APPENDICES TO OPENNESS & TRANSPARENCY

Leon Koay
(lkoay@law.harvard.edu)
and Michael Richardson
(mrichard@law.harvard.edu)
Harvard Law School

APPENDIX A

 

CALIFORNIA NONPROFIT PUBLIC BENEFIT CORPORATION LAW:

FEATURES OF MEMBER ACCESS

TO INFORMATION & DECISION-MAKING

 

 

A.         Types of Meetings

Board meetings

·               Regular meetings – if time and place fixed by bylaws or by board, no notice required

·               Special meetings – 4 days’ notice by first class mail or 48 hours’ notice by phone, telegraph of personal delivery.  Notice of special meeting not dispensable through bylaws or articles

 

Members’ meetings

·               Regular meetings – date and time, frequency, in accordance with bylaws; but in any event, in each year in which directors are to be elected

·               Special meetings – may be called for any lawful purpose by the board, chairman of board, president, a group comprising at least 5% of the members, or such other persons as bylaws may specify.

 

B.        Access to Meetings

·               Board meetings – generally, board members only

·               Members’ meetings – members or their proxies, officers and directors

 

C.        Decision-Making / Action

·               Board meetings – by majority of the board.  The board can also consent to action without a meeting if there is individual/collective written consent.

·               Members’ meetings – generally, by affirmative vote of majority present and voting.  Members can also permit action if all provide written consent.

 

D.        Access to Records, Books, Etc.

·              Annual report – to be sent to members not later than 120 days after close of fiscal year.  Should contain detail of assets and liabilities, principal changes in assets and liabilities, revenue or receipts, expenses or disbursements, and a statement of interested person transactions and indemnifications (if any)

·              Membership lists – any member by notice, if it is for a purpose reasonably related to his interest as a member

·              Accounting books, records, minutes of proceedings of the members and the board and committees of the board – open to inspection upon written demand by any member at any reasonable time, for a purpose reasonably related to such person’s interests as a member

 

E.         Attorney General Supervision

·              The Attorney General may examine a public benefit corporation on behalf of the state, to ascertain the condition of its affairs and the extent of

(i)      failure, if any, to comply with trusts which the corporation has assumed

               (ii)     departure from the purposes for which it is formed

 

·              The Attorney General is empowered to institute proceedings to correct any noncompliance or departure, and may institute action on his own or upon complaint of a member, director or officer of the corporation.

 

 

 

APPENDIX B

 

FEDERAL & CALIFORNIA SUNSHINE LAWS:

ESSENTIAL FEATURES

 

 

A.  THE FREEDOM OF INFORMATION ACT (FOIA)

 

The FOIA guarantees individuals the right to access Federal Agency records.  The purpose behind the act is to encourage the development of a well informed citizenry that can then act as a check against government corruption and hold the public servants accountable to the public.  The following is a brief description of the procedural requirements of the act. 

 

Application:  The FOIA applies to the records maintained by agencies within the executive branch of the federal government.  This includes the Office of the President and independent regulatory agencies.  A record is defined as a document which is (1) either created or obtained by an agency and (2) under the agency's control at the time of the FOIA request.

 

·         Anyone can make a request for a record.  This request can be made for any reason whatsoever, with no showing of relevancy required.  There are two requirements, however, for making a request.

  1. The request must reasonably describe the record sought.
  2. The request must be made in accordance with an agency's published procedural regulations for obtaining records.

 

·         Once a request is initiated, the agency is required to inform the requester within ten days of whether or not it will grant or deny access to the record.

  1. Moreover, if access is granted, the record should be made available promptly thereafter.

 

·         If the agency denies access, the decision to deny the request must inform the requester of the reasons for the denial, of the right to appeal, and of the name and title of each person responsible for the denial.

  1. Furthermore, an administrative appeal decision, assuming the requester appeals the decision, upholding a denial must inform the requester of the reasons for the denial, of the requester's right to judicial review in the federal courts, and also the name and title of each individual responsible for the appeal denial.

 

·         An important element of the FOIA is that the information is only available upon request.  Unlike the Securities Exchange Act, there is no requirement to regularly disseminate information.

 

Exemptions: An agency can deny a request for a record based on any of the following exemptions.

·         The following is a brief description of a few of the exemptions that might be more or less relevant to ICANN. 

