The California Non-Profit Public Benefit Corporation
Law
(Cal. Corp. Code,
Sections 5110, et seq.) provides a broad set of rules,
policies
and
recommended procedures governing the operation of the
non-profit
entities,
such as ICANN, which are incorporated under its provisions, and
Chapter
5,
Article 2 (Sections 5520, et seq.) specifically governs the
nomination
and
election of Directors by members. The touchstone of the rules is reasonableness.
Section 5520
provides: "As to
directors elected by members, there shall be
available to the
members
reasonable nomination and election procedures given
the
nature, size and
operations of the corporation." While the rules provide
some
latitude for the
creation of reasonable nomination and election procedures,
they
also provide
a guide, and a safe harbor (See, Section 5220(b)), for
what a
reasonable
nomination and election procedure looks like.
In two
critical areas, ICANN's draft nomination procedures and
election
timelines
vary materially from what the California Code
recommends.
1. Self-Nomination
Threshold.
Under the draft ICANN rule, "an individual seeking
self-nomination"
is
required to obtain "support from 10% of the At Large Members in
his/her
geographic region...." See, Proposed Rule 9.
The California Code, at Section
5521(b), provides a dramatically
different
standard. For corporations with
fewer than 5000 members, it
places the
number of votes required for nomination
at 2%. For corporations
with 5000 or
more members, such as ICANN here, it
allows nomination by
"one-twentieth
of 1 percent of voting power but not
less than 100, nor more than
500."
To put this in perspective, in a geographic
region with 8000
members, the
ICANN proposed rule would require a nominee
to obtain the
support of 800
members. Section 5521(b), however, would place
the bar
significantly lower,
at just 100.
2. Nomination and Election
Timelines
The ICANN draft rules provide 30 days sets the close of
nominations
just 30
days from the beginning of the election period: nominations
close
on August
20th and election begins September 20th.
Section 5522(a), however,
provides almost twice as long: "The
Corporation's
articles or bylaws shall
set a date for the close of nominations
for the Board.
The date shall not
be less than 50 nor more than 120 days
before the day
directors are to be
elected."
Extending the campaign period into the 50-120 day window of
Section
5522(a) would not significantly delay the planned election, and
the At Large
Directors could still be seated by the annual meeting in
November.
* * * * *
The safe harbor rules of Section 5220(b) provide that "If
a
corporation
complies with all of the provisions of Sections 5521, 5522,
5523,
and 5524
applicable to a corporation with the same number of members,
the nomination
and election procedures shall be deemed reasonable." While
the listed
provisions are by no means exclusive or mandatory, they do
provide
a guide
as to what a reasonable nomination and election looks like.
When
followed,
they also provide some protection to ICANN against a judicial
challenge
to the
reasonableness of its nomination and election procedures.
While ICANN
is still a work in progress, not every aspect of its
operations
need be created
from whole cloth. The California Non-Profit
Public Benefit
Corporation Law
provides guides for many of these procedures,
and the
ICANN nomination and
election procedures should be revised to
follow them.
Respectfully submitted,
Bret
Fausett