Question on Bylaw change 4.04(b)

[Tom Herrin]

Section 4.04 (b) of the proposed by-law changes is one part of this process I am really struggling with. Specifically, it reads as follows:

"It shall be the duty of the a Director directors to:

(b) Supervise the officers and Executive Director of the Association to assure that their duties are performed properly (this is being removed)

(b) Fully abide in their fiduciary duty of care, inquiry and loyalty. Directors that fail to abide in their fiduciary duties will be subject to disciplinary action. (this is being added)"

Fundamentally, this brings the question: Are we to be a corporation operating like a business, or are we to be driven by the needs and ideas of our individual members? This change as written takes away the ability for directors to question the leadership of the organization, and instead gives the organization (and said leadership) the ability to punish the directors if the do not show 'loyalty' to the organization.

Personally, I am in agreement with Evan Page’s thoughts found in post 43 of the By Law Changes thread, but I would like to hear the other side of the argument on this one, for the sake of open discussion. Can someone with knowledge of why this is being requested to be changed explain why it is being included, and what do we gain from it? How does the organization as whole benefit from this change?

[mpallamary]

Tom, your observations are excellent. I read these proposed changes, most of which emphasis disciplinary procedures as authoritarian. At a minimum it would discourage anyone from "violating" the ambiguous duties of the members. As an example, who defines "duty of care," "inquiry," and "loyalty?" What do these words mean? Presumably, as with Dave Woolley, these would be decided in secret meetings wherein everyone will be legally advised not to talk about the proceedings. We have all seen how this works.

I have been unable to find anyone willing to discuss this revision or any other as they are afraid of reprimand or possibly becoming the subject of expulsion.

Clearly, the sole purpose of the legal admonishment it is to discourage a democratic debate.

We must save CLSA.

[dmi]

As far as I can tell it appears that the executive director has retained counsel and there has been an attorney/ client privilege created between the executive director and an attorney hired by that executive director. As far as I can tell the attorney was engaged using association funds. I wonder if Mr Myron would see an ethical problem with his dues being used against him and his interests.

I would need more information to know how the budgetary process works for our organization, but it does concern me that there may be an accountability issue with regard to how professional services are procured.


My view is that my best interests are served by MORE democracy not less.

[marois]

Attached is an article on board members and conflicts. This may help answer some questions.

Armand Marois

[land butcher]

An org like CLSA is not the same as a meeting with a client. This is supposed to be a open org to benefit the Surveyors in CA.
To compare a meeting of the BOD of CLSA and legal council with OJ conferring with his defense atty is ludicrous.

[land butcher]

Attached is an article on board members and conflicts. This may help answer some questions.

Armand Marois

As I read that, once a BOD makes a final decision that decision is to be upheld by all members of the BOD -ONLY. No after criticism by a member of the BOD - ONLY

Is this why they want chapter reps renamed to directors so that they cannot go back to their respective chapters and say anything against the decision(s) of the BOD.

[Tom Herrin]

Armand, thank you for the post and the document. It will take me a bit to digest, but this helps explain some of the idea behind this subject. It is still very hard for me to agree with - that is the digesting part still to come...

[dmi]

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It is not lost on the membership that many attorneys draw up what I'll call onsies. These are a one or two page document that covers common issues like My neighbor's tree is dropping fruit all over my driveway what can I do? or How do I stop people from using by lawn as their pets' restrooms? Generally these documents are unremarkable as legal documents. They are marketing tools that identify potential clients by promising to understand and provide hope for a solution for what ails the potential clients. Ah yes a soothing elixir for everything that causes trouble and irritation from a barking dog that won't shut up to a mouthy chapter representative who refuses to learn their proper place.

Alcorn speaks of a situation where a matter is settled as far as a board is concerned except a disloyal director who is critical of the decision. From that frame of reference I'd say that when the board and the executive director fail to honor the will of the membership by NOT accepting and NOT honoring the vote, that they would be disloyal to the organization.

I did not see any language to remove a disloyal executive director or an elected officer.

As far as I am concerned, no means no. If an amendment is voted down, then that ought to be the end of that amendment. It could be that there are amendments that are defeated that should be brought back BUT IT IS ONLY THE AMENDMENT(S) THAT WOULD PLACE OUR BYLAWS IN HARMONY.

I do not care what Alcorn says. You could hire a platoon of attorneys and I would not care what they had to say either. WHY? Because this matter is a matter for the membership to solve.

This matter is extremely important and I take it very seriously. This important decision is being made by the people without whose support this organization would not exist in the first place.

I take offense at the notion our vote is a suggestion like a postcard in a suggestion box that will be considered or not as the whim suits the powers that be.

