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

Tue May 8 13:21:16 EDT 2018

Just a note from the peanut gallery.  Generally, the executive committee
isn't so much a decision making committee as a steering committee.  They
don't constitute a quorum, and so can't do action on their own.  The
executive committee is generally made up of the officers.

On Tue, May 8, 2018 at 1:11 PM, Terran McCanna <
tmccanna at georgialibraries.org> wrote:

> +1 to Ron's comments.
>
> I'm unsure how the Executive Committee's decision-making responsibilities
> would differ from the overall Board's decision-making responsibilities. Can
> the Executive Committee consist of the entire board?
>
> As for indemnity, hopefully it will never come to that, but it makes sense
> to me that a majority of the board would be required to determine that a
> director did not act in good faith.
>
>
>
> Terran McCanna
> PINES Program Manager
> Georgia Public Library Service
> 1800 Century Place, Suite 150
> Atlanta, GA 30345
> 404-235-7138
> tmccanna at georgialibraries.org
>
>
> On Mon, May 7, 2018 at 12:03 PM, Gagnon, Ron <gagnon at noblenet.org> wrote:
>
>> 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
>>>
>>>
>>> _______________________________________________
>>> eg-oversight-board mailing list
>>> eg-oversight-board at list.evergreen-ils.org
>>> http://list.evergreen-ils.org/cgi-bin/mailman/listinfo/eg-ov
>>> ersight-board
>>>
>>>
>>
>>
>> --
>> Ronald A. Gagnon
>> Executive Director
>> North Of Boston Library Exchange (NOBLE)
>> Danvers, Massachusetts  01923
>> 978-777-8844
>> www.noblenet.org
>>
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>>
>>
>
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