[Eg-oversight-board] Fwd: Evergreen ByLaw Comments
Donna Bacon
donna at mobiusconsortium.org
Tue May 8 13:22:12 EDT 2018
MOBIUS has an Executive Committee for our Board which is comprised of
the President, Past President, and Vice-President/President-Elect. The
EC makes the majority of day to day decisions and who I generally, as
the Director, have discussions with about membership business or
brainstorm with. We have 13 members on our Board and there are many
decisions that we make that do not require a vote from the whole Board.
This just makes us more efficient at operating our organization.
I would not think that the Evergreen Board would need an Executive
Committee since you do not have membership or staff. Most of your
discussion and decisions need to be discussed by the whole Board.
Donna
On 5/8/2018 12:11 PM, Terran McCanna 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 <mailto:tmccanna at georgialibraries.org>
>
>
> On Mon, May 7, 2018 at 12:03 PM, Gagnon, Ron <gagnon at noblenet.org
> <mailto: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 <mailto: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
> <mailto:donna at mobiusconsortium.org>>
> Date: Thu, May 3, 2018 at 9:13 AM
> Subject: Evergreen ByLaw Comments
> To: Mike Rylander <miker at equinoxinitiative.org
> <mailto: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 redbelow.
>
> 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 <http://www.noblenet.org>
>
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--
Donna Bacon
Executive Director
MOBIUS
111 E Broadway, Ste 220
Columbia, MO 65203
573.268.1845
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