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Accountability and Transparency Frameworks and Principles
Legal and Corporate accountability
ICANN's Accountability and Transparency Frameworks and Principles were approved by the Board on 15 February 2008.
The full frameworks and principles are also available in PDF format:
http://www.icann.org/transparency/acct-trans-frameworks-principles-10jan08.pdf
Contents
- Overview
- Accountability in the Public Sphere
- Legal and Corporate accountability
- Accountability to the participating community
Legal and Corporate accountability
A second important aspect of ICANN’s accountability is the legal and corporate accountability that comes about through the organization’s Bylaws and through the state and national laws that govern ICANN’s behavior. The Bylaws underpin the operations of ICANN and in particular set out the procedures for the appointment of Directors and for the running of ICANN’s core governance process, the Board. As such, they are a critical component of ICANN’s accountability framework. ICANN is a California nonprofit public benefit corporation, and is subject to both the state laws of California, and United States federal laws. One of the reasons that ICANN was constituted as a California nonprofit public benefit corporation is that the State of California provides a rigorous framework of legal accountabilities for organizations of this type. The responsibilities that have been put in place through ICANN’s Bylaws and its corporate structure should give stakeholders certainty that ICANN operates to the highest standards of accountability.
This section of the Management Operating Principles sets out:
- A. The ICANN Bylaw requirements for corporate responsibility
- B. The jurisdictional legal obligations ICANN has as a California nonprofit public benefit corporation
A. BYLAW REQUIREMENTS
ICANN’s Bylaws are the internal rules by which the Corporation operates.
The Bylaws state that the powers of ICANN and all property and business and affairs are to be conducted by or under the direction of the Board. The Board may act only by a majority vote of all members of the Board at any annual, regular, or special meeting of the Board, or by unanimous written consent of all voting members.
The Bylaws also require ICANN to have in place a process by which any person or entity may request review or reconsideration of actions by the Board that materially impact an individual or entity. This is outlined further in the framework for Dispute Resolution at ICANN.
The Bylaws can only be altered and new Bylaws adopted by a two-thirds (2/3) vote of all members of the Board.
B. JURISDICTIONAL LEGAL OBLIGATIONS
- Fiduciary obligations of directors
- Duty of Care
- Duty of Inquiry
- Duty of Loyalty
- Duty of Prudent Investment
- Accountability of Senior Staff
As a California nonprofit public benefit corporation, ICANN is subject to both the state laws of California, and United States federal laws. Laws generally applicable to ICANN and its operations include laws relating to tortious behavior, laws applicable to contracting activities of corporations, and laws prohibiting monopolistic behavior. As a corporation, ICANN is a legal entity and has the ability to sue and be sued for its actions, and to be held responsible in a court of proper jurisdiction for its business dealings with the global community. Accordingly, ICANN’s activities in the global community are conducted under awareness and appreciation of the laws applicable to it as an organization.
Under its articles of incorporation:
- ICANN is a non-profit public benefit corporation
- It is not organized for the private gain of any person
The law that organizes ICANN is called the California Non-profit Public Benefit Corporation Law for charitable and public purposes. ICANN has been granted tax-exempt status by the United States federal and California state governments. Tax-exempt status was conferred upon ICANN based on its mission of providing technical coordination for the Internet, and the resulting benefits to the public community at large. ICANN’s status as a tax-exempt organization carries with it certain responsibilities to federal and state authorities which are different than those associated with taxable, for-profit entities. Specifically, ICANN’s operating activities and organizational decision-making are guided by requirements incorporated into ICANN’s charter for continuing eligibility for tax-exempt status. The California Attorney General is the legal overseer of California nonpublic benefit corporations such as ICANN. As such, the Attorney General works to protect the interest of all public beneficiaries within his or her jurisdiction. The Attorney General, acting on behalf of the public, may conduct investigations and bring legal actions to ensure that ICANN does not stray from its public charitable purpose. For corporate behavior that has otherwise gone uncured and uncorrected, members of the public are also able to petition the Attorney General to conduct these investigations. ICANN is recognized as a public charitable organization described in Internal Revenue Code (“IRC”) § 501(c)(3). This recognition carries with it several benefits, namely, exemption from federal taxation and the ability to receive tax-deductible charitable contributions. Being an IRC § 501(c)(3) organization, however, also imposes special responsibilities on ICANN. Among those responsibilities is that ICANN’s directors must ensure that ICANN operates exclusively in furtherance of its public charitable and scientific purposes and avoids transactions that may confer excessive economic benefit on corporate insiders, others closely affiliated with ICANN or private parties who contract with ICANN.
