[Eg-oversight-board] Fwd: Evergreen ByLaw Comments

Mon May 7 12:03:16 EDT 2018

Mike,
Sorry to be late in responding...

We at NOBLE use email votes (sparingly) and they can be effective and leave
a good audit trail.  I would support that capability for Evergreen.

As to the Executive Committee, I would have concerns about that -- can it
be larger than two for a minimum?

For budget, I would go along with your suggestion of 10%.

Email for notice is good.

President and Treasurer should be different persons.

Thanks!

Ron

On Fri, May 4, 2018 at 11:40 AM, Mike Rylander <miker at equinoxinitiative.org>
wrote:

> All,
>
> As promised, here is the initial response from MOBIUS' lawyers to Karen's
> direct comments and suggestions.
>
> I said before that the suggestions were mostly rejected, but that isn't
> quite right.  The lawyers are starting from an adversarial position, which
> is understandable given their stated past experience, as opposed Karen's
> suggestions starting from a more amicable default.  As a practical matter,
> I take Karen's suggestions as an aim to streamline and simplify
> communication and action in the common case, whereas the MOBIUS' lawyer's
> apply more structure up front in an attempt to protect against "activist
> directors" (their words in one case).  The question before us is which do
> we want to enshrine in our by-laws -- my interpretation of the choice could
> be summed up as: do we value efficiency and assumption of good-faith over
> prescribed defenses against internal strife?
>
> I can be convinced in either direction, but I tend towards the former by
> default.
>
> To be clear on my position, I believe that most of Karen's suggestions
> (particularly on practical matters such as the use of email for certain
> functions) do not weaken any overall protections we have, and just avoid
> overhead given the way our community works.  The biggest issue surrounds
> indemnity, which we can discuss in more detail, but the example I provided
> works to limit the issues raised below by restricting indemnity to only
> litigation that arrises from the fact that a director was, in fact, a
> director.  Anyway, I would appreciate all input you care to provide.
> Thoughts?
>
> Thanks again, everyone!
>
> --
> | Mike Rylander
> | President
> | Equinox Open Library Initiative
> | phone:  1-877-OPEN-ILS (673-6457)
> | email:  miker at EquinoxInitiative.org
> | web:    http://EquinoxInitiative.org
>
>
> ---------- Forwarded message ---------
> From: Donna Bacon <donna at mobiusconsortium.org>
> Date: Thu, May 3, 2018 at 9:13 AM
> Subject: Evergreen ByLaw Comments
> To: Mike Rylander <miker at equinoxinitiative.org>
>
>
> Mike,
>
> See the comments below from our attorneys.
>
> Most of these comments relate to the committees permitted under the
> bylaws.  While it is standard to contemplate such committees being formed
> in the corporate documents, as a practical matter, entities of this size
> actually forming sub-committees is rare and it is much more common for the
> whole board to oversee the operations.  Please see our comments in red
> below.
>
>
>
> Section 3:15 Actions By Board Without A Meeting
>
> Under the draft bylaws all decisions must be taken in a meeting, or
> otherwise the only mechanism is by unanimous written consent. The bylaws
> are silent as to whether email constitutes proper written consent. You may
> want to make this looser so that a majority of the board can vote by email
> without a meeting. This has been a major pain point for other orgs I've
> worked with.
>
>
>
> Generally speaking we do not recommend email as sufficient for unanimous
> written consent due to the record keeping requirements for corporate
> entities.  How Evergreen has described its decision-making process is that
> the board will make a decision, likely via internet chat and without a
> formal meeting, and then document that decision in a resolution that is
> circulated and signed by all of the board members.  That final, signed
> resolution then goes into the corporate record book.  This avoids questions
> as to the final language that was approved, makes it easier to ensure all
> signatures are obtained, and is a best practice for the
> statutorily-required record keeping.
>
> Section 4:1  The Executive Committee.
>
> The executive committee section is very strong, which is ok if you're
> careful (the board can appoint a committee of only 2 people to do almost
> everything the board does). So I wanted to flag that.
>
>
>
> Does Evergreen want to change this?  Note, as written the board has
> discretion over whether to even form an executive committee and which
> powers to give it.  There are carve-outs explicitly listed for certain
> actions the board cannot designate.  As written, this gives flexibility to
> the board on whether to create the committee and whether to give it very
> limited or very broad powers.
>
> Section 4:2 The Finance Committee.
>
> This says that any major change in the budget must be approved by the
> Board. This is vague and is silent as to materiality. It may be better to
> give the committee a little bit of clear flexibility in case you do form a
> finance committee.
>
>
>
> Does Evergreen want to change this?  Note, as written the board has
> discretion over whether to even form the financial committee.  To keep
> controls on the committee, its powers are limited to exceed or change the
> budget, which is left in control of the board.  This is fairly standard.
>
> Section 4:5 Meetings of Committees.
>
> You may want to amend this to permit the use email for notice.
>
>
>
> We generally do not permit email for required statutory notices as the
> Missouri statutes do not specify the effective date for electronic notice
> absent proving the email was received.  If there is a dispute between the