Alcorn really has no say whatsoever in how WE decide what it is WE want our association to be and do.

I say read the amendments carefully and consider what they mean and IF THE CHANGES WILL BENEFIT YOU.

[marois]

Section 4.04 (b) of the proposed by-law changes is one part of this process I am really struggling with. Specifically, it reads as follows:

"It shall be the duty of the a Director directors to:

(b) Supervise the officers and Executive Director of the Association to assure that their duties are performed properly (this is being removed)

(b) Fully abide in their fiduciary duty of care, inquiry and loyalty. Directors that fail to abide in their fiduciary duties will be subject to disciplinary action. (this is being added)"

Fundamentally, this brings the question: Are we to be a corporation operating like a business, or are we to be driven by the needs and ideas of our individual members? This change as written takes away the ability for directors to question the leadership of the organization, and instead gives the organization (and said leadership) the ability to punish the directors if the do not show 'loyalty' to the organization.

Personally, I am in agreement with Evan Page’s thoughts found in post 43 of the By Law Changes thread, but I would like to hear the other side of the argument on this one, for the sake of open discussion. Can someone with knowledge of why this is being requested to be changed explain why it is being included, and what do we gain from it? How does the organization as whole benefit from this change?

Regarding 4.04, this particular section has to do with the duties of an individual director. The way it is written now seems to indicate each director supervises the Executive Director and Officers. If you review section 4.02 the Board of Directors is the decision making body of the CLSA.

[dmi]

If there was confusion, the confusion could have been addressed. I seen no reason why the duty of a director or the duty of the directors to supervise the executive director ought to be changed in order to clarify the duty of a director or the duty of the directors.

I would be okay with the new language provided the fiduciary duties subsumes the duty to supervise the execute director on the part of the director and/or the directors. I think that if a director or directors fail in their fiduciary duties to supervise the executive director, that there should be some consequence.

[mpallamary]

Agreed! That is one of the primary reasons nonprofit laws were revised in 2008. The changes require an abundance of transparency and openness in the way we operate. There is a significant burden on the BOD to fulfill its fiduciary duties. As evidenced by the filed tax returns, it is obvious that has not been done. Instead of the BOD and officers getting defensive and critical of this observation and related inquiries, the only solution is to come into compliance. It does not have to be so painful. Instead of secret meetings, these things are all supposed to be discussed in the open. Put another way, what is there to hide and who would object to assuring the organization is in good health, financially and structurally?

[mpallamary]

Here is my last post for the evening. Thank you everyone for indulging me.

The attached link provides for a free download of a pamphlet. It is good reading!

http://www.independentsector.org/upload ... actice.pdf

[Mike Hartley]

CLSA is incorporated, correct? So does California's Corporation Code Section 300-318 apply to CLSA?

If not, just tell me I'm ignorant ... no problem.

But if so, this is from California Code (emphasis mine):

309. (a) A director shall perform the duties of a director,
including duties as a member of any committee of the board upon which
the director may serve, in good faith, in a manner such director
believes to be in the best interests of the corporation and its
shareholders and with such care, including reasonable inquiry, as an
ordinarily prudent person in a like position would use under similar
circumstances.
(b) In performing the duties of a director, a director shall be
entitled to rely on information, opinions, reports or statements,
including financial statements and other financial data, in each case
prepared or presented by any of the following:
(1) One or more officers or employees of the corporation whom the
director believes to be reliable and competent in the matters
presented.
(2) Counsel, independent accountants or other persons as to
matters which the director believes to be within such person's
professional or expert competence.
(3) A committee of the board upon which the director does not
serve, as to matters within its designated authority, which committee
the director believes to merit confidence,

so long as, in any such case, the director acts in good faith, after
reasonable inquiry when the need therefor is indicated by the
circumstances and without knowledge that would cause such reliance to
be unwarranted.
(c) A person who performs the duties of a director in accordance
with subdivisions (a) and (b) shall have no liability based upon any
alleged failure to discharge the person's obligations as a director.
In addition, the liability of a director for monetary damages may be
eliminated or limited in a corporation's articles to the extent
provided in paragraph (10) of subdivision (a) of Section 204.

Perhaps this code section just does not apply because CLSA is a different type of corporation, but on the other hand, if this code section does apply, I saw nothing in the governement code about loyalty exactly. The code just states that the director should perform his/her duties in good faith, in the best interest of the corporation AND its stakeholders, and in a similar fashion as a prudent person would do in a similar situation.

It still seems to me that some directors are going way over board on the "loyalty to association above all else" issue. Am I looking at this correctly?

