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