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

Wed May 9 11:54:51 EDT 2018

Here are my comments. Sorry it took me so long....

Section 3:15 Actions By Board Without A Meeting: I have no problem with email voting. PaILS makes provision for this and has used it.

Section 4:1  Executive Committee: In PaILS the Executive Committee is basically the board officers and has no defined role. I don't see the need for it in Evergreen.

Section 4:2 The Finance Committee  I actually like 4.2 the way it is written (I would prefer that "major change" not be defined and be addressed at the policy level) with one exception: I think the Treasurer should be the chair of any Finance Committee. 

Section 4:5 Meetings of Committees. Email notice would be fine.

Section 5:1 Officers. I missed this before: why on earth would we want one person to hold multiple offices?

Section 6:12  Indemnification and Liability of Directors and Officers: I am fine with the language as it currently stands.

-----Original Message-----
From: eg-oversight-board [mailto:eg-oversight-board-bounces at list.evergreen-ils.org] On Behalf Of Mike Rylander
Sent: Wednesday, May 9, 2018 11:28 AM
To: Terran McCanna <tmccanna at georgialibraries.org>
Cc: Mike Rylander <miker at equinoxinitiative.org>; eg-oversight-board <eg-oversight-board at list.evergreen-ils.org>; Gagnon, Ron <gagnon at noblenet.org>
Subject: Re: [Eg-oversight-board] Fwd: Evergreen ByLaw Comments

Thanks, Terran.

The Exec committee can be the full board, if that's what we want to create.  We can certainly specify that in the bylaws.

As for indemnity, my concern is more that, as I understand the current wording, it's the other way around and the majority of the board must conclude that a director /did/ act in good faith, rather than that they did /not/.  Perhaps that's a distinction without a difference, but I see the presumption of good faith rather than the need for positive vote of such as and important choice of perspective and tone.  But, as has been mentioned, once we get to that point...

Thanks!

--
Mike Rylander
  | President
  | Equinox Open Library Initiative
  | phone:  1-877-OPEN-ILS (673-6457)
  | email:  miker at equinoxinitiative.org
  | web:  http://equinoxinitiative.org

On Tue, May 8, 2018 at 1:12 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-oversight-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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