  1. Exemption One exempts from disclosure national security information concerning the national defense or foreign policy.
  2.  Exemption Two protects from mandatory disclosure certain records that relate only to the internal personnel rules and practices of an agency.
  3. Exemption Five exempts inter-agency or intra-agency memorandums or letters which would not be available by law to a party in litigation with the agency under civil discovery rules.

 

·         Purposes behind the exemptions:

Society's interest in maintaining an open government can often come into conflict with other important interests of the public, among these are

  1. The effective and efficient operation of the government.
  2. The responsible use of the government's limited fiscal resources.

3.   An interest in preserving the confidentiality of sensitive personal, commercial, and governmental information.    

.

 

B.  THE SUNSHINE ACT

 

The Sunshine Act opens the meetings and deliberations of multi-member federal agencies to the public.  The purpose behind the act is to enhance the public's access to and the public's understanding of government decision-making beyond the amount of access offered by the FOIA.  The belief is that written records do not fully explain the reasoning for a decision or the compromises that were made during the decision-making process.

 

Application: 

·         The act applies only to agencies which are

  1. Subject to the FOIA, and
  2. Headed by a body of two or more members a majority of whom are chosen by the President with the advice and consent of the Senate

 

·         Meetings covered by the act

  1. A meeting for purposes of the act means "the deliberations of at least the number of individual agency members required to take action on behalf of the agency where such deliberations determine or result in the joint conduct or disposition of official agency business…."

Such a meeting has to be open to the public regardless of whether the public has requested attendance.

 

·         Although the Sunshine Act gives the public the right to observe an agency meeting, it does not provide a right of public participation at the meeting. 

 

·         Notice Requirements:

  1. At least one week prior to a meeting, an agency must announce the meeting's subject matter, time, place and whether the meeting will be open or closed. It must also provide the name and phone number of the individual designated to respond to requests for information concerning the meeting.
  2. After public notice is given, no change may occur in the time or place of the meeting unless the agency publicly announces the change at the "earliest practicable time."

 

Exemptions:

·         Like the FOIA, there are certain exemptions which allow an agency to conduct its business in a closed session. Of the ten exemptions, seven of them are modeled after the exemptions contained in the FOIA. However, there are two other unique exemptions which possibly are applicable to ICANN.

  1. Exemption Nine permits an agency to close a meeting, or a portion thereof, if it determines that the premature disclosure of information might likely lead to significant financial speculation, or significantly affect the stability of any financial institution.   It can also close a meeting if the disclosure would likely frustrate the implementation of a proposed course of action by the agency.
  2. Exemption Ten allows an agency to close a meeting to prevent disclosure of information concerning the agency's participation in a civil action.

 

Procedures to close a meeting:

·         A majority of the members of an agency have to vote  to close a meeting or a portion of a meeting

·         Each member's vote must be recorded.

·         Within one day of voting to close a meeting, the agency must make available to the public a full written explanation of its decision along with a list of all persons expected to attend the meeting and their affiliations.

·         The agency is required to maintain a transcript or recording of each closed meeting.

·         The public must be given prompt access to these transcripts or recordings, unless the agency restriscts such access

 

Standard of review applied to a decision to close a meeting

·         The agency has the burden of showing that its decision to close the meeting was lawful.

·         "If an agency's decision to close a meeting is challenged before the meeting is held, then a court must employ a foreseeability standard under which the agency must show that it is 'more likely than not that exempt matters would be discussed at the closed portion or portions of the meeting.'"

·         If challenged after the meeting is held, then the court must base its decision on the discussion that actually occurred.

 

C.  THE BROWN ACT:

 

The Brown Act is California's version of the Sunshine Act.

·         Although there are many variations between the two acts, one distinguishing feature of the Brown Act is that it not only requires open meetings, but it also guarantees the public the right to provide testimony at any regular or special meeting. However, reasonable regulations may be enacted to ensure that as many members of the public as possible are given the opportunity to speak.

 

 

 

 

 

 

APPENDIX C

 

SEC REGULATED DISCLOSURE:

ESSENTIAL FEATURES

 

The Securities Exchange Act prescribes disclosure of company information on a periodic and systematic basis, with reports having to be filed with the Securities Exchange Commission, which acts as overseer and enforcer.  The reports that are required represent perhaps the most complete source of information about a company, and are intended to facilitate investor decision making, plus maintain the overall integrity of financial markets.

