FOR ASSIGNED NAMES AND NUMBERS
November 6, 1998
J. Beckwith Burr
Re: Internet Corporation for Assigned Names and Numbers
Dear Ms. Burr:
On behalf of the Internet Corporation for Assigned Names and Numbers (ICANN), I am responding to your letter to Dr. Herb Schorr of October 20, 1998. ICANN is prepared to fulfill the mission identified in the White Paper to allow the management of Internet names and address to be administered by a new, not-for-profit corporation. We are pleased to have been recognized by the Department of Commerce as the appropriate entity to take on that responsibility, and we are eager to get started.
First, a note about the formation of the ICANN Board. On October 25, 1998, the nominees for the ICANN Board met in person and by telephone in New York. During that meeting, we decided that the most prudent course, in view of the untimely death of Dr. Jon Postel, was for the ICANN Board to be officially constituted so that it could complete the mission that Dr. Postel and many other persons and entities throughout the world have focused on so diligently since the issuance of the White Paper last June. We did not wish to be presumptuous, but we believed that this was a necessary step to enable this process to continue effectively and expeditiously. Accordingly, the nine At Large members of the Initial Board have now been duly elected, and I have been elected its Interim Chairman. In addition, Michael Roberts was named as Interim President and Chief Executive officer. Mr. Roberts will act for an interim period only and will not be a candidate for the long-term President and Chief Executive Officer. Because of Mr. Roberts' office and consistent with the submitted bylaws, Mr. Roberts was also elected to the Board. The views set forth in this letter are those of the unanimous Board.
In your letter to Dr. Schorr, you state that the United States is prepared to "begin work on a transition agreement between the United States and ICANN" once certain issues described in your letter are satisfactorily resolved. The ICANN Board has carefully considered each of the issues raised in your letter and has had a number of discussions concerning those issues with a variety of interested persons and groups (including authorized representatives of the two groups whose proposals you specifically mentioned -- the Boston Working Group and the Open Root Server Confederation). As a result of this work, we have made certain revisions to the bylaws that were submitted to you with Dr. Postel's letter of October 2, 1998 (which for shorthand we will call the "October 2 bylaws"). Those revised bylaws have been adopted by the Board, and we are now operating pursuant to them. A copy of the bylaws as adopted is attached.
In determining what revisions should be made, we were guided by your letter, discussions with BWG and ORSC and others, and our own judgment of what was sensible and workable. We believe we have dealt appropriately with all the issues raised in your letter, in many instances by adopting particular changes suggested by BWG, ORSC and other commenters. We have not made (and indeed could not make) every change suggested by everyone, because some are conflicting, some are not supported by a consensus of the Internet community, and some are, in our judgment, not likely to be effective. We explain below the specific changes that we considered and those that we made and why. We believe that these changes satisfactorily respond to the issues raised in your October 20 letter.
In your letter, you specifically identify six areas for further consideration. I will discuss each of these issues separately.
Neither the drafters of the ICANN bylaws nor anyone else has yet been able to devise a membership structure that is generally accepted to be appropriate and practical for the At Large membership. For this reason, the October 2 bylaws provided that if the Initial Board decides that it is not "possible" to create a "workable" membership structure, it would have to devise some alternative structure to elect the nine At Large Directors. Since this caveat has contributed to the concerns on this issue you reference in your letter, we have eliminated it. The bylaws now make it clear that the Board has an unconditional mandate to create a membership structure that will elect the At Large Directors of the Board, as proposed by the BWG and some other commenters.
We will move directly to devise a workable membership structure and will seek broad input on how this can be best done. As suggested by the BWG in a recent conversation, the bylaws as adopted require the creation of an Advisory Committee on Membership, consisting of Directors and others, to advise the Board on this issue. We note and appreciate that the ORSC proposal contained a specific suggestion for implementation of membership that we will carefully consider, and we assume that others will come forward with additional ideas and suggestions.
Some remain concerned that the Initial Board could simply amend the bylaws and remove the membership provisions that we have just described above. We commit that this will not happen. In addition to our commitment, the U.S. government has publicly stated that it will maintain oversight during the transition period, and we fully expect that the creation of a membership and the transfer of authority to a fully elected Board will occur before that transition period ends.
-- The Board is required to publish at least annually a report describing its activities, including an audited financial statement and a description of any payments (including reimbursements of expenses) made to Directors.
-- The Board can set fees only to recover "reasonable" operating costs and to establish "reasonable reserves" for future expenses and contingencies "reasonably related to the legitimate activities of the corporation." The fees and charges must be fair and equitable and must be published on the Internet.
-- In general, and of course including financial matters, the Board is obligated to operate to the maximum extent feasible in an "open and transparent manner and consistent with procedures designed to ensure fairness," with significant policies and procedures widely publicized on the Internet and adopted only after the Board has received and evaluated comments from the Internet community.
In addition, the ORSC financial accountability proposals come in the context of companion provisions that would create a totally different membership structure from what was proposed in the October 2 bylaws by, among other things, not permitting the Supporting Organizations to elect members of the ICANN Board. We have carefully considered this issue, and concluded that the structure proposed in the October 2 bylaws -- with four separate membership organizations each electing Directors and thus creating an ICANN Board with a balanced representation of the various Internet technical, commercial and user constituencies -- is both appropriate and supported by the vast majority of Internet stakeholders. Since we therefore concluded not to accept the ORSC suggestion to change those provisions that allow the Supporting Organizations to elect members to the ICANN Board, to adopt the related ORSC provisions on financial issues would unduly distort the accountability of the new organization.
