TOTAL OF $32 MILLION OVER AN EIGHT-YEAR PERIOD; AND, (II), 36 MILLION OF A NEW gTLD AUCTION PROCEEDS.
I WILL OPEN IT TO DISCUSSION AND THEN COME BACK WITH THE RESOLUTIONS.
I SEE AVRI.  YES.
>>AVRI DORIA:  THANK YOU.  THIS HAS BEEN A VERY DIFFICULT DISCUSSION FOR ME AND A DIFFICULT DECISION FOR ME.  I HAVE LONGED BELIEVE THAT THE MONIES OF AUCTION OF LAST RESORT SHOULD BE DEALT WITH BASED ON COMMUNITY RECOMMENDATIONS.  HISTORICALLY, I HAVE BEEN VERY VOCAL AND, IN FACT, RATHER STRIDENT ON IT AT TIMES.
ORIGINALLY, I FELT THAT THE METHODS FOR DETERMINING HOW TO DEAL WITH THESE FUNDS SHOULD BE DEALT WITH BEFORE WE HAD THE FUNDS AND BEFORE HAVING THE FUNDS IN OUR HANDS STARTED TO INFLUENCE OUR THINKING.
THAT WAS NEVER THE CONSENSUS OF THE COMMUNITY OR OF THE BOARD.  THE BOARD AND THE COMMUNITY SAID LET'S WAIT AND SEE HOW MUCH MONEY WE HAVE BEFORE WE KNOW WHAT KIND OF PROCESS WE NEED TO PUT IN PLACE.
IT'S BEEN TWO YEARS NOW SINCE THE AUCTIONS CROSS-COMMUNITY WORKING GROUP WAS FORMED AND STARTED WORKING ON THE PROBLEM OF HOW TO USE THE FUNDS AND LIKE MANY, I AWAIT THEIR RECOMMENDATIONS ON WHAT TO DO ABOUT IT.
IN THE MEANTIME, THE PRESSURES OF THE RESERVE FUND AND THE MANDATE THAT THE FUND BE REPLENISHED AFTER THE TRANSITION COSTS HAVE BECOME A PRIMARY  NEED, HAVE BECOME A FOCUS.  THERE HAS ALWAYS BEEN THE DISCUSSIONS AMONG THE COMMUNITY AND SUCH.  AND WHILE THERE CERTAINLY ISN'T UNANIMITY ON THE ISSUE, THERE IS STRONG SUPPORT AS FAR AS I CAN TELL FOR THESE FUNDS TO BE PUT IN THE RESERVE.
SO GIVEN THE NEED, GIVEN THE APPARENT SUPPORT WITHIN THE COMMUNITY FOR THIS MOVE, I BASICALLY AM ALLOWING THAT TO SORT OF OVERRULE MY STILL VERY STRONG FEELING AND COMMITMENT TO THE NOTION THAT ALL MONIES FROM THE AUCTIONS OF LAST RESORT SHOULD BE DETERMINED BY THE COMMUNITY AND I'M HOPING TO SEE A DECISION, A RECOMMENDATION FROM THE CCWG IN SOON TIME.  THANK YOU.
>>RON DA SILVA:  THANK YOU,  AVRI.
LITO.
>>LITO IBARRA:  THANK YOU, RON.  I JUST WANTED TO STRESS THE FACT THAT REGARDING THE FIRST RESOLUTION ABOUT THE 32 MILLION, IT'S A SAVINGS THAT WE ARE PROPOSING TO MAKE DURING THE SEVEN TO EIGHT YEARS' PERIOD.  AND I WANTED TO STRESS THIS IS A JOINT COMMITMENT BETWEEN THE BOARD, ORG, AND COMMUNITY TO GET TO THAT OBJECTIVE OF SAVING 32 MILLION IN THIS PERIOD OF TIME.  SO I JUST WANTED TO STRESS THIS IS A COMMUNITY WORK.  IT'S A JOINT COMMITMENT AMONG ALL OF US.  THANK YOU.

>>RON DA SILVA:  KHALED.