 

A.  REPORTS TO BE FILED

 

1.  Form 8-K (Current Reports)

These are to be filed within 15 days of a triggering event.  Triggering events include:

·            Changes in control

·            Acquisition or disposition of a significant amount of assets

·            Bankruptcy

·            Changes in the company’s auditors

·            Resignation of directors resulting from a dispute with management

The events that trigger a Form 8-K requirement are generally deemed to be sufficiently material so that an investor would ordinarily wish to be informed of the same forthwith, and the required filing endeavours to ensure reasonably quick disclosure.  They are not however designed to incorporate disclosure of every material development.

 

2.  Form 10-Q (Quarterly Reports)

To be filed within 45 days of the end of a quarter.  Specific in character, usually consists predominantly of financial information, i.e data for the relevant quarter plus comparisons to previous corresponding quarters, and management discussion and analysis (“MD&A) of the financial information.  Also includes:

·            Any material legal proceeding commenced or terminated during the period

·            Changes in the company’s securities

·            Default on senior securities

·            Matters submitted to a vote of shareholders

·            Any other development voluntarily disclosed by the corporation

 

3.  Form 10-K (Annual Reports)

To be filed no later than 90 days after the close of the fiscal year.  This is the most detailed periodic disclosure by a public company and is intended to provide a relatively complete and in-depth overview.  It offers an extensive review of all major developments over the past year, and includes:

 

 

·            Descriptions of the business and properties owned

·            Important legal proceedings

·            Financial information, plus audited statements

·            Information on officers and directors – these incorporate disclosure as to background, stock ownership, compensation, and transactions with the company (self-dealing / interested party transactions)

The annual report would also incorporate and update the information disclosed in all current and quarterly reports over the past year.  As with the quarterly reports, it also contains MD&A.

 

 

Management Discussion and Analysis (MD&A)

 

MD&A plays a significant role in the public company disclosure regime.  It is intended to provide shareholders with a view of the company’s finances “through the eyes of management” – a genuine analysis of the company’s operations.  Among the requirements of MD&A are:

·            That they be accurate (and sanctions apply for irresponsible statements)

·            They properly disclose the company’s financial condition, changes in financial condition and results of operations, plus information reasonably necessary towards understanding of the same

·            The disclosure of ‘trends’ that would have significant impact (favourable or otherwise) on capital resources or company income, e.g unusual or infrequent events/transactions, known trends or uncertainties, material commitments, etc

·            Generally, transactions that are reasonably expected to have a material effect on the company’s operations

 

 

B.  PROXY MATERIALS

 

Often, shareholders do not show up to vote at shareholder meetings.  Instead, they execute proxies in favour of third parties to exercise their voting powers.  The proxy process is governed by rules to ensure that shareholders have sufficient information to make an informed decision prior to executing a proxy.  Features of this process include:

·            Issuance of a proxy/information statement by the company

·            In the statement, substantial disclosure of any proposals up for vote

·            Where relevant, a description of the background and compensation of directors and executive officers

·            Inclusion of shareholder proposals (often a contentious process)

·            Also, usually in tandem with the information statement, an annual report to shareholders (not the same as Form 10-K)

 

 

APPENDIX D

 

OVERVIEW OF ICANN MEETING/DISCLOSURE PROCEDURES

IN COMPARISON TO FOIA, SUNSHINE LAWS, AND SEC REGULATIONS

 

 

ICANN

 

FOIA/SUNSHINE LAWS, SEC REGULATION

 

 

Provides minutes of Board, Supporting Organizations, and Committee meetings within 21 days via the web. However, there are some exceptions:

-  Personnel or employment matters

-  Legal matters

- Matters it is prohibited by law or contract from disclosing

-  Other matters that the Board determines, by a three-quarters (3/4) vote of Directors voting, are not appropriate for public distribution

 

 

FOIA: Individual has to request the sought-after record.

 

Sunshine Act: Transcript of closed meeting made available to public unless this disclosure is exempt under one of the act's ten exemptions

 

For matters not disclosed, the Board shall describe in generic terms in the relevant minutes the reason for such nondisclosure.

