Why AILA Needs to Reincorporate, and Why Your Vote Counts
On Friday April 17, 2015, AILA will hold a special members meeting in Washington D.C. where members can discuss the proposed move from New York to D.C., and vote on these resolutions either by direct vote at the meeting, or by proxy. Receipt of electronic proxies closes on Friday, April 17, at noon.
AILA had budgeted this year for a long-overdue complete legal review of its organizational documents, and engaged outside counsel for that purpose. That counsel recommended not only that we make changes in our Bylaws, but that we reincorporate into the District of Columbia, where our headquarters is located and where the laws are more suitable to an association of our size. The Bylaws Committee reviewed counsel’s recommendations, and prepared and recommended the amendments and reorganization to the Board. The Board voted unanimously to support these moves.
As the Chair of AILA’s Bylaws Committee, and AILA’s Secretary, we urge members to vote in favor of AILA’s reincorporation plan. We realize that some rumors and myths have been circulating about these plans, and we would like to address some of them here:
1. Why is AILA doing this? Why not just remain incorporated under New York law?
A primary reason for moving to a different jurisdiction is to allow direct electronic voting on elections and bylaws. New York law does not permit this. D.C. law does. In addition, the D.C. Nonprofit Corporation Act of 2010 is based on the most recent ABA model rules, is considered state-of -the-art and offers a great deal of flexibility in the details of not-for-profit governance, for example, related to the creation of committees. AILA as a national organization no longer has any ties to the state of New York apart from historic ones. This is an opportunity to update AILA’s governance documents and structure in many ways, to move into a more modern jurisdiction, and to offer a better voting system.
2. Isn’t New York’s system of proxy voting the same as direct electronic voting?
No. A proxy process requires a member to ask another AILA member to cast a vote on his or her behalf at a meeting. If the meeting does not take place, or the proxy holder does not come to the meeting, the proxy is null and void and the vote is not cast. If a member casts a proxy vote and then changes his or her mind, he or she must ask the proxy holder to revoke and or change his proxy. This is awkward and administratively burdensome.
Last year, AILA conducted its officers and directors election by electronic proxy for the first time. We had the lowest turnout in memory: about 10%. Turnout in recent years has ranged from 17% to 28% (which is considered average to high in association voting). The proxy process, even electronic, does have a dampening effect on member participation.
D.C. nonprofit law permits direct electronic voting by members. Under D.C. law, members may cast a secure electronic ballot directly, rather than using a proxy to have someone else cast their vote. It is simpler, more direct, more secure, and less administratively burdensome than a proxy system. In addition, under AILA’s proposed D.C. bylaws, electronic voting for bylaws will take place after AILA’s annual meeting, allowing members a generous amount of time to consider all written positions presented on any bylaws change as well as any information presented at the annual meeting.
The Bylaws Committee believes—and AILA’s leadership has unanimously agreed—that there is simply no reason for AILA, now an organization of almost 14,000 attorneys, to be forced into a clunky proxy system (no matter how “close” such a system may be to direct voting), when direct electronic voting is available under D.C. law to all members for elections, bylaw amendments, and other critical ballot items.
3. Do the proposed D.C. Bylaws require attendance at a meeting in order to cast a vote—electronic or otherwise?
No. With respect to officers and directors, under the proposed D.C. Bylaws, electronic voting will take place before AILA’s annual meeting. As discussed above, under the proposed D.C. Bylaws, electronic voting for bylaw amendments will take place after AILA’s annual meeting, but attendance is not required at that meeting in order for a member to cast a vote.
4. Has AILA proposed this move in order to avoid compliance with certain transparency protections in the 2014 amendments to the NY nonprofit law?
No. New York enacted changes to its nonprofit law in 2014, but the assertion that those changes would impose substantive changes on AILA is based on a misunderstanding of the substance of the 2014 amendments. Most of the provisions in the 2014 amendments apply only to charitable organizations under IRC section 501(c)(3). AILA is not classified as a charitable organization—it is an association under section 501(c)(6).
AILA has for many years been following the practices now required by the 2014 amendments that do apply to AILA, such as a conflict of interest policy, restrictions on related-party transactions, having employees serve as Board chair, participation in compensation process, and whistle-blower policy. Specifically, New York law now requires a conflict of interest policy and statement signed by directors and officers. AILA has had this in place for many years. New York law requires nonprofits to follow certain procedures when considering related-party transactions and not to allow compensated individuals to participate in compensation discussions or to serve as Board chair. AILA was already adhering to similar policies. New York law requires any organization with more than 20 employees and $1 million in revenue to have a whistleblower policy. AILA has had a staff whistleblower policy in place for a long time.
5. By moving to the D.C. jurisdiction will AILA change from a “member-governed organization to a “board-governed organization” and thereby disenfranchise its members?
No. AILA has been a Board-governed organization, and will continue to be a Board-governed organization under D.C. law. A “member-governed” organization is one with so few members that its members are also its primary governing body, similar to a closely-held corporation or a small homeowners association. This does not apply to AILA.
It was the hope and aim of the Bylaws Committee to draft the proposed D.C. Bylaws in such a way as to make them clear and understandable for all members. If you are interested in how they will operate we strongly encourage you to read them. And we ask you to vote in favor of this important change.
By Eleanor Pelta, Chair of the AILA Bylaws Committee, and Marketa Lindt, AILA Secretary