Fiduciary obligations of directors
Under California corporate law, ICANN’s Board of Directors is charged with overall responsibility for the management of the business and affairs of the corporation. The general legal duties of an ICANN director are owed to the corporation itself, and the public at large.
Generally, a director of a non-profit public benefit corporation shall perform his/her duties in good faith, in the best interests of the organization and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances.
That is generally understood to embrace four duties, which directors owe to the organization and its constituencies: (a) a duty of care; (b) a duty of inquiry; (c) a duty of loyalty; and (d) a duty of prudent investment.
The duty of care is best expressed as the seriousness that each Director brings to his or her responsibilities such as gaining and maintaining familiarity with the business objectives of the organization. It also includes important business considerations and industry information relevant to the organization’s activities, and serving on the same basis on committees to which the Director may be appointed. The duty of care also requires that the Director take reasonable measures to ensure that the organization is managed and directed in a manner that is consistent with its mission. Further, the duty of care requires the Directors to be attentive to the concerns expressed by the organization’s counsel and follow directives concerning the confidentiality of advice and overall legal strategy approved by the Board of Directors or the officers for dealing with particular problems or issues that may arise.
The duty of inquiry generally requires that a Director take such steps as are necessary to be sufficiently informed to make decisions on behalf of the organization and participate in the Board of Directors’ activities. In satisfying this duty, Directors must balance against competing considerations, such as the organization’s obligations relating to confidentiality of information received from third parties, privacy rights of employees and others who deal with the organization, attorney-client privilege relating to legal proceedings or legal advice to the organization, and protection against disclosures of information which may damage the organization’s business, property, or other interests.
The duty of loyalty generally involves the protection of the organization’s interests in its business, properties, assets, employees, and legal rights, avoidance of conflicts of interest or self-dealing on the part of Directors, and serving the interests of the organization and not the interests of any other person or group, including a constituency of the organization which caused the Director to be selected.
Directors of a non-profit corporation are required, in the management of the organization’s investments, to avoid speculation and to comply with any applicable standards in the organization’s Articles, Bylaws, or the terms of any gift or grant of funds to the corporation.
In addition, due to the tax-exempt status of ICANN, its directors and officers owe a duty to avoid “excess benefit” transactions and those that inure to the benefit of any insider (i.e., an officer or director of ICANN) or confer a benefit on a private party which is not an insider. Further, directors of a California nonpublic public benefit corporation may, under certain circumstances, be subjected to personal liability for uninsured damages resulting from acts or omissions not within the scope of the director’s duties; that are not performed in good faith; or that are reckless, wanton, intentional or grossly negligent.
Similar standards of legal accountability apply if the Corporation opens international offices. There has been some discussion among the ICANN community about potential review of ICANN’s legal status in the context of its further internationalization. Whatever may emerge out of these discussions, if anything, ICANN is committed to maintaining the same standards of external accountability to those outlined above.
Accountability of Senior Staff
The senior staff of ICANN serve as officers of the organization and are elected annually by the Board. The Bylaws require the designation of the President, Secretary, and Chief Financial Officer. The Board appoints the President and CEO and permits the Board to designate other officers on an annual basis. The Board also has the ability to remove any officer by a two-thirds vote of the Board and each officer is subject to ICANN’s conflict of interest policies. Like Board members, these officers have fiduciary responsibilities to the corporation and are also accountable under state and federal laws.
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