[arin-discuss] Importance of Corporate Governance

[Dean Anderson]

Every once in a while, I get a message like this:

> Hi Dean,
> 
> I have been following things for some time with regards to your
> details with respect to the ARIN board and alleged wrong doings.  I
> feel I am at a bit of a disadvantage in that I am not 1. a lawyer and
> 2. Canadian.
> 
> Do you have time to summarize the importance of your claims and,
> basically, why I should care?

I don't want to encourage the small noisy group who advocate their views
by threatening and trying to suppress or silence contrary views, but I
think that basically, its a fair question that should be answered from a
high level perspective. I think its important to educate people about 
these subjects.

Honest corporate governance is important; and that's why members should
[and a great many do!] care.

I have noticed that nearly all the members of ARIN are corporations.  
Agents of the corporation [are supposed to] act in the interest of their
company, not their personal interest. If honest corporate governance of
ARIN isn't your personal interest or part of your job, then perhaps your
company has someone else who should be working on ARIN governance for
the benefit of the member corporation. If you aren't personally
interested, probably your company is interested in good corporate
governance.

So, Assuming the reader is interested in corporate governance, I also
suggest that one read "The Seven Signs of Ethical Collapse" by Marianne
Jennings, J.D.  The inside cover to the book really sums up why one
should care:

 "Do you want to make sure you
  * Don't invest your money in the next Enron?
  * Don't go to work for the next WorldCom right before the crash?
  * Identify and solve problems in your organization before they send 
    it crashing to the ground?"

I'll add another quote from the Author's Note of the same book:

 "When Daniel Petrocelli, Mr. Skilling's lawyer for the trial, first 
  met with Mr. Skilling to discuss serving as his defense lawyer, Mr.  
  Petrocelli owned to him that he was not criminal lawyer. Mr.  
  Skilling's response was, "That's okay. I'm not a criminal". Wrong 
  again, this time wrong for a lifetime. [...]

 "But do we fancy ourselves different from these companies and the 
  now-convicts who led them, or do we work to be sure we don't fall into 
  the same traps? We need some new ideas and a different road."


I want to avoid those old traps, offer new ideas, and find a different
road.


Let me put things in more detailed terms with respect to ARIN and the 
present issues under investigation.

First, one couldn't have honest corporate governance without the ability
for members to investigate the Directors or the management. As a general
statement, a dishonest "anyone", including a Board Member, Manager, or
whomever, can be expected to resist investigation, so investigation
cannot depend on the approval of the Board of Directors.  It has also
been eloquently pointed out that the object of an investigation is to
uncover facts; It was pointed out that it is a waste of the democratic
process to require the membership to vote without facts. So an
investigation cannot require the prior support of the membership; Its
just silly to argue that one must get support of the membership to do an
investigation.  An investigation is the MEANS to get the facts necessary
to support some action by the membership.

Second, I note many thoughtful comments have supported the
investigations. Members want to know the answers to the reasonable
questions of how ARIN is spending money. Members have a legal right to
know what ARIN is doing and how ARIN is spending its money.  Board
Members of a corporation are "fully answerable" to the membership. The
issues of ARIN's activities and the board members' conflicts of
interests are legitimate business questions that affect corporate
governance. Indeed, many members seem to be unaware of these conflicts
of interest and unaware of the full facts affecting the character and
ethics of Board Members. As I mentioned, the Board Members are "fully
answerable" to the members; this is the law.  And I think many members
want answers to these questions.

By contrast, the persons who want to stop the investigation also
advocate disregarding any current or past wrongdoing, disregarding facts
reflecting negatively on Board Members' character, disregarding the ARIN
bylaws, and disregarding bad faith, false statements, and conflict of
interest of Board Members.  They advocate _against_ ARIN reporting the
facts of, for example, what ARIN has spent on NANOG.  They advocate
_against_ having quorum requirements for the election of Board Members.  
They advocate _against_ discussion of corporate governance. Their
position is contrary to principles of good corporate governance.

These positions are not inconsequential to good corporate government.  
Reduced participation in elections over a period of years has enabled
one small group (NANOG) to take control of ARIN, and to begin
transfering funds from ARIN to NANOG. This transfer is not
insignificant, and adds to more than $500,000.00 so far.  The current
board wants to continue siphoning off money from ARIN to NANOG at a rate
of at least $50,000 per year. It appears the NANOG-affiliated Directors
have may have directed ARIN payment for ARIN A/C Members to attend
NANOG, furnishing benefits for some members at the expense of other
members. These transactions are inurements which are explicitly
prohibited by the bylaws, the IRS regulations for 501(c)6 corporations,
and the articles of incorporation which state there will be no violation
of 501(c)6.  Inurements are "jeapordizing transaction" which jeapordize
the tax-exempt status of ARIN, as well as being contrary to the bylaws.

Third, I think many members wonder WHY ARIN is paying for programmers,
DBA's, executive assistants and other non-network-operations staff
(whose job has nothing to do with the craft of Network Operations), to
attend NANOG seminars teaching the craft of Network Operations. I think
they wonder HOW MUCH is being spent.  Questions of "How much has been
spent on NANOG?", and "for what benefit to ARIN?", are legitimate
questions for 'ARIN to spend time and resources" answering. To date,
ARIN has given only vague answers or none at all.

Bad character has consequences. Bad choices have consequences.  The bad
consequences affect Canadians, too.  That is why these issues, and good
corporate governance are important. Indeed, they are probably the most
important things that members decide.

IRS pages on 501(c)6 Life Cycle
http://www.irs.gov/charities/nonprofits/article/0,,id=169366,00.html

IRS page on 501(c)6 Inurement
http://www.irs.gov/charities/nonprofits/article/0,,id=169403,00.html

"The statutory inurement proscription, however, precludes furnishing 
benefits for some members at special rates, at the expense of other 
members."

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