> corporation and a board member, this can be difficult.  With mail, the
> statutes specify the effective date based on the mailing without requiring
> proof of receipt.  Moreover, any regular meetings of the committee do not
> require notice; notice only applies if there is a special meeting outside
> of the normal schedule.  As most decisions will likely be made outside of
> official meetings, those will be evidenced by a resolution signed by all
> members and waiving the notice requirements.
>
> Section 5:1 Officers.
>
> The bylaws don't permit the President and Vice Chairman to be the same
> person, which is I'm sure consistent with state law, but some states
> require that the president and treasurer not be the same person, so that
> there is some level of fiscal controls. You might want to consider adding
> that in this case.
>
>
>
> There is no such restriction as to the president and treasurer being the
> same individual under Missouri law, and therefore we do not add such a
> limitation in the bylaws.  The authority of the president and treasurer are
> controlled by the board, which is how the bylaws address this issue.  If
> you want to add additional restrictions, let us know.
>
> Section 5:2  Appointment and Term of Office
>
> There's a 1 year term limit on officership. You might want to leave those
> limits up to the board if Missouri law permits. While you do one year terms
> now, that might not be convenient in the future for some reason, and then
> you'd have to amend the bylaws.
>
>
>
> The term of the directors must be specified in the bylaws or articles
> under Missouri law.  We typically specify the term in the bylaws rather
> than the articles as the bylaws are easier to amend.  The 1 year term of
> directors was requested by Evergreen.  As the officers are all currently
> board members, which is typical, we want the terms of directors and
> officers to match, otherwise an individual’s term as an officer may not be
> over even if their term as director is complete.  It can be changed in the
> future by amending the bylaws.
>
> Section 6:2 Fiscal Year
>
> I would let the board fix the fiscal year, with it initially as the
> calendar year.
>
>
>
> The fiscal year is most commonly listed in the bylaws.  While not a
> statutory requirement, many banks and other institutions prefer it be
> listed in the bylaws.  The fiscal year as initially established is the
> calendar year.  If the board wants to change it, we can amend the bylaws.
> If Evergreen wants to remove it from the bylaws, we can add it to the
> consent resolution.  However, any change to the fiscal year would still
> need to be approved in a resolution of the board signed by all members.
>
> Section 6:9 Executive Director
>
> I would beef up this section to anticipate the possibility of other
> employees.
>
>
>
> This section is intentionally left vague as the board does not anticipate
> hiring any employees, but does plan to retain an outside company to handle
> its operations.  We do not recommend having two companies or individuals
> designated to the same “executive director” position.  The board can hire
> other contractors (or employees) to perform any number of functions, but we
> would not recommend vesting more than one person/entity with the title
> “executive director”.
>
> Section 6:11 Books and Records
> D. Inspection  Procedure
>
> I would consider deleting "(c) demonstrate a direct connection between the
> purpose for
> inspection and the requested records." I don't understand why a Director
> should have to explain why they want to see the records. It seems like an
> unnecessary bar - I think Directors should be engaged with the org.
>
>
>
> The bylaws also note that the directors can inspect corporate records in
> accordance with applicable law.  We have the limitation regarding
> connection in the documents as we have seen litigation tactics from
> activist directors who are in opposition to the corporation use their
> inspection rights offensively in the litigation to cause the corporation to
> waste time and money.  For the most part, directors do not use the formal
> process specified in the bylaws to request information if the relationship
> is healthy (they just email the appropriate person and such information is
> provided).
>
> Section 6:12  Indemnification and Liability of Directors and Officers
> D.
> A majority of the board determines whether a Director was acting in good
> faith, etc. in order for the indemnity kicks in. If we're at the point
> where this section is invoked, something has gone very wrong. Does it make
> sense that the majority of the board are the ones to decide if the standard
> is met? I could imagine situations that are very muddy. At least consider
> putting in a limit on the discretion of the board in that case.
>
> This limitation is standard in most bylaws.  The limitation protects the
> corporation from a director seeking to take advantage of the
> indemnification section by invoking it to fund litigation adverse to the
> corporation’s interest.  We have seen indemnification sections invoked by
> directors that use the section to fund the director’s own litigation
> against the corporation.  If the majority approval is not obtained, the
> indemnification section will still apply if the director obtains a court
> order enforcing the section, so the board cannot override the
> indemnification provided in the bylaws.
>
>
>
> --
> Donna Bacon
> Executive Director
> MOBIUS
> 111 E Broadway, Ste 220
> Columbia, MO 65203
> 573.268.1845
>
>
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>
>

-- 
Ronald A. Gagnon
Executive Director
North Of Boston Library Exchange (NOBLE)
Danvers, Massachusetts  01923
978-777-8844
www.noblenet.org
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