[Mike Hartley]

Agreed! That is one of the primary reasons nonprofit laws were revised in 2008. The changes require an abundance of transparency and openness in the way we operate. There is a significant burden on the BOD to fulfill its fiduciary duties. As evidenced by the filed tax returns, it is obvious that has not been done. Instead of the BOD and officers getting defensive and critical of this observation and related inquiries, the only solution is to come into compliance. It does not have to be so painful. Instead of secret meetings, these things are all supposed to be discussed in the open. Put another way, what is there to hide and who would object to assuring the organization is in good health, financially and structurally?

Mike,

Frankly I am ignorant about corporate law as it pertains to CLSA. I just posted questions about California's corporation code that will likely confirm that.

Can you point me towards the law that governs entities such as CLSA? I would like to read it.

Thanks.

[mpallamary]

Hi Mike,

You can start here. This is the form we have to file. As to the notion of loyalty, etc., a lot that is being advanced is being made up on the fly. Here is the federal form we need to file. More to follow. I have an appointment this AM.

http://www.irs.gov/pub/irs-pdf/f990.pdf

[mpallamary]

Our first obligation under the law is to preserve our non profit status by filling out our Form 990 tax returns properly. We still haven't seen the 2013 return. Take a look at the 2012 return attached. Look at the names of the officers. Did you know the Central Office created a Chief Financial Officer position? There is no record of that. Look at the form stating we have no chapters. These are just a few of the obvious problems.

When you point out problems like this and ask related questions you are the subject of expulsion.

This is serious stuff and it threatens the association. Take a look at the answers about our organizational efforts. Compare the listed directors with the reality. What is going on here and why?

[marois]

Our first obligation under the law is to preserve our non profit status by filling out our Form 990 tax returns properly. We still haven't seen the 2013 return. Take a look at the 2012 return attached. Look at the names of the officers. Did you know the Central Office created a Chief Financial Officer position? There is no record of that. Look at the form stating we have no chapters. These are just a few of the obvious problems.

When you point out problems like this and ask related questions you are the subject of expulsion.

This is serious stuff and it threatens the association. Take a look at the answers about our organizational efforts. Compare the listed directors with the reality. What is going on here and why?

The attached is a response from the Excom to Mr. Pallamary's questions regarding Tax Form etc...

Armand Marois

[Mike Hartley]

So I am still having difficulty understanding where the "duty to the Association above all else" comes from.

I was encouraged to read Alcorn's article regarding "Duty of Loyalty." I thought it was a good article, but it is not an independent resource. What I mean is this ... Alcorn is supposedly an expert in legal matters regarding non-profit corporations. As such, that firm wrote an article about "Duty of Loyalty". To be fair, Alcorn may understand these laws very well and may also represent many non-profits very well. But here's the rub, CLSA was convinced about Alcorn's prowess at least in part because of things like this article. Alcorn was hired based upon their expertise and then when questions arise from members, we are told, "see, read this article from the experts." There is no independent confirmation of what constitutes a director's duties.

So I called Dorothy today and asked a couple questions. She told me that CLSA is a "nonprofit 501(c)(6) mutual benefit corporation and is governed by the California Nonprofit Corporations Code Sections 5000 thru 8817."

Upon investigation and reading through much of California Corporations Code (http://www.leginfo.ca.gov/.html/corp_ta ... ents.html), I found this to be the only applicable law that governs the duties of a director of a nonprofit mutual benefit corporation (emphasis mine):

7231. (a) A director shall perform the duties of a director,
including duties as a member of any committee of the board upon which
the director may serve, in good faith, in a manner such director
believes to be in the best interests of the corporation and with such
care, including reasonable inquiry, as an ordinarily prudent person
in a like position would use under similar circumstances.
(b) In performing the duties of a director, a director shall be
entitled to rely on information, opinions, reports or statements,
including financial statements and other financial data, in each case
prepared or presented by:
(1) One or more officers or employees of the corporation whom the
director believes to be reliable and competent in the matters
presented;
(2) Counsel, independent accountants or other persons as to
matters which the director believes to be within such person's
professional or expert competence; or
(3) A committee upon which the director does not serve that is
composed exclusively of any or any combination of directors, persons
described in paragraph (1), or persons described in paragraph (2), as
to matters within the committee's designated authority, which
committee the director believes to merit confidence, so long as, in
any case, the director acts in good faith, after reasonable inquiry
when the need therefor is indicated by the circumstances and without
knowledge that would cause such reliance to be unwarranted.
(c) A person who performs the duties of a director in accordance
with subdivisions (a) and (b) shall have no liability based upon any
alleged failure to discharge the person's obligations as a director,
including, without limiting the generality of the foregoing, any
actions or omissions which exceed or defeat a public or charitable
purpose to which assets held by a corporation are dedicated.

