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<p style="margin-top:0;margin-bottom:0">Unless it is required, I don't see a need for an Exec committee.</p>
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<p style="margin-top:0;margin-bottom:0">Thanks Mike. I think I needed that explanation to fully see the difference. IMO good faith should be presumed, unless a majority of the board concludes that the director did not act in good faith. I would even go as
far as adding a high majority - 2/3 of the board.</p>
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<div id="divRplyFwdMsg" dir="ltr"><font face="Calibri, sans-serif" style="font-size:11pt" color="#000000"><b>From:</b> eg-oversight-board <eg-oversight-board-bounces@list.evergreen-ils.org> on behalf of Mike Rylander <mrylander@gmail.com><br>
<b>Sent:</b> Wednesday, May 9, 2018 11:28:14 AM<br>
<b>To:</b> Terran McCanna<br>
<b>Cc:</b> Mike Rylander; eg-oversight-board; Gagnon, Ron<br>
<b>Subject:</b> Re: [Eg-oversight-board] Fwd: Evergreen ByLaw Comments</font>
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<div class="PlainText">Thanks, Terran.<br>
<br>
The Exec committee can be the full board, if that's what we want to<br>
create. We can certainly specify that in the bylaws.<br>
<br>
As for indemnity, my concern is more that, as I understand the current<br>
wording, it's the other way around and the majority of the board must<br>
conclude that a director /did/ act in good faith, rather than that they did<br>
/not/. Perhaps that's a distinction without a difference, but I see the<br>
presumption of good faith rather than the need for positive vote of such as<br>
and important choice of perspective and tone. But, as has been mentioned,<br>
once we get to that point...<br>
<br>
Thanks!<br>
<br>
--<br>
Mike Rylander<br>
| President<br>
| Equinox Open Library Initiative<br>
| phone: 1-877-OPEN-ILS (673-6457)<br>
| email: miker@equinoxinitiative.org<br>
| web: <a href="http://equinoxinitiative.org">http://equinoxinitiative.org</a><br>
<br>
On Tue, May 8, 2018 at 1:12 PM Terran McCanna<br>
<tmccanna@georgialibraries.org><br>
wrote:<br>
<br>
> +1 to Ron's comments.<br>
<br>
> I'm unsure how the Executive Committee's decision-making responsibilities<br>
would differ from the overall Board's decision-making responsibilities. Can<br>
the Executive Committee consist of the entire board?<br>
<br>
> As for indemnity, hopefully it will never come to that, but it makes<br>
sense to me that a majority of the board would be required to determine<br>
that a director did not act in good faith.<br>
<br>
<br>
<br>
> Terran McCanna<br>
> PINES Program Manager<br>
> Georgia Public Library Service<br>
> 1800 Century Place, Suite 150<br>
> Atlanta, GA 30345<br>
> 404-235-7138<br>
> tmccanna@georgialibraries.org<br>
<br>
<br>
> On Mon, May 7, 2018 at 12:03 PM, Gagnon, Ron <gagnon@noblenet.org> wrote:<br>
<br>
>> Mike,<br>
>> Sorry to be late in responding...<br>
<br>
>> We at NOBLE use email votes (sparingly) and they can be effective and<br>
leave a good audit trail. I would support that capability for Evergreen.<br>
<br>
>> As to the Executive Committee, I would have concerns about that -- can<br>
it be larger than two for a minimum?<br>
<br>
>> For budget, I would go along with your suggestion of 10%.<br>
<br>
>> Email for notice is good.<br>
<br>
>> President and Treasurer should be different persons.<br>
<br>
>> Thanks!<br>
<br>
>> Ron<br>
<br>
>> On Fri, May 4, 2018 at 11:40 AM, Mike Rylander <<br>
miker@equinoxinitiative.org> wrote:<br>
<br>
>>> All,<br>
<br>
>>> As promised, here is the initial response from MOBIUS' lawyers to<br>
Karen's direct comments and suggestions.<br>
<br>
>>> I said before that the suggestions were mostly rejected, but that isn't<br>
quite right. The lawyers are starting from an adversarial position, which<br>
is understandable given their stated past experience, as opposed Karen's<br>
suggestions starting from a more amicable default. As a practical matter,<br>
I take Karen's suggestions as an aim to streamline and simplify<br>
communication and action in the common case, whereas the MOBIUS' lawyer's<br>
apply more structure up front in an attempt to protect against "activist<br>
directors" (their words in one case). The question before us is which do<br>
we want to enshrine in our by-laws -- my interpretation of the choice could<br>
be summed up as: do we value efficiency and assumption of good-faith over<br>
prescribed defenses against internal strife?<br>
<br>
>>> I can be convinced in either direction, but I tend towards the former<br>
by default.<br>
<br>
>>> To be clear on my position, I believe that most of Karen's suggestions<br>
(particularly on practical matters such as the use of email for certain<br>
functions) do not weaken any overall protections we have, and just avoid<br>
overhead given the way our community works. The biggest issue surrounds<br>
indemnity, which we can discuss in more detail, but the example I provided<br>
works to limit the issues raised below by restricting indemnity to only<br>
litigation that arrises from the fact that a director was, in fact, a<br>
director. Anyway, I would appreciate all input you care to provide.<br>
