RES: [governance] ICANN stumbling on a hornet nest

Tue Sep 4 15:31:40 EDT 2012

Karl, very clear thoughts!
 At my time in the board  I have learned a lot about California Legal
System, and dedicate lots of time to understand each decision clearly and
act accordingly. Even not belonging to the culture of "direct question" I
believe I left the impression among my pairs that I would not accept
anything  without a clear explanation. 
Be Board member is not an easy task and sure adds lots of possible
liability, but the task itself, even in our time, without any compensation (
that I consider a better choice), worth the experience!
Best,  
-----Mensagem original-----
De: governance-request at lists.igcaucus.org
[mailto:governance-request at lists.igcaucus.org] Em nome de Karl Auerbach
Enviada em: terça-feira, 4 de setembro de 2012 04:26
Para: Chaitanya Dhareshwar
Cc: governance at lists.igcaucus.org; Salanieta T. Tamanikaiwaimaro
Assunto: Re: [governance] ICANN stumbling on a hornet nest

On 09/03/2012 07:19 PM, Chaitanya Dhareshwar wrote:

> No more public seats!? Gone the voice of reason is..?
>  
> There's QUITE some detail in your diary Karl. I understand how this 
> gives the public information - but how does this become insurance? 
> Could you elaborate please?

That is an extremely complex question and it is affected by laws that vary
from jurisdiction to jurisdiction.  I can only begin to touch the surface in
an email.

Let me begin by reflecting that ICANN obtains it legal existence from the
laws of the State of California under a provision pertaining to
non-profit/public-benefit corporations.  (There are many kinds of
corporations and many kinds of non-profits, so the public-benefit part is
important.)

California isn't particularly unique in its laws - it, like much of the
world, is a blend of Civil Law and Common Law concepts diluted by a lot of
modern thought and pragmatic experience.  As such one will tend to find that
what is true in California will often have counterparts in the laws of other
places.  As a result I tend to be mildly amused by those who argue that
ICANN should be moved elsewhere - my amusement comes from my thought that
"the corporations laws of all those other places are probably more similar
to those of California than they are different".

The USA is also a federal system in which power is divided between the
national level and the state level.  As such ICANN also has status under the
national tax law as a "501(c)(3)" which means that it gets an exemption from
taxation because of charitable of scientific purposes.

It is important to distinguish between those two things.

With regard to the US national, 501(c)(3) status there is a thing called
"intermediate sanctions" which occurs when a body of that status pays an
"excess benefit" to a closely related party.  Generally that means paying
above fair market value to someone who is a director, officer, founder, or
in some other way exercises a strong level of control.  That sanction is
cast as a 200% tax and insurance policies tend not to insure against the
risk of taxation.  This law was intended to be draconian.
Since those intermediate sanctions can fall directly onto the personal
assets of corporate directors there is a possibility that ICANN's insurance
for directors may not provide protection.  (The situation gets even more
complicated when directors are compensated - one can drown in the details of
this stuff.  Suffice it to say that prudence suggests that one should try to
avoid getting anywhere near entangled by this stuff.

The point about the diary is more at the level of state law.  Typical
corporate law imposes very heavy duties on corporate directors - the word is
"fiduciary duty".  It is a very, very heavy burden and contains a large
amount of risk to a director's personal assets.  It is also an extremely
complicated duty.  For example, as a California public benefit corporation
ICANN's directors are obligated to consider the impact upon the public well
being when evaluating whether a proposed action is in the best interest of
the corporation or not.  Many directors do not understand this and consider
only the best interest of the public benefit corporation without recognizing
the need to incorporate the effect upon the public.

Because of the difficult and potentially draconian nature of fiduciary
responsibilities there is an escape valve built into most corporation laws -
which is the idea that directors are allowed some flexibility as long as
they act in certain ways.

One of those ways is that a corporate director obtains a degree of
protection if he/she can demonstrate that he is making an informed,
reasonable decision in the context of a business purpose.  The rule allows a
director to make a mistake and yet avoid liability for that mistake - It's a
rather sensible idea, otherwise no one would risk taking on the role of a
director.

So my diary was intended to demonstrate that when I was making a choice that
I had tried to become informed, that I tried to evaluate the alternatives,
and that the decision was being made in the context of the purpose of the
business.

That point about being "informed" is more tricky than one might think ...
being on ICANN's board requires an enormous amount of work just to keep up,
and much more to understand, and even more to really comprehend the
competing issues.  Any person who considers the role should recognize that
it is more than a full-time job.

Becoming informed is hard - that is why when I was on the board I'd ask many
questions, often to the point of annoying those who wanted to move ahead.

But I discovered that some disputes coming before ICANN were really not
disputes at all, but rather were people who were talking past one another
using different words.  Asking questions tends to reveal when their are real
differences or merely much more easily correct mis-understandings.  There
are plenty of real and hard issues in internet governance, so it is nice to
be able to find the easy ones by asking some questions.

And the diary was also meant to be a two-way street - by exposing my thought
processes others could see where I had gone awry and could try to change my
point of view.

I found that very valuable - there is nothing like disagreement to cause two
people to explain themselves to one another.  ;-)

This is an area in which internet governance is weak - We Americans tend to
feel comfortable with a rough-and-tumble dialog - an argument - as a means
to illuminate and comprehend issues.  Other cultures work through less
confrontational means.

Both methods are correct, neither method is wrong.  I found, however, that
there is not enough accommodation by those who use one of these methods for
those who use the other.  As an American I found myself often upbraided
(often rather subtly) for being very direct in my questions and words.  And
as an American I often found it difficult to comprehend how I was to learn
enough about issues if I did not ask direct questions and used, instead,
indirect means.

	--karl--

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