>>KHALED KOUBAA:  THANK YOU, RON.  I THINK IT'S ALSO IN OUR DUTY AS BOARD TO STRESS ON THE IMPORTANCE OF THE REPLENISHMENT OF THE RESERVE FUND.  THIS IS VERY IMPORTANT FOR THE CONTINUITY OF THE ORGANIZATION AND THE ICANN STABILITY AND FINANCIAL STABILITY, SO IT HAS BEEN A LONG DISCUSSION WITHIN THE BOARD FINANCE COMMUNITY WITHIN THE BOARD ABOUT HOW TO DO IT.  IT WAS REALLY AN IMPORTANT DECISION FROM OUR SIDE.  MY PERSONAL VIEW WAS NOT TO PUT A LOT OF PRESSURE ON THE ICANN ORG BECAUSE I KNOW THAT IT NEEDS AS WELL SOME SORT OF MAYBE HARD DECISION TO MAKE IN CHOOSING BETWEEN ACTIVITIES.  THERE WERE AN INSURANCE FROM ICANN ORG WHICH I THINK GORAN AND XAVIER FOR THE HARD WORK THEY HAVE BEEN DOING.  THERE WERE ASSURANCE THAT THE -- THE AMOUNT THAT WOULD BE SAVED FROM THE BUDGETS WILL NOT IMPACT THE COMMUNITY WORK, AND THAT WAS AN IMPORTANT ELEMENT IN OUR DECISION, TO EN E SURE THAT THE COMMUNITY STILL CONTINUED TO DO ITS WORK WITHOUT ANY IMPACT ON THE OPERATIONS.  SO I WOULD LIKE TO THANK THE ICANN ORG AND STRESS ON THE FACT THAT IT HAS BEEN AN IMPORTANT DECISION FOR US TO MAKE.  THANK YOU.
>>RON DA SILVA:  THANK YOU, KHALED.  RAM.
>>RAM MOHAN:  THANK YOU, RON.  SECURITY AND STABILITY IS NOT JUST FOR THE TECHNICAL INFRASTRUCTURE AND THE UNIQUE IDENTIFIER SYSTEM THAT WE -- ICANN HELPS BE A STEWARD OF.  IT IS ALSO ABOUT THE STABILITY OF THE ORGANIZATION AND TO ENSURE THAT THE ORGANIZATION IS ABLE TO HANDLE BLACK SWAN EVENTS.  SOME FOLKS IN THE COMMUNITY IN OUR DISCUSSIONS -- NO, MA'AM FOLKS IN THE COMMUNITY HAVE SUGGESTED THAT THERE'S NO REQUIREMENT OR NO NEED EVEN TO TARGET 12 MONTHS OF EXPENSES AS A RESERVE FUND LEVEL.  THAT PERHAPS IT IS OKAY TO RUN WITH A MUCH SMALLER NUMBER OF MONTHS AS THE RESERVE.  I'VE HEARD THREE MONTHS.  I'VE HEARD SIX MONTHS AS APPROPRIATE LEVELS.  AND IN FACT, THERE HAVE BEEN SOME COMMUNITY MEMBERS WHO HAVE SAID YOU REALLY DON'T NEED IT AT ALL.