Thoughts?<br>
<br>
>>> Thanks again, everyone!<br>
<br>
>>> --<br>
>>> | Mike Rylander<br>
>>> | President<br>
>>> | Equinox Open Library Initiative<br>
>>> | phone: 1-877-OPEN-ILS (673-6457)<br>
>>> | email: miker@EquinoxInitiative.org<br>
>>> | web: <a href="http://EquinoxInitiative.org">http://EquinoxInitiative.org</a><br>
<br>
<br>
>>> ---------- Forwarded message ---------<br>
>>> From: Donna Bacon <donna@mobiusconsortium.org><br>
>>> Date: Thu, May 3, 2018 at 9:13 AM<br>
>>> Subject: Evergreen ByLaw Comments<br>
>>> To: Mike Rylander <miker@equinoxinitiative.org><br>
<br>
<br>
>>> Mike,<br>
<br>
>>> See the comments below from our attorneys.<br>
<br>
>>> Most of these comments relate to the committees permitted under the<br>
bylaws. While it is standard to contemplate such committees being formed<br>
in the corporate documents, as a practical matter, entities of this size<br>
actually forming sub-committees is rare and it is much more common for the<br>
whole board to oversee the operations. Please see our comments in red<br>
below.<br>
<br>
<br>
<br>
>>> Section 3:15 Actions By Board Without A Meeting<br>
<br>
>>> Under the draft bylaws all decisions must be taken in a meeting, or<br>
otherwise the only mechanism is by unanimous written consent. The bylaws<br>
are silent as to whether email constitutes proper written consent. You may<br>
want to make this looser so that a majority of the board can vote by email<br>
without a meeting. This has been a major pain point for other orgs I've<br>
worked with.<br>
<br>
<br>
<br>
>>> Generally speaking we do not recommend email as sufficient for<br>
unanimous written consent due to the record keeping requirements for<br>
corporate entities. How Evergreen has described its decision-making<br>
process is that the board will make a decision, likely via internet chat<br>
and without a formal meeting, and then document that decision in a<br>
resolution that is circulated and signed by all of the board members. That<br>
final, signed resolution then goes into the corporate record book. This<br>
avoids questions as to the final language that was approved, makes it<br>
easier to ensure all signatures are obtained, and is a best practice for<br>
the statutorily-required record keeping.<br>
<br>
>>> Section 4:1 The Executive Committee.<br>
<br>
>>> The executive committee section is very strong, which is ok if you're<br>
careful (the board can appoint a committee of only 2 people to do almost<br>
everything the board does). So I wanted to flag that.<br>
<br>
<br>
<br>
>>> Does Evergreen want to change this? Note, as written the board has<br>
discretion over whether to even form an executive committee and which<br>
powers to give it. There are carve-outs explicitly listed for certain<br>
actions the board cannot designate. As written, this gives flexibility to<br>
the board on whether to create the committee and whether to give it very<br>
limited or very broad powers.<br>
<br>
>>> Section 4:2 The Finance Committee.<br>
<br>
>>> This says that any major change in the budget must be approved by the<br>
Board. This is vague and is silent as to materiality. It may be better to<br>
give the committee a little bit of clear flexibility in case you do form a<br>
finance committee.<br>
<br>
<br>
<br>
>>> Does Evergreen want to change this? Note, as written the board has<br>
discretion over whether to even form the financial committee. To keep<br>
controls on the committee, its powers are limited to exceed or change the<br>
budget, which is left in control of the board. This is fairly standard.<br>
<br>
>>> Section 4:5 Meetings of Committees.<br>
<br>
>>> You may want to amend this to permit the use email for notice.<br>
<br>
<br>
<br>
>>> We generally do not permit email for required statutory notices as the<br>
Missouri statutes do not specify the effective date for electronic notice<br>
absent proving the email was received. If there is a dispute between the<br>
corporation and a board member, this can be difficult. With mail, the<br>
statutes specify the effective date based on the mailing without requiring<br>
proof of receipt. Moreover, any regular meetings of the committee do not<br>
require notice; notice only applies if there is a special meeting outside<br>
of the normal schedule. As most decisions will likely be made outside of<br>
official meetings, those will be evidenced by a resolution signed by all<br>
members and waiving the notice requirements.<br>
<br>
>>> Section 5:1 Officers.<br>
<br>
>>> The bylaws don't permit the President and Vice Chairman to be the same<br>
person, which is I'm sure consistent with state law, but some states<br>
require that the president and treasurer not be the same person, so that<br>
there is some level of fiscal controls. You might want to consider adding<br>
that in this case.<br>
<br>
<br>
<br>
>>> There is no such restriction as to the president and treasurer being<br>
the same individual under Missouri law, and therefore we do not add such a<br>
limitation in the bylaws. The authority of the president and treasurer are<br>
controlled by the board, which is how the bylaws address this issue. If<br>