 

 

FOIA: If a request is denied, a reason must be given,  individual must be made aware of his/her right to appeal, and the name and title of each person responsible for the decision must be given.

 

Sunshine Act: The agency must make publicly available a written explanation of its decision along with a  list of all persons expected to attend the closed meeting and their affiliation.

 

 

Any person affected by an action of the Corporation may request review or reconsideration of that action by the Board.  

Board currently considering procedures for third party review.

 

 

FOIA: administrative appeal of decision available, or one can seek judicial review.

 

Sunshine Act: judicial review

 

Annual meeting open to the public, but it appears that there is no right on the part of the public to participate.

Regular meetings and special meeting appear to be closed to the public.

 

Sunshine Act:  All meetings not subject to an exemption are open.  Public does not have the right to participate.

 

California's Brown Act:  All meetings not subject to an exemption are open and the public has the right to participate

 

 

The Board shall post on the Web Site:

(i) periodically a calendar of scheduled meetings for the upcoming year, and

(ii) in advance of each Board meeting, a notice of the fact and time that such meeting will be held and, to the extent known, an agenda for the meeting.

If reasonably practicable, the Board shall post notices of special meetings of the Board at least fourteen (14) days prior to the meetings.

 

 

Sunshine Act: At least one week prior to a meeting, an agency must announce the meeting's subject matter, time, place and whether the meeting will be open or closed. It must also provide the name and phone number of the individual designated to respond to requests for information concerning the meeting.

 

 

The Corporation shall cause the annual report and the annual statement of certain transactions as required by the CNPBCL to be prepared and sent to each member of the Board and to such other persons as the Board may designate, no later than one hundred twenty (120) days after the close of the Corporation's fiscal year.

 

SEC Regulations:

Corporation must file various periodic reports, i.e

(i)   Current report upon occurrence of a triggering event (Form 8-K)

(ii)  Quarterly report with quarterly data (Form 10-Q)

(iii) Annual report with comprehensive review of past year’s performance (Form 10-K)

Accurate and frank management discussion & analysis required in (ii) and (iii).  All reports in (i) thru (iii) publicly available to anyone.

 

Prior to annual shareholder meetings, management required to circulate proxy statements and enable dissemination of shareholder proposals, plus distribute annual report to shareholders (separate from Form 10-K)

 

 

 

 

 

APPENDIX E

 

CURRENT ICANN BYLAWS

AND COMMENTS FOR DISCUSSION

 

From Article III: Transparency and Procedures

 

Section 1. GENERAL

The Corporation and its subordinate entities shall operate to the maximum extent feasible in an open and transparent manner and consistent with procedures designed to ensure fairness. In addition to the specific procedures set forth in these Bylaws, the Initial Board shall investigate the development of additional transparency policies and transparency procedures designed to provide information about, and enhance the ability of interested persons to provide input to, the Board and Supporting Organizations. Any such additional transparency policies and procedures shall be widely publicized by the Board in draft form, both within the Supporting Organizations and on a publicly-accessible Internet World Wide Web site maintained by the Corporation (the "Web Site"). Any such additional transparency policies and procedures may be adopted only after a process for receiving and evaluating comments and suggestions has been established by the Board, and after due consideration of any comments or suggestions received by the Board.

 

·         Comments

1.  This provision of the Bylaws does not explicitly state any procedures that the Initial Board has to follow during its investigation into the development of additional transparency policies and procedures.   Does this mean that the Board is empowered to develop these additional policies and procedures without any comments or suggestions from the public as to possible proposals?  For although the Bylaws mandate that any additional policies  "may be adopted only after a process for receiving and evaluating comments and suggestions," this seems to only mean that the public can make comments and suggestions on policies that the Board proposes.  Basically, there does not appear to be any requirement that the public be allowed to submit proposals, only that it can comment on the Board's proposals.

 

2.   What does it mean for the Board to give comments and suggestions in "due consideration?"   

 

Section 2. ACCESS TO INFORMATION

All minutes of meetings of the Board, Supporting Organizations (and any councils thereof) and Committees shall be approved promptly by the originating body and, no later than twenty-one (21) days after the meeting, shall be made publicly available on the Web Site and otherwise; provided, however, that any minutes relating to personnel or employment matters, legal matters (to the extent the Board determines is necessary or appropriate to protect the interests of the Corporation), matters that the Corporation is prohibited by law or contract from disclosing publicly and other matters that the Board determines, by a three-quarters (3/4) vote of Directors voting, are not appropriate for public distribution shall not be included in the minutes made publicly available. For any matters that the Board determines not to disclose, the Board shall describe in generic terms in the relevant minutes the reason for such nondisclosure.