THE REAL ISSUE FOR THE COMMUNITY AS WELL AS FOR ICANN TO UNDERSTAND IS THAT THE CLEAR INTENT HAS TO BE TO SAFEGUARD THE STABILITY ORGANIZATION AS IT EXISTS TODAY.  AND CERTAINLY ALL THE EFFICIENCIES THAT CAN BE BROUGHT TO BEAR MUST BE BROUGHT TO BEAR.  THAT'S SOMETHING THAT THE ICANN ORG HAS TO DO.  BUT REGARDLESS OF ALL OF THAT, FROM A PURE STABILITY PRINCIPLE, WE REALLY OUGHT TO KEEP IN MIND THAT 12 MONTHS IS A PRUDENT AMOUNT.  IT'S A PRUDENT NUMBER.  IT LOOKS LIKE IT'S A VERY LARGE AMOUNT, BUT IT ACTUALLY -- IF THERE IS A BLACK SWAN EVENT, YOU MAY ACTUALLY NEED THAT IN A REAL HURRY.  SO I'M -- I'M GLAD THAT THE BOARD IS GOING DOWN THIS DIRECTION, AND I'M ALSO PLEASED THAT MANY MEMBERS OF THE COMMUNITY SUPPORT THE MODEL WHERE THERE ARE 12 MONTHS OF RESERVES.  I HOPE THAT WE CONTINUE TO EVALUATE WHAT IS AN APPROPRIATE NUMBER -- AMOUNT OF RESERVE AND WHAT ARE THE NUMBER -- APPROPRIATE NUMBER OF MONTHS, ET CETERA.  THAT'S A BENCHMARKING EXERCISE THAT OUGHT TO BE DONE WITH SOME REGULARITY.  BUT AT THE SAME TIME, I REALLY HOPE THAT WE DON'T SACRIFICE THE PRINCIPLE OF STABILITY OR THE ORGANIZATION AND THE RISK APPETITE THAT THE ORGANIZATION REALLY OUGHT TO TAKE IN FAVOR OF JUST NOT HAVING THAT AMOUNT OF MONEY ALLOCATED.  THANK YOU.
>>RON DA SILVA:  THANK YOU, RAM.  MATTHEW.
>>MATTHEW SHEARS:  THANK YOU.  I WOULD LIKE TO RECOGNIZE THE COMMUNITY INPUT ON THIS CHALLENGING ISSUE AND INDEED ITS DIVERSITY.  I THINK THIS HAS -- THE BOARD HAS RECOGNIZED THIS DIVERSITY AND WE HAVE DISCUSSED THIS ISSUE AT CONSIDERABLE LENGTH.  THE RESULT THAT YOU'RE SEEING BEFORE YOU, I BELIEVE, IS A RESPONSIBLE AND BALANCED WAY FORWARD, RECOGNIZING IT MIGHT NOT BE TO THE LIKING OF SOME.  OTHERS HAVE PROPOSED AS RAM HAS SAID THAT THERE BE MORE ALLOCATED FROM THE AUCTION PROCEEDS.  BUT I THINK THIS REPRESENTS THE RIGHT WAY FORWARD AND THE BALANCED WAY FORWARD.  THANK YOU.
>>RON DA SILVA:  THANK YOU, MATTHEW.  LOUSEWIES.
>>LOUSEWIES VAN DER LAAN:  I THINK KHALED, RAM, AND MATTHEW BEAUTIFULLY SAID WHAT I WAS GOING TO SO NO NEED.
>>RON DA SILVA:  THANK YOU, LEON.
>>LEON SANCHEZ:  I JUST WANT TO ECHO WHAT'S BEEN SAID BY MY COLLEAGUES BUT I ALSO WANT TO ADD THAT I THINK IT'S IMPORTANT THAT WHATEVER SAVINGS THE ORGANIZATION HAS IN ORDER TO FULFILL THESE 32 MILLION TRANSFER OVER THE EIGHT YEARS CAUSES THE LESS IMPACT POSSIBLE TO THE COMMUNITY PROGRAMS THAT HAVE BEEN AFFECTED SO FAR WITH THESE -- WITH THESE SAVINGS.  SO I REALLY URGE US AS BOARD AND THE ORGANIZATION TO WORK IN A WAY WITH THE COMMUNITY TO FIND WAYS TO -- TO LESSEN THE IMPACT THAT THE SAVINGS MAY HAVE ON COMMUNITY PROGRAMS.
>>RON DA SILVA:  THANK YOU, LEON.  AKINORI.
