Monday, November 4, 2013

The Minnesota Orchestral Association Governance, Part 2

After the Minnesota Orchestra's 75th Anniversary in 1977-78, the governing structure of the Association had changed from what the original founders had established.  Some changes were minor, such as the date of the membership's annual meeting, or the number of people on the Board of Directors.  But one change that occurred in 1977 set a precedent: the change to Article II.  Now, not just anyone who could pay a minimum of $100 per year could be a member of the Association.  Now, the Board of Directors would choose who could be a member.  This change put the membership directly under the control of the Board.  And yet, the Board was still accountable to the membership.

Photo credit: Greg Helgeson

The Restatement in 1990-91

I expected yet another amendment to the Articles of Incorporation in 1990-91, but instead, the title on the document read "Certificate of Restated Articles of Incorporation of The Minnesota Orchestral Association."  This wasn't an amendment.  It was a re-drafting of the Articles.  The first page is like a preamble, stating that the undersigned President and Secretary of the Association certify that the restated Articles of Incorporation had been approved by a majority of the Board of Directors at a meeting held December 8, 1990, and by "the members with voting rights" at a meeting on January 7, 1991, and this document supersedes and replaces all prior Articles of Incorporation.

While previous Articles of Incorporation and all amendments had been notarized, oddly, this document has not.  The signatures are barely legible, and there's no printed names under them to know who had signed.  I sought this information from Gwen Pappas, the Director of Public Relations at the MOA.  She informed me that the President at that time was Deborah Borda (currently President of the Los Angeles Philharmonic), the Secretary was Karen Hubbard, and the Chairman of the Board was the late N. Bud Grossman.  Once I knew the names, I could see that the President's signature was Deborah Borda's, but the Secretary's looks like T. M. Crawford, not Karen Hubbard.  A mystery, along with the lack of notarization.

I decided to try to obtain answers to my questions regarding this document from Deborah Borda and contacted the LA Philharmonic's Director of Public Relations, Sophie Jefferies.  She contacted Ms. Borda in Europe where she's traveling for business for the next 3 weeks, and asked her my questions.  According to Sophie, Ms. Borda's reply was that it was too long ago to remember, and she thought that the Board would have the information I sought from her.  I have made a request to Gwen Pappas to possibly get the answers from Karen Hubbard. 

In addition to the lack of notarization question, I had a couple questions about the Restated Articles of Incorporation, so on to the Articles themselves.

Article I: As in the original Articles, this article states the name of the corporation, the general purpose, the plan of operation, and the corporation's location.  With the exception of the name and the specific location of Orchestra Hall on Nicollet Mall in Minneapolis, this article did not change from the original.

Article 2: In the original Articles, this article described the requirements for membership in the Association which was open to anyone who could pay a min. of $100 per year, who then would be entitled to one vote per each full $100 paid per year, and they could lose their membership by not paying.  In 1977, as we've seen, these requirements were changed to those established by the Board and ratified by the membership.  In 1991, this article reads: "There shall be no capital stock of this corporation."  What had been Article III in the original Articles, is now Article II.  What happened to the membership?  In fact, with this change, the Board had eliminated the membership, and by that, eliminated the group to whom they were accountable and from who the Board is elected.  I had asked Deborah Borda why this change had occurred and now, I've passed the question on to Gwen Pappas to ask Karen Hubbard.

Article 3:  So we know already that this article is not the same as the original, since it's now Article II.  Article III in the 1991 restatement reads: "The government of this corporation and the management of its affairs shall be vested in a board of directors.  The board of directors shall elect successors of those directors whose terms expire each year."  That's it, folks.  In the original Articles, the fourth Article described the government of the corporation in some detail.  Now that's gone.  I decided that the detail must now be in the MOA's bylaws and I needed a copy to see if that was the case.  More on the bylaws later.

Article 4: This article in the 1991 restatement reads in its entirety: "These Articles of Incorporation may be amended from time to time by the affirmative vote of a majority of the entire board of directors."  Under this article is once again the list of the original Board of Directors and Officers of the corporation followed by the Secretary of State's filing stamp dated Feb. 5, 1991.

When I first read this document, I was shocked.  Talk about a bloodless coup.  The membership was gone, even the membership chosen by the Board after 1977.  There was no longer a larger group of Association members from whom the Board would be elected, and the officers, and to whom the Board and officers would be accountable.  I had found the answer to my questions about Board accountability.  There was essentially no one within the corporation who could "fire" the Board and start over.

The Bylaws

First, I requested a copy of the MOA Bylaws from Gwen Pappas.  I was waiting for her response (she was waiting for someone else to give her the go ahead) when I learned from a comment after Part I in this series that the Bylaws had been posted online at the Save Our Symphony Minnesota website. I downloaded a copy along with several other documents offered by SOSMN.  They also offer the original Articles and amendments for reading.  These Bylaws are "as last amended October 22, 2009."  So, after the most recent financial issues began but before the lockout of the musicians.

The Bylaws consist of five articles as follows:
Article I -- Board of Directors.  This article has 13 sections.
Article II -- Committees.  This article has 7 sections.
Article III -- Indemnification.  This article has 1 section.
Article IV -- Officers.  This article has 5 sections.
Article V -- Miscellaneous.  This article has 2 sections.

