* ALAC Statement on Revisions to Conflicts of Interest Policy and Bylaws to Allow Board to Consider Compensation for Director Services
* Revised and updated: ALAC Statement on Revisions to Conflicts of Interest Policy and Bylaws to Allow Board to Consider Compensation for Director Services
DRAFT TEXT
PROPOSED Statement of the At Large Advisory Committee (ALAC)
Advice to the ICANN Board regarding the proposed revisions to the Conflicts of Interest Policy and Bylaws, set forth in the call for Public Comment here: http://www.icann.org/en/announcements/announcement-01sep11-en.htm
The ALAC advises the ICANN Board to PROCEED with the proposed revisions of the Conflicts of Interest Policy and associated revision(s) of the ICANN ByLaws to facilitate and implement an appropriate compensation scheme for voting Board Directors an outlined in the December 2010 Accountability and Transparency Review Team (ATRT) recommendation #5.
“The Board should expeditiously implement the compensation scheme for voting
Directors as recommended by the Boston Consulting Group adjusted as necessary to
address international payment issues, if any”1
Detailed in further discussion in the report on the ATRT's WG #1 “Compensation of directors is an issue closely associated with the theme of developing the ICANN Boards’ experience and collective skill-set and has been the subject of independent review, Board Governance Committee discussion and ongoing Board consideration. To date, only compensation for the Board Chair has been decided. In order to help guide and structure the future process for improving the Board’s operations, it is critical that the matter of remuneration be resolved promptly.”2
ALAC also notes that the ATRT-final-recommendations report states that in their public consultations “Recommendation 5 was also widely supported but this has been slightly reworded to take into account comment received both from Board members and the community.”
And echoes the sentiments outlined in the ATRT's Final Report “Compensation of directors is an issue closely associated with the theme of developing the ICANN Boards’ experience and collective skill-set and has been the subject of independent review, Board Governance Committee discussion and ongoing Board consideration. To date, only compensation for the Board Chair has been decided. In order to help guide and structure the future process for improving the Board’s operations, it is critical that the matter of remuneration be resolved promptly.” page 18
Finally we note that these proposed revisions to the Conflicts of Interest Policy and ByLaws (as proposed) is in keeping with the original recommendations made in the independent Review of th ICANN Board in 2008 by the Boston Consulting Group/Colin Carter & Associates in November 20083 As well as the final report of the Board review Working Group was released in January 20104 Which states “The WG acknowledges the general support from independent consultants and the community for the proposal of compensating Directors for their services, with the Chair being compensated at some multiple of the standard Directors’ amount.” pages 18-19
________________________
Footnote References
1. http://www.icann.org/en/reviews/affirmation/atrt-final-recommendations-31dec10-en.pdf, p 2.
2. http://www.icann.org/en/reviews/affirmation/atrt-final-recommendations-31dec10-en.pdf, p 19.
3. http://www.icann.org/en/reviews/board/report-02nov08-en.pdf
4. http://www.icann.org/en/reviews/board/board-review-final-26jan10-en.pdf
7 Comments
Jean-Jacques Subrenat
The content seems fine.
The presentation should be improved. For instance,
- numbering of notes should be in a different case (or font, or colour) from the word or figure they refer to;
- where a note has been added, the rest of the sentence should not start with an upper-case letter.
Questions of presentation are of special importance in the case of legislative texts, bylaws or policy papers, as they become references for later consultation, debate and decision.
Cheryl Langdon-Orr
Yes indeed JJS the format is limited in the Wiki copy but the fonts etc., are 'more traditionally formatted' (as you indicate they should be) in the attached PDF copy... However after all comments and edits are made from discussions here a NEW formatted file is prepared and a standard cover note is prepared by staff before it is forwarded as a final that template is checked to be in proper format... and then the final document as transmitted is used to replace draft text document both here, and in any associated correspondence or Statement archives.
Eduardo Diaz
I believe there is a typo in the year after the word December in the first paragraph. Should it be 2010?
Cheryl Langdon-Orr
Nice catch Yup 2010 NOW changed in Wiki NOT however in the attached PDF file that can be changed after ALL comments are in...
Carlton Samuels
I am on record for strongly supporting Board compensation. The text is good enough to attract my support.
Ganesh Kumar
I concur, in principle, with the draft ALAC statement and recommendations to the ICANN board on the proposed revisions to the Conflicts of Interest Policy (“Policy”) and Bylaws to enable compensation for its directors. Such compensation is an accepted practice in the for-profit arena. Athough not so among the non-profit firms, given the requisite efforts from each of the directors as the guardians of public interest in the multi-stakeholder operating model, appropriate compensation is justifiable due to significance of the ICANN’s mission.
However I see ATRT recommendations as a step to achieve accountability and transparency objectives. Approaching ATRT recommendations as a mere checklist of tasks may not enable ICANN to embody its accountability and transparency aspirations into a reality in its entirety. To this end, I see further room for improvement in many aspects of the policy, than confining the scope of the changes to fulfill ATRT recommendation #5. After all with compensation comes higher standards of accountability and transparency and, therefore, handling conflicts are at the crux of the compensation issue.
