[Foundation-l] Notice of the results of the WMF Board of Trustees election

[Michael Snow]

Alison Wheeler wrote:
> On Sun, July 15, 2007 14:17, Arne Klempert wrote:
>   
>> There are already many legal connections between Chapters (A) and
>> Foundation (B). But: A and B having legal connections isn't the same
>> as A being responsible for something B does or vice versa.
>>     
> The usual test in this sort of case is one of "control". WMUK has a legal
> agreement - a contract - for the use of the name and logo with the
> Foundation, but that agreement - explicitly - gives no 'control' over
> activities or anything else to either party over the other.
>
> WMUK having the ability to appoint (either alone or in concert with
> others) a member of the Board of WMF though would create a clear route of
> 'control' and create a line of responsibility, imho. as indeed would the
> WMF haing any representation in the operation of a Chapter.
>   
Part of the reason for structuring nonprofits on the model of 
corporations is that certain corporate law principles transfer quite 
usefully to the nonprofit setting. For example, in a member-based 
nonprofit the members are largely analogous to shareholders in a 
corporation.

One of the basic functions of a corporate structure is to limit the 
liability of ordinary shareholders or members. Generally speaking, the 
limitation is pretty thorough; shareholders or members are not liable 
for the acts of the corporation, only their own. Hence Florida Statutes 
§ 617.0604 (1), which is specifically about nonprofit corporations: "A 
member of a corporation is not, as such, personally liable for any act, 
debt, liability, or obligation of the corporation." (Please nobody get 
confused by "personally" here. A formally organized chapter is a legal 
person, so all else being equal, a chapter as a member of the Wikimedia 
Foundation should have no greater liability under Florida law than an 
individual member.)

In the for-profit context, "ordinary" shareholders are distinguished 
from "controlling" shareholders, so you are right to focus on control as 
an issue. But I think treating "alone or in concert with others" as 
equivalent is a seriously mistaken analysis. Instead, the difference is 
essential to understanding what it means to have control. Control 
involves being able to dictate the activity of the corporation, not 
merely having a voice in its operations. A person or entity would 
qualify as a controlling shareholder if they're a majority shareholder, 
or if some aspect of the corporate ownership structure gave them 
majority voting power over the decisions of the corporation at the 
highest levels.

One chapter (out of twelve, or a hundred, or however many) casting one 
vote for one member of the Wikimedia Foundation Board of Trustees does 
not thereby have control. Not of Wikimedia, nor of the board, nor of 
that particular board member. This is entirely "ordinary" participation 
in the governance of the organization. Otherwise, I'm not sure how we 
can avoid concluding that the 1254 people who voted for Frieda could be 
liable for the Wikimedia Foundation's actions in a way that the 1234 
people who voted for Oscar are not (unless of course you voted for both, 
in which case you're out of luck). A chapter voting in an election isn't 
materially different from an individual voting.

If a chapter had the power to directly appoint a board member, it might 
look different - although really, control should involve appointing a 
majority of the board. Jimmy might have controlled the board, 
pre-expansion, in terms of legal analysis (not to disparage Michael and 
Tim's independence). Now, I don't see how anybody does.

This is one of the reasons my suggested structure for chapters 
functioning as members of the Wikimedia Foundation would specifically 
avoid putting chapters - or any selection process - in a position to 
"control" the majority of the board. Three community-elected seats, 
those filled in the just-concluded election; three seats selected by the 
actual membership of the foundation; three appointed seats, to allow for 
outside perspectives or fields of expertise that aren't adequately 
represented. There would be no danger of the chapters controlling the 
board, even collectively (and the chapters are very clearly independent 
of each other). This proposed system is designed to foster checks and 
balances between the groups as necessary.

--Michael Snow