My questions regarding these Bylaws are: How does someone become a member of the Board?  Are there term limits?  Who has voting rights?  How does someone become an Officer?  Is there any kind of accountability built into the Bylaws?  If so, how and to whom?  I am most interested in Articles I and IV, but will comment on the other articles briefly.

Article I Board of Directors

In Section I, general powers of the Board are defined as being the management of the corporation's business.  These are fairly broad powers, and I would have liked to have seen a specific list of duties and responsibilities to the corporation, including fiduciary duties and responsibilities.

Section II describes the "classes" of directors.  So, we've gone from a general board of directors without classes in the original Articles, to a board that's been divided up into classes.  There are five: regular, ex-officio, emeriti, life, and honorary.  Only two, regular and ex-officio, have voting rights, but the Board can award voting rights to individual life directors at the time that they become life directors.  So not all life directors have voting rights, and those who do have them for only 5 years unless renewed by the Board for another 5 years.

Section III describes general qualifications a person must have in order to be considered for the board: specifically, you cannot be eligible if you receive salary, wages or any remuneration from the MOA or the Minnesota Orchestra; exception, the President who is paid a salary.  That's it.  So it looks like anyone could serve on the Board, right?  I doubt it.  The Board has a committee called "Board Development and Governance" that sounds like it would be responsible for finding new board members.  However, under its description section in Article II, there's nothing about duties and responsibilities, only who will serve, how they're elected, and filling vacancies that occur.

Each class of director has a section in which their terms are defined.  Regular directors are divided into 3 groups, the election of the groups is staggered so that one-third of the regular directors are elected each year.  Regular directors serve three-year terms, they can serve only three consecutive full three year terms, and no person can serve more than 15 consecutive years.  In order to be elected to the board again as a regular director, one full year must elapse in which that person is not a director.  There are details covering terms if a director is elected Chair, also.

Ex-officio Directors are the President of the MOA, the President of WAMSO-Minnesota Orchestra Volunteer Association, President-Elect of WAMSO, The Chairperson of the Crescendo Project Board of Directors, and the President of YPSCA-Young People's Symphony Concert Association during the terms of their respective offices.  Ex-officio directors have the right to vote.  The Board can add to this group from people holding positions of responsibility at the MOA or the Minnesota Orchestra.  It sounds like former but not present musicians could become ex-officio directors if the Board wants them.  Present musicians receive remuneration from the MOA, at least, when they have a mutually agreed-upon contract in place.

Directors Emeriti are elected, upon recommendation by the Board Development and Governance Committee, to the Board for life.  The requirements: demonstrated long-term exemplary commitment and service to the MOA, and having completed 2 or more 3-year consecutive terms as a member of the Board.  They do not have the right to vote. 

Life Directors are elected in the same manner as Directors Emeriti, but the number of life directors at any one time is limited to no more than 12.  The requirements: enduring and distinguished leadership and service and outstanding other contributions to the objectives and purposes of the MOA.  They are elected for life.  The right to vote is given by the Board on an individual basis at the time of election.

Honorary Directors are prominent members of the community invited to serve on the Board for a one-year term by the Board.  These directors are usually governmental or educational leaders, and do not have voting rights.

For this Article, I have only two more interesting points to examine.  Under "Director Conflicts of Interest," there is a quite specific description of what constitutes a conflict of interest (in fact, the MOA has another document that explains this issue further available at the SOSMN website).  It depends on a director being open and up front about his or her business associations and activities in order to avoid a conflict of interest.  What interested me was the last sentence in this section: "Failure to comply with the provisions of this section shall not invalidate any contract or transaction to which this corporation is a party."  I'm not a legal expert on conflict of interest, but that sounds like there's no consequences for having failed to comply for either the director or the MOA.  So a director who has a business relationship with a specific corporation, let's say, Wells Fargo Bank, sets up a sponsorship contract for the MOA with the bank but doesn't disclose his business relationship with the bank.  What happens when the Board finds out?  Nothing.  The contract remains, the director is not punished in any way.  There must be something I'm missing here....

Under the section regarding "Quorum and Voting," at any and all meetings of the Board, one-third of voting directors constitutes a quorum.  And then this sentence: "A Director who is present at a meeting when an action is approved is presumed to have assented to the action unless such Director objects to the legality of the meeting, expressly votes against the action, or is prohibited from voting because of a conflict of interest."  In other words, if a director doesn't actually do something to make clear what his or her vote is, that inaction will be considered a positive vote.  It's good that they put this in writing to inform Directors from the beginning of their terms -- I'm assuming Directors are given a copy of the Bylaws upon election.  I'd call this the "opt-out option" rather than an opt-in.

Article II Committees: This article's sections describe committee authority, the Executive Committee and its members, Board Development and Governance Committee and its members, other committees, subcommittees, committee chairs, and an interesting section about Ex-Officio Members.  I thought this section referred to ex-officio directors, but no, it describes how the Chairman of the Board and the President shall be ex-officio members of all committees, except the Audit Committee for the President, and they'll have the right to vote on any matter before any committee.  This section struck me as being kind of paranoid and controlling in the extreme.  Is this kind of oversight and control really necessary? 

