OVERVIEW OF CERTAIN LEGAL ISSUES AND RESPONSIBILITIES

1
OVERVIEW OF CERTAIN LEGALISSUES AND
RESPONSIBILITIES
A Presentation to the IEEE Standards Association
Standards Board New Member Orientation
Claire H. Topp, Esq. Dorsey Whitney LLP50
South Sixth Street Minneapolis, MN 55402 (612)
343-8278
2
Basic Governance and Tax Exemption Principles

• IEEE is
• A NY not-for-profit corporation governed by NY
  law for corporate governance issues
• A U.S. corporation governed by US law
• IEEE is also subject to applicable laws in those
  countries where IEEE conducts activities
• A member organization - no shareholders
• Focused on public benefit
• Governed by the Board of Directors (Article IX,
  Section 1 of Constitution)

3
Basic Governance and Tax Exemption Principles
(continued)

• The IEEE-SA Board of Governors operates as a
  committee of the IEEE Board of Directors, and the
  Standards Board as a subcommittee and so on and
  so on.
• As subsidiary bodies of the IEEE Board of
  Directors, these bodies share its fiduciary
  obligations even if their members are not on any
  other higher board.
• Their obligations are to the IEEE, not to the
  IEEE-SA or its members, participants, or funding
  sources
• The rules pertaining to governance (as opposed to
  technical standards development activities) do
  not require openness, consensus-building, or
  inclusion of non-SASB members in the
  decision-making process

4
Section 501(c)(3) Tax-Exempt Status of IEEE

• IEEE is exempt from tax under Section 501(c)(3)
  of the U.S. Internal Revenue Code of 1986
• IEEE must operate exclusively for educational
  and scientific purposes
• IEEE is not a Section 501(c)(6) organization and
  thus should not engage in a substantial level of
  activities directed at the protection or
  promotion of the professional business interests
  of the professions represented by its membership

5
Section 501(c)(3) Tax-Exempt Status of IEEE
(continued)

• Unlike Section 501(c)(6) trade associations which
  exist to promote the common business interests of
  its members, the IEEE, including IEEE-SA, as a
  Section 501(c)(3) organization, exists to serve
  the global needs of industry, government, and the
  public

6
Fiduciary Duties

• Duty of Care
• Duty of Loyalty
• Duty of Obedience

7
Fiduciary Duties Duty of Care

• Participate in the decisions of the IEEE-SASB and
  be informed (as to data relevant to the decision)
• Prudent Person Rule should act in good faith
  and with that degree of diligence, care and skill
  which an ordinary prudent person would exercise
  under similar circumstances in a like position
  (NPCL Section 717)

8
Fiduciary Duties Duty of Care (continued)

• Diligence (also known as duty of attention)
• Attend meetings regularly - be informed as to
  minutes and agenda and attachments
• Spend sufficient time and energy to be reasonably
  familiar with matters requiring board or
  committee attention
• Review adequate information
• Monitor delegated activities
• Ask questions at the meetings
• Make your decisions based on your informed
  knowledge and experience

9
Fiduciary Duties Duty of Care (continued)

• Business Judgment Rule good faith and full
  disclosure
• You can rely on information, opinions and reports
  from others including experts (Dorsey Whitney
  your auditors) and Staff
• If there is a reason for suspicion make an
  inquiry
• Delegation the IEEE-SASB does not operate the
  day-to-day business of IEEE-SA the IEEE-SASB
  delegates to corporate agents volunteer
  officers and the Staff

10
Fiduciary Duties Duty of Care (continued)

• Requires that you exercise your powers in the
  best interests of IEEE as a whole, not in your
  own interest or the interest of any entity you
  are employed by or otherwise affiliated with
• Act only in the best interests of the IEEE as a
  whole
• Pursuant to Bylaw I-303.6, IEEE-SA shall be
  responsible to the Board of Directors for
  standards programs that enhance the strategic
  initiatives of the IEEE

11
Fiduciary Duties Loyalty

• Each Standards Association participant serving on
  a governing body (e.g., Board of Governors,
  Standards Board, and their committees) must act
  in the best interest of the IEEE, which includes
  protecting the IEEE from consequences resulting
  from unauthorized actions or inactions and/or
  unethical conduct by Standards Association
  participants.

12
Fiduciary Duties Loyalty

• Conflicts of interest (see IEEE Policies Section
  9.8)
• Be aware of the potential
• Act with candor and care
• Not automatically illegal or dishonest but must
  be disclosed, so they can be dealt with
  appropriately

13
Fiduciary Duties Conflict of Interest Policy

• You must consider each item of business where you
  are asked to take action and determine whether
  you have an actual or perceived conflict of
  interest with the interests of the IEEE.
• The SASB should decide whether a body that simply
  makes a recommendation to the SASB should follow
  the same rules regarding conflict of interest.

14
Fiduciary Duties Conflict of Interest Policy

• A conflict of interest is defined as any
  situation in which a participants decisions or
  votes could substantially and directly affect the
  participants professional, personal, financial
  or business interests, including, but not limited
  to, the financial or business interests of such
  participants employer or entity with which such
  participant is otherwise affiliated.

15
Fiduciary Duties Conflict of Interest Policy

• Must disclose potential conflict before
  discussion or presentation to the board or
  committee and indicate whether you are
• recusing yourself from discussion or vote
• believe you are able to separate those interests
  from your obligation to act in the best interest
  of the IEEE.
• Conflicted person will be removed from the
  numerator and the denominator for the purposes of
  quorum.

16
Fiduciary Duties Conflict of Interest Policy

• Minutes must record the details of the conflict
  of interest process, including names of
  individuals, members offering to recuse
  themselves, and the vote of the body on whether
  or not the remaining individuals are approved to
  engage in further discussion and vote.

17
Fiduciary Duties Conflict of Interest Policy

• If you think you can act in the best interest of
  the IEEE, then the board/committee will go into
  executive session and you will leave the meeting,
  along with others who are recusing themselves,
  and the remaining members of the governing body
  will vote on whether or not to permit those
  interested in participating to continue engaging
  in the discussion and/or the subsequent vote.

18
Fiduciary Duties Obedience

• Carry out specific objectives of IEEE
• Cannot divert corporate resources to other goals
• Support decisions of the IEEE Board, the IEEE-SA
  BOG and IEEE SASB once made
• Comply with laws internal and external
• Follow IEEE procedures Constitution, Bylaws,
  Policies
• Comply with law to protect tax exempt status of
  IEEE - Section 501(c)(3)

19
Liability

• Volunteer Protection Act (the VPA)
• The VPA was enacted by Congress in 1997
• Generally, a volunteer is not liable for
  negligent acts taken or omitted while acting
  within the scope of his/her volunteer
  responsibilities
• Volunteers are still liable for willful or
  criminal misconduct, gross negligence and
  reckless misconduct
• States may provide additional protections or opt
  out of being covered by the VPA
• The non-profit organization (i.e., IEEE) is not
  protected by the VPA it remains vicariously
  liable for the acts and omissions of its
  employees and agents (including volunteers)
• Directors Officers Liability Insurance Coverage

20
Liability - Indemnification

• Indemnification
• Permitted by New York law but mandatory if
  defense is successful
• Even though permissive under New York law, IEEE
  has made it mandatory even if defense is
  unsuccessful
• IEEE shall defend and pay, if found by Board of
  Directors to be engaged in duly authorized
  activity and not ... taken in bad faith or in a
  manner inconsistent with the purposes or
  objectives of IEEE
• GOOD NEWS - no individual board member has ever
  been sued in that capacity

21
Questions?