The ICANN Articles of Incorporation already filed require that ICANN "operate for the benefit of the Internet community as a whole . . . through open and transparent processes that enable competition and open entry in Internet related markets." In addition, the ICANN bylaws as adopted contain a number of additional specific provisions designed to ensure openness and transparency. For example, the bylaws direct that:
These appear to us to be very significant guarantees of openness and transparency. The BWG proposed that Board minutes be approved within 30 days (while the October 2 bylaws provided that they must be approved "promptly"); we have adopted that requirement and, in fact, have shortened the period to 21 days. There were also suggestions that the mandate to the Board in the bylaws that it adopt a reconsideration process be broadened to apply to all actions by the Corporation, not just Board actions. We have accepted this suggestion.
We note that some have questioned our choice of California as a jurisdiction in which to form ICANN. We have carefully reviewed the various suggestions of alternative jurisdictions, and while each has merits, we believe that the well-written and specific nonprofit corporate laws of California are most consistent with ICANN's goal of creating maximum accountability and openness.
The ICANN bylaws as adopted provide that all Directors, however elected, serve in their individual capacity and not as a representative of any group or entity. It is not clear why this would be any more difficult to do for an officer of a Supporting Organization than it would be for an officer or employee of a private corporation (and the Board, as a body of unpaid volunteers providing service to a non-profit corporation, inevitably will include such persons). To the extent that any conflicts of interest arise, the bylaws as adopted treat that issue by requiring that the Directors disclose, not less than once a year, "all business and other affiliations which relate in any way to the business and other affiliations of the Corporation." Additional disclosures are required in order to address the possibility that a Director might become an "interested director" or an "interested person" within the meaning of the relevant California statutes.
The bylaws as adopted also provide that the Board shall (the October 2 bylaws said "may") adopt further policies to address conflict issues, and we have made it clear in the bylaws as adopted that these policies will cover the Supporting Organizations as well. Because it is not yet clear what organizational form the Supporting Organizations will take, or whether they will even have officers and directors, it seems premature to articulate detailed conflict of interest rules for them at this time.
Finally, the ICANN bylaws as adopted require that any application for recognition as a Supporting Organization contain "policies for disclosure to the Corporation by members of or participants in a Supporting Organization council of conflicts of interest or other financial interests in matters within the scope of the Supporting Organization (such conflicts of interest, however, not necessarily requiring abstention from action)." The rationale for this provision is that disclosure of any such conflicts is important for those serving on the bodies charged with making policy recommendations, but that it would be impractical and unwarranted to prohibit participation on the councils to anyone with a potential conflict. As noted above, any Supporting Organization members who became Directors would automatically fall under the conflicts rules related to Directors.
The ICANN bylaws sought to ensure this broad representation by limiting the number of At Large Directors who could come from any one geographic region to no more than 50% of the total (as a practical matter, four out of nine) and by limiting the number of Directors selected by a Supporting Organization from any one region to no more than two. Obviously, before all of the nineteen Board members are seated, it is difficult to say in the abstract that these procedures will or will not accomplish their goal. The Board is committed to ensuring that this global entity's permanent governance structure is globally representative, and we welcome ideas on how to make this happen. We are aware of various suggestions, such as limiting the aggregate number of Directors from the Supporting Organizations to no more than half from any one region, or requiring that at least on Director come from every region. These may be appropriate aspirational goals, but it is difficult to see how they could be effectively implemented. We hope to receive specific proposals on how these or similar goals could be met consistent with the membership election processes contemplated in the bylaws as adopted.
In summary, the ICANN Board believes that it has taken the appropriate steps to respond to the issues raised in your October 20 letter, by making changes to the October 2 bylaws that reassure everyone in the Internet community that ICANN will listen to all voices, and carry out its work in an open and transparent manner. We do not have the ability to make everyone happy -- as noted, the various suggestions for changes conflicted in many respects -- but we have gone to great lengths to try to accommodate the reasonable concerns of those who have expressed interest.
While we have now adopted the attached bylaws, they are not cast in stone; there will have to be changes to reflect the work of the Initial Board and to create the permanent governance structure of ICANN. We will carefully consider any and all suggestions for improvement as we move forward in this process. Nobody should operate under the illusion that any issue has been resolved "once and for all." Similarly, nobody should feel that issues that are important to them and have not been addressed to their satisfaction cannot be revisited. The process is just beginning.
Our goal, as the Initial Board, is to complete the organizational work as quickly as possible, and to hand over a fully functioning, properly representative ICANN to its first elected Board as soon as possible. We must create an organization that can begin to assume responsibility for the administration and policies of the Internet name and address system, and we must do so quickly, openly and effectively. This Board is committed to accomplishing all of these somewhat conflicting objectives.
We have already had many conversations and consultations with those who commented on the October 2 bylaws and accompanying material, and we will have many more as we move through this process. We have announced our first open meeting for November 14, 1998, in Boston. We will attend a meeting of the European Panel of Participants in Brussels on November 25, 1998, and we hope to hold a meeting in Asia soon as well. It is now time to complete the transition process, and we hope we can do so as soon as possible. As I said at the beginning of this letter, we truly are eager to get started.
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