 

·         Comments

  1. This provision allows the Board to permanently prohibit public disclosure of materials that it determines to be inappropriate for public distribution.  Should a decision of the Board permanently seal a record or should there be a time at which these materials become available to the public? 
  2. For although some matters may be inappropriate for disclosure at one point in time,  when the interests that necessitated that privacy have waned there might be no valid reason to further prohibit the disclosure of the material.  This determination would obviously have to be made on a case by case basis.

 

·         Proposals

  1. The Bylaws could stipulate that the public has the right to view any materials that the Board previously chose not to disclose after a ten-year period of nondisclosure.  However, a request to view previously undisclosed matters could be denied, if the Board determines that the requested material is still inappropriate for public distribution. 
  2. Such a proposal would be very similar to the right of an agency under the FOIA to deny a request for a record. 

 

 

 

Section 3. NOTICE AND COMMENT PROVISIONS

(a)    The Board shall post on the Web Site (i) periodically a calendar of scheduled meetings for the upcoming year, and (ii) in advance of each Board meeting, a notice of the fact and time that such meeting will be held and, to the extent known, an agenda for the meeting. If reasonably practicable, the Board shall post notices of special meetings of the Board at least fourteen (14) days prior to the meetings.

 

(b) With respect to any policies that are being considered for adoption that substantially affect the operation of the Internet or third parties, including the imposition of any fees or charges, the Board will:

 

(i) provide public notice on the Web Site explaining what policies are being considered for adoption and why;

(ii) provide a reasonable opportunity for parties to comment on the adoption of the proposed policies, to see the comments of others, and to reply to those comments; and

(iii) hold a public forum at which the proposed policy would be discussed.

 

·         Comments

  1. The Bylaws do not specify how much notice the public must be given of any public forums that ICANN holds to discuss the types of policies referred to in 3(b).  Do these public forums qualify as a special Board meeting and therefore 14 days notice is required? 
  2. If it is a physical public forum, then considering that individuals from around the world would  want to attend a forum in which policies that "substantially affect the operation of the Internet or third parties" are discussed, perhaps more than 14 days notice should be required.

3.   Opportunity for parties to comment:  What forum or format is to be made available, a simple listserv may not be adequate?   A more sophisticated method to focus on particular issues may be necessary.

4.   Under SEC Regulations, shareholders are entitled to have material and proposals circulated in relation to proposed company policy or action.  If the corporation does not agree to circulate the same, the shareholders can pursue the matter with the SEC

 

 

Section 4. RECONSIDERATION AND REVIEW

(a)   Any person affected by an action of the Corporation may request review or reconsideration of that action by the Board. The Board shall adopt policies and procedures governing such review or reconsideration, which may include threshold standards or other requirements to protect against frivolous or non-substantive use of the reconsideration process.

 

(b)   The Initial Board shall, following solicitation of input from the Advisory Committee on Independent Review and other interested parties and consideration of all such suggestions, adopt policies and procedures for independent third-party review of Board actions alleged by an affected party to have violated the Corporation's articles of incorporation or bylaws.

 

·         Comments

  1. This section of the Bylaws appears to be under development.  By way of comparison, under the FOIA senior personnel within the agency often consider appeals.  If there are problems encountered during the appeals process, then the individual can request judicial review.
  2. Who will oversee the advisory committee on independent review? 

Possibilities: The Attorney General of California, a special commissioner appointed by the Department of Commerce, a watchdog body similar to the SEC

 

From Article V: Structure of the Board of Directors

 

Section 13. ANNUAL MEETING OF THE BOARD OF DIRECTORS

Annual meetings of the Board will be held for the purpose of electing At Large Directors and Officers and for the transaction of such other business as may come before the meeting. The first annual meeting will be held the last week of September 1999 or on such other date as may be set by the Board. Subsequent annual meetings shall be held as set by the Board not less than ten (10) nor more than thirteen (13) months after the annual meeting held the prior year. In the absence of designation, the annual meeting will be held at the principal office of the Corporation. The annual meeting will be open to the public, and to the extent practicable, should be held in different locations around the world on a regular basis. If the Board determines that it is practical, the annual meeting should be distributed in real-time and archived video and audio formats on the Internet.