From this standpoint, I recommend to expand the ALAC statement to urge the ICANN board to address the issue in a manner more comprehensive than the proposed tactical changes for it to adopt broader, but specific, “categorical standards of independence” as a prerequisite to allow compensation for its directors or at the minimum require the Board to commit to such a review in near future. The areas of my concern include:
1. Definitions of Conflicts: Article VI Section 6 of the bylaws and the Article VII Section 7.1 (d)(e) of the policy address the definitions of conflict. While the bylaws base its definition on Sections 5233 and 5227 of the California Nonprofit Public Benefit Corporate Law (conditions for directors to be deemed as “interested directors”), the policy considers a director as conflicted when the Board Governance Committee makes such determination following, possibly, a self disclosure. Collectively these definitions appear to be weak and/or ambiguous when compared to firms, albeit for-profit and publicly traded, that operate in multiple jurisdictions and are expected to meet high expectations of its stakeholders. I believe that ICANN, a representative of global interests and a pioneer of multi-stakeholder governance model, should similarly adopt broader “categorical standards of independence” than what is mandated by State law requirements for its incorporation. Furthermore, the definitions of conflict or independence could be specific, and not general or vague, in stating the (a) exact monetary levels beyond which “self-dealing” transactions may be considered as conflicts, (b) nature of material relationships, including but not limited to commercial, industrial, legal, consulting and familial relationships and ( c) other aspects that are appropriate to hold ICANN to higher standards as appropriate.
2. Detection of conflicts: Article V Section 5.1 and Article VI Section 6.1 of the policy address the annual statements and periodic reviews. However, the stated intent is to avoid any activities that contravene the non-profit status granted by State of California. If ICANN is to adopt broader standards as described above, these disclosures and reviews need to be augmented as well. Additionally, Article II Section 2.1 of the policy requires the covered person to disclose potential conflicts to the Board Governance committee within the scope of a transaction and abstain from voting if the committee recognizes the conflict. It is customary in public firms not just to rely on self disclosures, but also to create venues for employees and public to report any such potential conflicts to the Board.
3. Implications of conflict: Article II Section 2.2-2.5 of the policy specify the procedures to determine a conflict and the subsequent actions to be taken regarding the transactions in which a conflict was detected. These procedures appear to assume normal scenario of self disclosure and the subsequent efforts of the Board Governance Committee to investigate if the transactions had already taken place. However, neither the bylaws nor the policy seem to address failure to disclosure conflicts by a director and the subsequent discovery of it by Board Governance Committee. The policy should be specific in courses of action that will be taken by the board, as it gives the public a clear indication of resoluteness of the Board in holding itself to high standards.
I make these comments in full acknowledgement that I am not a legal expert, but these are best practices that are typical in the listed corporations in which I have spent all of my career in. The accountability, transparency and the independence of a board cannot be seen just as a legal requirement but a matter of stakeholder confidence in the efforts of the firm.
Cheryl Langdon-Orr
I'd be delighted to have included in our ALAC Statement as and expansion and proposal for points for the ICANN Board to "promptly consider and as deemed appropriate address in the near future" the aforementioned issues raised by Ganesh (as we are nit meant to be giving legal advice ( ICANN can and will seek its own in that) but we are as an Advisory Committee to give Advice and out opinion on issues and I concur with Ganesh on this, and further can state that this approach is consistent with a considerable amount of the views of the wider ICANN Community that was presented to the ATRT during our interactive phase of our review process; Therefore I suggest the following text changes to the draft:-
That the above draft text is continued with the following=>
" Further the ALAC urges the ICANN board to address the issue in a manner more comprehensive than the proposed tactical changes for it to adopt broader, but specific, “categorical standards of independence” as a prerequisite to allow compensation for its directors or at the minimum require the Board to commit to such a review in near future.
The specific areas of our concern include:
1. Definitions of Conflicts: Article VI Section 6 of the bylaws and the Article VII Section 7.1 (d)(e) of the policy address the definitions of conflict. While the bylaws base its definition on Sections 5233 and 5227 of the California Nonprofit Public Benefit Corporate Law (conditions for directors to be deemed as “interested directors”), the policy considers a director as conflicted when the Board Governance Committee makes such determination following, possibly, a self disclosure. Collectively these definitions appear to be weak and/or ambiguous when compared to firms, albeit for-profit and publicly traded, that operate in multiple jurisdictions and are expected to meet high expectations of its stakeholders. The ALAC recommends that ICANN, as a representative of global interests and a pioneer of multi-stakeholder governance model, should similarly adopt broader “categorical standards of independence” than what is mandated by State law requirements for its incorporation. Furthermore, the definitions of conflict or independence must be specific, and not general or vague, in stating the (a) exact monetary levels beyond which “self-dealing” transactions may be considered as conflicts, (b) nature of material relationships, including but not limited to commercial, industrial, legal, consulting and familial relationships and ( c) other aspects that are appropriate to hold ICANN to higher standards as appropriate.
2. Detection of conflicts: Article V Section 5.1 and Article VI Section 6.1 of the policy address the annual statements and periodic reviews. However, the stated intent is to avoid any activities that contravene the non-profit status granted by State of California. If ICANN is to adopt broader standards as described above, these disclosures and reviews need to be augmented as well. Additionally, Article II Section 2.1 of the policy requires the covered person to disclose potential conflicts to the Board Governance committee within the scope of a transaction and abstain from voting if the committee recognizes the conflict. The ALAC recommends that as is customary in public firms the ICANN Board not just to rely on self disclosures, but also creates venues/mechanisms for employees and public to report any such potential conflicts to the Board.
3. Implications of conflict: Article II Section 2.2-2.5 of the policy specify the procedures to determine a conflict and the subsequent actions to be taken regarding the transactions in which a conflict was detected. These procedures appear to assume normal scenario of self disclosure and the subsequent efforts of the Board Governance Committee to investigate if the transactions had already taken place. As neither the bylaws nor the policy seem to address failure to disclosure conflicts by a director and the subsequent discovery of it by Board Governance Committee. The ALAC recommends that the policy should be specific in courses of action that will be taken by the board, as it gives the public a clear indication of resoluteness of the Board in holding itself to high standards. "