Conflicts of Interest and Decision Making

Board Discuss
#1

Please forgive me for this question, which may seem obvious to those in the know, but as an interested outside member of the public, could someone explain to me, or point me in the direction of, the rules relating to Conflicts of Interest of Board members and the ability to validly vote on proposals / decisions taken by the Board which are subject to a vote ?

Are Board members entitled to vote on a proposal submitted to for decision by the Board if they have a declared conflict of interest ?

If they are not entitled to vote, is that a blanket lack of entitlement for any given voting session, or limited only to a specific issue submitted for vote ?

Which rules, if any, are written down or available for consultation, that deal with Board member conflicts of interest, how they are interpreted, under which laws, etc ?

Having followed from a distance the exchanges about CoI of certain board members, I’m still confused as to what the actual rules are, how they apply to a Board member with a declared conflict of interest, and what the consequences are of that CoI in relation to the operational capacity of a member with a CoI.

Presumably, there are some written legal safeguards in the foundation’s paperwork that are available to the public to avoid a situation in which members with CoI are still able to vote on issues for which they have a declared interest ?

From both a personal (as a user, and community participant within the project) and professional perspective (LibreOffice is used in my small IP law office as the daily office suite), I’m somewhat concerned that there appears to be a degree of stagnation with regard to the activities of the Board as a whole, and a perception that the Board is not in a position to operate to the full extent of its remit. It would be a great shame were that to be the case, and if not resolved soon, I fear that this might have non-negligible repercussions on the very existence and continuation of the Foundation. After all, without a functional Board, how will anything get done ? If nothing gets done, what’s the point of having a Foundation at all ?

Hopefully, my concerns can be adequately addressed, and that really, there is nothing to worry about.

#2

Hi Alex,

Thanks for your questions.

The most focused document at the moment that is produced (and public available) from TDF is the Conflict of Interest Policy, which is part of the Rules of Procedure that the Board has decided to abide by; with those regulations, that are comparable to internal procedures, I think you can have most of the answers you are seeking for.

Being TDF a German Stiftung, all internal regulations must also be in accordance and in full compliance with other sources of law:

  • our Statutes
  • the laws of the country where it was founded, Germany (for example over foundations, taxation and general business regulations).

Since the legal landscape in Germany is complex enough and none of the Board members has, IIRC, formal legal training over German’s law, and furthermore considering the voluntary nature of being a member of the TDF Board of Directors, we were absolutely keen to get professional advices on the topics.

On the other hand, German regulation and common rules of understanding point out to Fiduciary Duties (and specifically to the Duty of Loyalty) when considering the position of a director inside the Board of Directors when dealing with Conflict of Interest. Although not specifically clear and in “legalese”, I find this comparison quite apt to explain the expectations from German laws perspectives, even when considering that TDF is not a company.

To be honest and in my recollection, it never happened that a director that declared a conflict of interest got, in the end, to vote; every director that declared an interest has been very respectful of this rule, usually leaving the room when discussing those topics where he/she declared a conflict.

The enforcement of such rule is somehow entitled to the Board (so to other directors), but in those specific cases there wasn’t any need for any enforcement: the rule was respected in the first place from the conflicted director, and he/she did not vote (or explicitly abstained; which is, in my perspective, the right way to assert dealing with his/her responsibilities as a Director without influencing the outcome).

But, to extend a little bit your question, what happens in the, hypothetical but plausible, situation when a Director do not declare a conflict and actively vote, then a conflict seems to exist at the time of vote, or becomes evident after the vote? Is his/her vote still valid? Is his presence during the discussion be considered influencing the rest of the Board? Is the vote still compatible with current regulations and if not, are there foreseeable consequences (= are there plausible risks attached in taking that kind of decision)?

Of course, in my position of Director of The Document Foundation, I have formed my own idea of how to deal with the issue and I have plausible solutions, but, being based on privileged information, I am not authorized (nor I feel sufficiently protected over a potential allegation of breaking the duty of confidence), to share them publicly. What I can say is that my own recollection of the issue is definitely not consensual inside the Board, and possible solutions deemed too damaging for a specific part of the community. I am purposefully not engaging publicly in the evaluation of such conclusions from fellow board members.

Cheers,

#3

Thank you, Emiliano, for the links, and it is reassuring to know that members of the board with declared conflicts should not vote on issues directly concerning, related to, or incidental to the issue subject to a vote.

You do raise an interesting point about the hypothetical situation in which a conflict becomes apparent at the time of the vote, or after the fact. My understanding from your comment on this point is that there is currently no consensus amongst board members on how to deal with such a situation.

My first thought would be to seek reference to German law or the practical application thereof, considering that the Foundation is a Stiftung under German law. Presumably this has already been considered, and if so what was the outcome?

The public has always been led to believe that a German-law based Stiftung was the best legal solution to protect the foundation from being controlled, or even misused by, one or other groups with vested interests (in contrast to what happened with Sun/Oracle and OpenOffice.org, for example, albeit the context was slightly different). It would be a huge disappointment, and possibly a great deception to some, to discover that this were not the case, or that where such a situation were to arise, there was no mechanism in place to handle it gracefully whilst remaining legally compliant.

#4

Hi Alex,

let’s say that there are still different points of view in regards to what a conflict of interest is and how some directors should change their behaviours.

Now at least we have a clearer position in regards to some board members which should help also future boards in evaluating CoIs and make them public as from our Statutes.

I wrote a bit more about improvements in behaviours that should be facilitated by following some simple Fiduciary Duties here:

There is hope that after having discussed things for such a long time and after having received more advice from external expert all directors would understand that we all have to follow the same laws, regulations and commonly accepted behaviours showing that vested interests are not affecting TDF’s governance as even the perception of impropriety damages our reputation and when doubts are surfacing we should all act to fix eventual inconsistencies in behaviour.

#5

Thanks Paolo, but I am also a little surprised that the Chair has not responded to my questions.

#6

Hi Alex,

sorry if I should have missed your question - it might also have been in a different context (this is now a forum instance). Could you point me to it please?

Best, Thorsten

#7

Hi Thorsten,

They would be the ones I posted at the beginning of this thread. The reason I ask is because I see position statements from other members, but nothing from the chair and I like to be able to compare various viewpoints with an aim to forming an understanding for myself.

Alex

#8

Hi Alex,

I believe Emiliano’s answer captures it pretty well:

  • TTBOMK, every time there was a CoI, the respective directors didn’t vote
  • participating in discussions is fine, influencing/voting with a CoI is not
  • if there ever is doubt about a CoI, it is the board who needs to decide (as per the CoI policy, individually for every director with an alleged CoI)

Beyond that, I share your concerns. There is a lot of needless strife, and there have been occasions, where at least I believe CoI accusations have been weaponized unfairly. There is justified hope though, that with the cleanup work and process fine-tuning that is currently going on (tendering and ESC decision-making is currently the most urgent, to finalize the budget) - that once that’s done & the ink is dry on the budget, the board returns to more productive modes of operation.

Best, Thorsten

#9

Thank you, Thorsten. Hopefully indeed, things will be able to move forward.

#10

Emiliano’s statement aged quite quickly, at the point I am quite confident I cannot state anymore what has been quoted.

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