you want to add additional restrictions, let us know.<br>
<br>
>>> Section 5:2 Appointment and Term of Office<br>
<br>
>>> There's a 1 year term limit on officership. You might want to leave<br>
those limits up to the board if Missouri law permits. While you do one year<br>
terms now, that might not be convenient in the future for some reason, and<br>
then you'd have to amend the bylaws.<br>
<br>
<br>
<br>
>>> The term of the directors must be specified in the bylaws or articles<br>
under Missouri law. We typically specify the term in the bylaws rather<br>
than the articles as the bylaws are easier to amend. The 1 year term of<br>
directors was requested by Evergreen. As the officers are all currently<br>
board members, which is typical, we want the terms of directors and<br>
officers to match, otherwise an individual’s term as an officer may not be<br>
over even if their term as director is complete. It can be changed in the<br>
future by amending the bylaws.<br>
<br>
>>> Section 6:2 Fiscal Year<br>
<br>
>>> I would let the board fix the fiscal year, with it initially as the<br>
calendar year.<br>
<br>
<br>
<br>
>>> The fiscal year is most commonly listed in the bylaws. While not a<br>
statutory requirement, many banks and other institutions prefer it be<br>
listed in the bylaws. The fiscal year as initially established is the<br>
calendar year. If the board wants to change it, we can amend the bylaws.<br>
If Evergreen wants to remove it from the bylaws, we can add it to the<br>
consent resolution. However, any change to the fiscal year would still<br>
need to be approved in a resolution of the board signed by all members.<br>
<br>
>>> Section 6:9 Executive Director<br>
<br>
>>> I would beef up this section to anticipate the possibility of other<br>
employees.<br>
<br>
<br>
<br>
>>> This section is intentionally left vague as the board does not<br>
anticipate hiring any employees, but does plan to retain an outside company<br>
to handle its operations. We do not recommend having two companies or<br>
individuals designated to the same “executive director” position. The<br>
board can hire other contractors (or employees) to perform any number of<br>
functions, but we would not recommend vesting more than one person/entity<br>
with the title “executive director”.<br>
<br>
>>> Section 6:11 Books and Records<br>
>>> D. Inspection Procedure<br>
<br>
>>> I would consider deleting "(c) demonstrate a direct connection between<br>
the purpose for<br>
>>> inspection and the requested records." I don't understand why a<br>
Director should have to explain why they want to see the records. It seems<br>
like an unnecessary bar - I think Directors should be engaged with the org.<br>
<br>
<br>
<br>
>>> The bylaws also note that the directors can inspect corporate records<br>
in accordance with applicable law. We have the limitation regarding<br>
connection in the documents as we have seen litigation tactics from<br>
activist directors who are in opposition to the corporation use their<br>
inspection rights offensively in the litigation to cause the corporation to<br>
waste time and money. For the most part, directors do not use the formal<br>
process specified in the bylaws to request information if the relationship<br>
is healthy (they just email the appropriate person and such information is<br>
provided).<br>
<br>
>>> Section 6:12 Indemnification and Liability of Directors and Officers<br>
>>> D.<br>
>>> A majority of the board determines whether a Director was acting in<br>
good faith, etc. in order for the indemnity kicks in. If we're at the point<br>
where this section is invoked, something has gone very wrong. Does it make<br>
sense that the majority of the board are the ones to decide if the standard<br>
is met? I could imagine situations that are very muddy. At least consider<br>
putting in a limit on the discretion of the board in that case.<br>
<br>
>>> This limitation is standard in most bylaws. The limitation protects<br>
the corporation from a director seeking to take advantage of the<br>
indemnification section by invoking it to fund litigation adverse to the<br>
corporation’s interest. We have seen indemnification sections invoked by<br>
directors that use the section to fund the director’s own litigation<br>
against the corporation. If the majority approval is not obtained, the<br>
indemnification section will still apply if the director obtains a court<br>
order enforcing the section, so the board cannot override the<br>
indemnification provided in the bylaws.<br>
<br>
<br>
<br>
>>> --<br>
>>> Donna Bacon<br>
>>> Executive Director<br>
>>> MOBIUS<br>
>>> 111 E Broadway, Ste 220<br>
>>> Columbia, MO 65203<br>
>>> 573.268.1845<br>
<br>
<br>
>>> _______________________________________________<br>
>>> eg-oversight-board mailing list<br>
>>> eg-oversight-board@list.evergreen-ils.org<br>
<br>
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<br>
<br>
<br>
<br>
>> --<br>
>> Ronald A. Gagnon<br>
>> Executive Director<br>
>> North Of Boston Library Exchange (NOBLE)<br>
>> Danvers, Massachusetts 01923<br>
>> 978-777-8844<br>
>> <a href="http://www.noblenet.org">www.noblenet.org</a><br>
<br>
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