Article III Indemnification:  This article indemnifies any former or present director, officer or employee, or any member of the Investment Committee or the Advisory Committee for the MOA Pension Plan, and the term of the indemnification.  It also covers the MOA buying insurance on behalf of any of the aforementioned people.

Article IV Officers

The first section lists the officers of the MOA to be the Chair of the Board, the Chair-Elect, the President, Secretary and Treasurer.  The Officers shall be chosen (not elected) from the Board.  Each officer has a term of one year.  Any two offices, except Chair and President, may be held by the same person.  Was Michael Henson a member of the Board of Directors before becoming President of the MOA?  Or was he hired to be President and then given the seat on the Board?  I think this detail may be a discrepancy in how the Board does business.  Or maybe not.  I don't know.  Section 3 describes the duties and responsibilities of the Chair, Chair-Elect and the President.  Section 5 describes the Treasurer's responsibilities as custodian of all money belonging to the MOA.

Addendum Nov. 15, 2013:  In response to an Anonymous reader's question in the comments below regarding the office of "Immediate Past Chair" that Richard K. Davis now holds, I contacted the Director of PR, Gwen Pappas, at the MOA and she replied with this explanation:

"Here is what I’ve found on this question:
·         The Orchestra’s bylaws (Article IV, Section 1) outline that “the officers of the corporation shall be a Chair of the board, a Chair-elect, a President, a Secretary, a Treasurer and such other officers as the Board of Directors may designate.”   It has long been the tradition of the Board to designate the Immediate Past Chair as an officer.  As you point out, it is a mechanism to ensure continuity.
·         In Article II, section 2 of the bylaws it notes that “The Executive Committee shall consist of the Chair, the Chair-elect, the immediate past Chair, the President, the Secretary and the Treasurer and the President of WAMSO….”
·         The language in these two articles of the bylaws with regard to immediate past Chairs has been consistent for at least the last 16 years.  (That is as far back as electronic records in our office go.)"  

Article V Miscellaneous:  This article covers the Corporate Seal and Amendments to the Bylaws.

Nowhere in the Bylaws is there any mention of being accountable to anyone but themselves.  What they do, they essentially do with impunity, unless someone on the Board has the courage to stand up and disagree, or gather a group in opposition.  What we have seen in the last 19 months is a Board of Directors under strict and rigid control by its Chair and President, I think, and apparently no one has had the courage to say no to them.  Or perhaps the naysayers have been too small a minority to have any power.  Members of the community that have attempted to contact Board members have been met either with silence or condescension, from what I've read on the blogs covering the MOA.  What disturbs me about the organization of this Board is that those people who have had the most experience and knowledge are put in the Emeriti and Life Director classes without any vote.  Maybe that doesn't make any difference because these Directors may have other power to influence.  But we have not seen anything like that in the last 19 months.

In Part 3, I will pull it all together for my recommendation, including a review MN State Representative Phyllis Kahn's proposed legislation....



Anonymous said...

So, Richard K. Davis is listed as an officer ("Immediate Past Chair") on the Minn Orch website. Did they just make that up out of thin air?

Gina said...

No, Anonymous, I doubt they made it up out of thin air. The bylaws that I had and that are available at the SOSMN website are as of October 2009. The Board can change the number of officers if they want to. At the moment, Nancy Lindahl is both Secretary (as listed) but also Chair-Elect. She will take over from Jon Campbell next year.

Many organizations have an officer who is the immediate past chair or president. It helps to insure continuity. However, in the case of the MOA, it insures a rigid leadership remains....

Anonymous said...

I certainly understand the need for an immediate past chair position, Gina, but it's not in the By-Laws as of October 2009. As you suggest, that could easily have changed, but did it? Otherwise, Davis is acting as an Officer when, in fact, he is no such thing.

Gina said...

OK, Anonymous, I'll see what I can find out.

Gina said...

To Anonymous regarding the question about Richard K. Davis as "Immediate Past Chair":

I took your question to the Director of PR, Gwen Pappas, at the MOA in insure that it would include the most recent bylaws, and her reply was as follows:

Here is what I’ve found on this question:
• The Orchestra’s bylaws (Article IV, Section 1) outline that “the officers of the corporation shall be a Chair of the board, a Chair-elect, a President, a Secretary, a Treasurer and such other officers as the Board of Directors may designate.” It has long been the tradition of the Board to designate the Immediate Past Chair as an officer. As you point out, it is a mechanism to ensure continuity.
• In Article II, section 2 of the bylaws it notes that “The Executive Committee shall consist of the Chair, the Chair-elect, the immediate past Chair, the President, the Secretary and the Treasurer and the President of WAMSO….”
• The language in these two articles of the bylaws with regard to immediate past Chairs has been consistent for at least the last 16 years. (That is as far back as electronic records in our office go.)

Thank you, Gwen! To Anonymous, I hope this is answered your question. Thank you! (I'm going to also include Gwen's answer in an addendum in the text above.)