>>AKINORI MAEMURA:  YES, THANK YOU, I'M JUST JOINING RON -- RAM, SORRY, ON WHAT HE SAID.  THE STABILITY OF THE (INDISCERNIBLE) IN THE RESILIENCY OF THE SYSTEM.  THAT'S NOT -- NOT MEANING ONLY WE DO THAT IN THE TECHNICAL MANNER BUT ALSO IT IS VERY IMPORTANT TO SECURE THE STABILITY OF THE -- THE CORPORATE MANAGEMENT ITSELF.  THEN THAT 12 MONTHS OF THE RESERVE IS NEVER TO BE TOO WEALTHY.  QUITE -- QUITE MODEST -- MODEST LEVEL OF THE RESERVE.  I'M REALLY APPRECIATE TO HAVE -- HAVE THAT LEVEL RETAINED.  AND THEN AS ALREADY SAID, THE TO REPLENISH THE RESERVES FROM THE AUCTION PROCEEDS IS QUITE A BIG DECISION BUT IT IS -- IT IS BENEFITING IN STABILIZING THE OPERATION OF ICANN.  THAT'S MY BELIEF AND THAT'S THE REASON WHY I AM SUPPORTING THIS.  THANK YOU.
>>RON DA SILVA:  GREAT.  THANK YOU, AKINORI.  SARAH.
>>SARAH DEUTSCH:  THANKS, RON.  YEAH, I JUST WANTED TO JOIN MY COLLEAGUES IN SUPPORTING 12-MONTH RESERVE.  I THINK IT'S A VERY RESPONSIBLE PRACTICE FOR ANY NONPROFIT.  ESPECIALLY ONE AS LARGE AS ICANN.  VERY HAPPY THAT COMMUNITY MEMBERS RECOGNIZE AND SUPPORT A ROBUST RESERVE AND I ALSO THINK THAT WE NEED TO KEEP IN MIND THAT THIS RESERVE PROTECTS THE ENTIRE COMMUNITY IN THE CASE OF UNFORESEEN EVENTS OR ANY KIND OF EMERGENCIES, SO IT'S QUITE RESPONSIBLE AND PRUDENT AND I'M GLAD WE'RE DOING IT.  THANK YOU.
>>RON DA SILVA:  THANK YOU, SARAH.  ANY FURTHER DISCUSSION?  BROAD SUPPORT.  BUT A LOT OF DISCUSSION.  APPRECIATE THAT.  I WILL READ THE RESERVE -- THE RESOLUTIONS AND HAND IT BACK TO YOU CHERINE.  THERE ARE TWO.  SO RESOLVED THE BOARD DIRECTS THE PRESIDENT AND CEO OR HIS DESIGNEES TO TAKE ALL ACTIONS NECESSARY TO INCREASE THE RESERVE FUND THROUGH ANNUAL EXCESS FROM THE OPERATING FUND OF ICANN ORGANIZATION BY A TOTAL OF $32 MILLION OVER A PERIOD OF SEVEN TO EIGHT YEARS, STARTING IN FY '19.
RESOLVED, THE BOARD DIRECTS THE PRESIDENT AND CEO OR HIS DESIGNEE TO TAKE ALL ACTIONS NECESSARY TO ALLOCATE $36 MILLION OF AUCTION PROCEEDS TO THE RESERVE FUND AS SOON AS TECHNICALLY FEASIBLE.  CHERINE.
>>CHERINE CHALABY:  THANK YOU VERY MUCH.  AND THANK YOU THE BOARD FOR THE -- FOR THE DISCUSSION AND THIS HAS BEEN GOING ON FOR A GOOD SEVEN MONTHS, THE BOARD DISCUSSION ON THIS AND I THINK WE'VE DONE OUR DUE DILIGENCE AND I THANK THE BOARD FOR A GOOD RESOLUTION, WELL BALANCED.  WHO WOULD LIKE TO MOVE THIS RESOLUTION?  RAM?  SORRY.  RON.  OKAY RON.  SORRY.  WHO WOULD LIKE TO SECOND?  SARAH RAISED HER HAND.  SARAH.  ANY FURTHER DISCUSSIONS?  OKAY.  ALL OF THOSE FOR SAY AYE.
[CHORUS OF AYES. ]
ANYONE AGAINST?  ANY ABSTENTION?  THANK YOU.  THE RESOLUTION IS PASSED.
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