 

·         Comments

  1. Although the public has the right to attend the annual meetings, it does not have a guaranteed right to participate at such meetings.  California's Brown Act gives the public the right to participate in the meetings of local legislative bodies in the hopes that this active participation will promote an environment in which "the best ideas will emerge."

 

·         Proposal

  1. The Bylaws could be amended to require that the public be given the opportunity to participate.  This amendment could be modeled after section 54954.3 of the Brown Act.

 

"54954.3. (a) Every agenda for regular meetings shall provide an opportunity for members of the public to directly address the legislative body on any item of interest to the public, before or during the legislative body's consideration of the item…(b) The legislative body of a local agency may adopt reasonable regulations to ensure that the intent of subdivision (a) is carried out, including … regulations limiting the total amount of time allotted for public testimony on particular issues and for each individual speaker."

 

Section 14. REGULAR MEETINGS

Regular meetings of the Board will be held on dates to be determined by the Board. To the extent practicable, regular meetings should be held in different locations around the world on a regular basis. In the absence of other designation, regular meetings will be held at the principal office of the Corporation.

 

Section 15. SPECIAL MEETINGS

Special meetings of the Board may be called by or at the request of one-quarter (1/4) of the members of the Board or by the Chairman of the Board or the President. A call for a special meeting will be made by the Secretary of the Corporation. In the absence of designation, special meetings will be held at the principal office of the Corporation.

 

 

 

·         Comments on sections 14 and 15

1.  The provisions affecting regular Board meetings and Special Board meetings do not require these meetings to be open to the public or that the public be allowed to participate in them.  In an attempt to make ICANN more transparent and open, the Board could consider allowing the public to attend these meetings and, if the Board chose, to allow the public to participate at such meetings.  The case for making Special Board meetings open to the public might be stronger since by definition these meeting are "special"; and therefore, probably of substantial importance to the internet community.   However, any such decision would have to consider the costs both financially and in terms of resources that open meetings would entail. 

 

 

 

 

 

 

LIST OF REFERENCES

 

1.                   Statement of Policy on the Management of Internet Names and Addresses, prepared by the US Department of Commerce (DOC), dated June 5, 1998 (White Paper) http://www.ntia.doc.gov/ntiahome/domainname/6_5_98dns.htm

2.                  Memorandum of Understanding between DOC and ICANN

http://www.ntia.doc.gov/ntiahome/domainname/icann-memorandum.htm

3.                  ICANN Status Report to DOC dated June 15, 1999

http://www.icann.org/statusreport-15june99.htm

4.                  ICANN Articles of Incorporation  http://www.icann.org/general/articles

5.                  ICANN Bylaws and proposed amendments

http://www.icann.org/general/bylaws

http://www.icann.org/general/bylaws-amend-8oct99.htm

6.                  California Corporations Code, sections 5000 et seq

7.                  Witkin, Summary of California Law, 9th Edition, sections 352 et seq

8.                  Marsh’s California Corporation Law (3rd Edition) – Chapter 23, Nonprofit Corporations

9.                  Schwing, Open Meeting Laws, 1994

10.              Kavass, Justice Department Guide to the Freedom of Information Act, 1993

11.              Adler, Litigation Under the Federal Open Government Laws, 16th Edition

12.              California Attorney General's Office, The Brown Act, 1994

13.              Pupillo, The Changing Weather Forecast: Government in the Sunshine in the 1990’s – An Analysis of State Sunshine Laws, 71 Wash.U.L.Q.1165

14.              Barrett, Facilitating Government Decision Making: Distinguishing between Meetings and Nonmeetings under the Federal Sunshine Act, 66 Tex.L.Rev.1195

15.              Susstein, Government Control of Information, 74 Calif.L.Rev.889

16.              Brown Jr, The Regulation of Corporate Disclosure, 3rd Edition

17.              Brandeis, Other People’s Money (1914)

18.              Corporate Law and Practice, Understanding the Securities Laws (Vol.2), 1998