So here I am again wondering why is it that some directors will not discuss anything at all related to CLSA Corporate business because they appear to be scared of violating their fiducial duties when in fact they are allowed, perhaps even required, to inquire about the Associations' activities. There is no mention here of needing to abandon the representation of individual members's or chapter's interests.

[dmi]

You did not answer my question. I appreciate the attempt. You present the same talking point that I have seen from others. This talking point is not germane to the issue.

I have not seen the vote count to know how many in committee voted to send these bylaws out of committee. I would guess that it was not unanimous. I do not have the vote count of the full board voting to send these bylaws to the membership, but once again I would bet dollars to doughnuts that the vote was not unanimous. I understand that a unanimous vote was not required in either situation. My point here is that there is some controversy over these changes even among the membership that IS IN THE KNOW.

WE NEED TO BE CLEAR HERE. The vote of the board to send the bylaws is just that, a vote to send the bylaws to the people who have the right and responsibility to approve or reject the bylaws. This is an act of self-determination. The purpose of sending the bylaws to the membership is NOT for the membership just to rubberstamp the work product. The vote is taken because this is a democratic organization and it works with the consent of the governed. The vote is taken because no one except the membership has the right to change the bylaws.

My opinion on these changes comes solely from my reading and reckoning with what is written on the page. My intent has been to engaged in a debate on the merits. A debate on the merits of the language as it is written, is what would be most useful. instead what I have seen is arrogance, condescension, comments that are insulting to the intelligence, half truths, if not in fact outright lies.

I have yet to see any one address the new power given to the executive to discipline the membership with private reprimands. How is this a good thing? How does this further the democratic principles of the organization?
Wouldn't our organization be better served if the executive director or the "designee" was spending their time on the routine business of the organization rather than attempting the duties of a den mother?

I have yet to see any credible discussion of how taking away the right and responsibility of the membership to decide who they would want to suspend or expel is in the best service of democratic ideals.

The picture is being painted that some folks just don't want to play nice and go along with the majority. This is an entirely inappropriate comment to be made in the context of clarifying the bylaw proposal.

The fact is that a director would be disloyal for NOT making reasonable inquiries. In the face of evidence of possible, incompetency, negligence, fraud and unlawful activity, the duty of fiduciary care requires reasonable inquiry. Directors are required to act in good faith.

[marois]

You did not answer my question. I appreciate the attempt. You present the same talking point that I have seen from others. This talking point is not germane to the issue.

I have not seen the vote count to know how many in committee voted to send these bylaws out of committee. I would guess that it was not unanimous. I do not have the vote count of the full board voting to send these bylaws to the membership, but once again I would bet dollars to doughnuts that the vote was not unanimous. I understand that a unanimous vote was not required in either situation. My point here is that there is some controversy over these changes even among the membership that IS IN THE KNOW.

WE NEED TO BE CLEAR HERE. The vote of the board to send the bylaws is just that, a vote to send the bylaws to the people who have the right and responsibility to approve or reject the bylaws. This is an act of self-determination. The purpose of sending the bylaws to the membership is NOT for the membership just to rubberstamp the work product. The vote is taken because this is a democratic organization and it works with the consent of the governed. The vote is taken because no one except the membership has the right to change the bylaws.

My opinion on these changes comes solely from my reading and reckoning with what is written on the page. My intent has been to engaged in a debate on the merits. A debate on the merits of the language as it is written, is what would be most useful. instead what I have seen is arrogance, condescension, comments that are insulting to the intelligence, half truths, if not in fact outright lies.

I have yet to see any one address the new power given to the executive to discipline the membership with private reprimands. How is this a good thing? How does this further the democratic principles of the organization?
Wouldn't our organization be better served if the executive director or the "designee" was spending their time on the routine business of the organization rather than attempting the duties of a den mother?

I have yet to see any credible discussion of how taking away the right and responsibility of the membership to decide who they would want to suspend or expel is in the best service of democratic ideals.

The picture is being painted that some folks just don't want to play nice and go along with the majority. This is an entirely inappropriate comment to be made in the context of clarifying the bylaw proposal.

The fact is that a director would be disloyal for NOT making reasonable inquiries. In the face of evidence of possible, incompetency, negligence, fraud and unlawful activity, the duty of fiduciary care requires reasonable inquiry. Directors are required to act in good faith.

This has been posted in another thread, but it may answer some of your questions. It has info on how the Policy and Procedure Committee voted. And it should be noted that the Executive Director has no authority to discipline any member. It also references how a designee is authorized by the BOD, but the final decision still rests with the BOD.

Armand Marois

[mpallamary]

Cui bono.