FC: An ICANN board member's yearlong quest to review financial info

[Declan McCullagh <declan () well com>]

[Forwarded from Dave Farber's IP list; I invite ICANN representatives to 
reply. Background on Karl's relationship with ICANN (and campaign for a 
board seat last year: 
http://www.politechbot.com/cgi-bin/politech.cgi?name=Auerbach --Declan]

> Date: Mon, 3 Dec 2001 13:52:32 -0800 (PST)
> From: Karl Auerbach <karl () cavebear com>
> To: David Farber <dave () farber net>
>
> Here's more on my now year-long quest to inspect ICANN's records:
>
> A Director of virtually any corporation in the US has several rights and
> obligations.
>
> The obligation side of the equation is very strong - it's called a
> "fiduciary" duty, which is one of most stringent obligations that our
> legal system can impose on a person.  As part of that duty, a Director is
> compelled to exercise his or her *independent* judgement.  The ability of
> a Director to elect to rely upon the judgement of others is very tightly
> circumscribed.
>
> As a Director I could be personally liable for corporate misdeeds.  There
> are laws that protect some directors, but they are largely really not much
> more than rice-paper walls that may easily be pierced.
>
> In other words, there are big Swords of Damocleas that hang above
> Directors.
>
> The legal system recognizes that it is useless to impose responsibility on
> Directors without also giving them, each of them individually, the powers
> to become informed so that they may make informed judgements. To that end
> the law gives Directors strong powers to inquire into every aspect of a
> corporation's operations.
>
> Under the California corporations code that governs
> non-profit/public-benefit corporations (such as ICANN) those rights are
> "absolute":
>
>         6334.  Every director shall have the absolute right at any
>         reasonable time to inspect and copy all books, records and documents
>         of every kind and to inspect the physical properties of the
>         corporation of which such person is a director.
>
> It's not often that a legislature underscores that a right is "absolute".
> ;-)
>
> This right to inspect and copy not a collective power that may be
> exercised only by the board acting in concert.  Rather it is a distinct
> power that exists in each and every Director - it may be exercised upon
> the independent discretion of each Director.
>
> And a Director is not required to indicate to corporate management the
> purpose of his or her inspection or what he or she is looking for.
>
> I have asked to inspect ICANN's financial records along with several other
> documents (such as the employee handbook and proprietary rights
> agreements, if any, that govern employee conduct).  I have also asked to
> review the billing statements and conflict waiver requests from those who
> render professional services to ICANN - that's a natural part of my role
> on ICANN's "conflicts" committee, but it is a request that I could make
> even were I not on the conflicts committee.
>
> In my experience as a Director of various corporations, inspection of the
> corporate financial records is a good way to inquire as to the efficiency
> and behavior of corporate management.  In most corporations, requests such
> as mine are quickly and fully answered by management without stonewalling,
> without demands for restrictive covenants that would force a Director to
> surrender his or her rights of independent judgement, and without
> statements from management that more than implicitly assert that the
> Director has some nefarious purpose.
>
> One must remember that those fiduciary obligations that I mentioned impose
> upon a Director an obligation of loyalty to the corporation.  That
> obligation generally requires that a Director keep confidential that
> corporate information that is, in-fact, confidential.  However, the
> Director is not compelled to blindly and unthinkingly accept any
> self-serving labels of confidentiality that corporate management may chose
> to apply.
>
> I made my initial request to inspect the financial records - in particular
> the general ledger - more than a year ago.  Despite repeated efforts and
> requests, I still have not been allowed to see those records.
>
> Oh, ICANN's management will say that they have afforded an opportunity;
> that I merely need to sign away my duty of independent judgement, that I
> merely need to allow corporate management to bind me in advance in how I
> may review the activities of that very same management; that I allow
> management to set conditions on the inspection that are so limiting that
> they would render any such inspection marginal and superficial.
>
> To sign these agreements would be to abandon my Director's obligations of
> independent judgement - I would be agreeing to allow my decisions to be
> controled by ICANN's management - by exactly the same people whose actions
> I am obligated to review.
>
> To add insult to injury the "agreements" that ICANN has demanded that I
> sign are cast in the most condescending of language and contain unfounded
> assertions against my personal integrity.
>
> All of this has occurred for the most part outside of the public eye.
> And even if I do gain access to corporate records the information that I
> review will almost certainly remain inaccessible to the public - My
> obligation of loyalty to the corporation demands that I use the
> information only to improve the corporation and it is unlikely that
> disclosure would further that obligation.  But one can not agree in
> advance, as ICANN's management is demanding, that disclosure may never
> occur.  For example: In the unlikely event that I were to discover
> information that must be disclosed - such as evidence of criminal activity
> - then, of course, my duties would be affected accordingly.
>
> ICANN's management has demonstrated over the course of the last year that
> it has an institutional hostility and an intent to preventing me from
> carrying out my duties as a Director of the Corporation.
>
> My recourse is to either abandon my obligations as a Director or to
> initiate such steps outside of the corporate boundaries as are consistent
> with my obligation of loyalty to the corporation.
>
> Such steps cost money, potentially lots of money.
>
>                 --karl--





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