PASS Update #65 (Officers, September Meeting)

I wanted to start with a follow up to my last post about the officer elections and the concerns about having two officers from the same company. The question came in about whether having two from the same company increased the risk, and I want to try to answer that.

  • The first risk is fraud. I believe that having two carries no more weight than one. Officers are empowered to sign contracts, speaker for PASS in an official capacity, so if one should go rogue there is no need for an accomplice.
  • The second risk is influence. Would having two from the same company increase the influence they have on the Board? This is a harder question. At a Board meeting the answer is no. The by-laws allow two and within a Board of 14 or so having two from the same company (which we do from Microsoft, CA, and SolidQ) is manageable. At an Exec meeting (officers plus HQ) it’s entirely different though, there it is much easier to influence direction because they are the ones in the room (on the call).

In the end I worry less about fraud. You know how crazy putting controls in place can be, we have some and perhaps need more, but we’re slow enough to respond as it is without just reacting. I’d like to see us bring an outside consultant in to evaluate the fraud risk, not just for the officers, but for HQ as well. I worry more about influence. Influence is subtle, and rarely evil,but it does happen. The question is,do the things they influence matter?

To me it only matters if it is something the Board doesn’t see, eventually. Imagine that we have two officers who decide to grant their company very favorable pricing on exhibit space at the Summit. The Board sees the totals and news about deals, but we don’t look at the terms of each one. Even if we did, would we know it was unfair? Maybe it’s a package, a multi-year deal, or includes other portions that would justify the discount.

In the end what I care about, and what I suspect you care about, is that money PASS accrues is used for good, and definitely not used to benefit Board members. I think the one control we should add is some sort of annual disclosure about any money paid/reimbursed to Board members with a short narrative.

Changing topics, I wasn’t able to attend the September 2011 Board meeting. We’ve moved the meeting to 10am, the best compromise we could find on time as it means HQ (on the west coast) are on the call at 7am and for our European friends it’s towards the end of the day. 10 am is a hard time for me to get away (we normally met at 12:30) and I don’t have a solution yet. Since I couldn’t attend I proxied my vote to Neil Buchwalter from CA, a friend, and one whose judgment I trust and values are similar to my own.

The main topic of the meeting was to resolve an issue that had been ongoing for a couple weeks. Back in August we voted to appoint three international members in a non-voting status. A couple weeks after the vote Raoul Iilyes would be working for SolidQ, and that threw us into a discussion of whether that would require us to vote for an exception to the clause in the by-laws that limits us to two from any one company (there is a provision for a 3rd, but 3 is the hard cap).

The final analysis is that since they are advisors and not directors, it doesn’t require an exception. We wanted Raoul because he’s been deeply involved in the SQLRally in Sweden, and he has just joined SolidQ. Neil (and I by proxy) supported this decision. It’s a hard call. Raoul accepted our invitation in good faith, and I’m sure that we didn’t ask or remind him about the 2 per company thing, we hadn’t figured out if it would apply or not. I believe here the good outweighs the harm, and from what I say had we taken the vote to grant the exception it would have been approved.

That said, it’s revealed – again – just how hard governing is, how much language matters. Here it is:

“The Board may also choose to appoint any number of non-voting advisors to the Board by a majority vote for a period of up to one year each. Such advisors may have full access to all Board communications and may also be invited to Board meetings.”

The whole point of advisors is influence. It requires a majority vote so I have no concerns there, but the amount of access is a concern. If you’re at the Board table on an ongoing basis we will treat you as a peer. That’s hugely different than a consultant that might come in for a couple hours of discussion or to make a report. They can – by design – exert a lot of influence.

Should the two per company rule apply to these advisors? I don’t know. I feel like the intent of the change (in which I participated) was to reassure the members that there was no hidden cabal, and to keep PASS safe for future generations from undue influence. Following that thinking, I think it should apply to anyone seated at the table on a recurring basis.

It’s been a long, somewhat painful discussion, and while I wish it had been cleaner, it was a great discussion to have, and to see it reflected in the minutes (due in the next week or so, please do read them).