ICANN Board Review

The ICANN Board Review (Board) was conducted between 2007 and 2010, using the organizational review model.

Background

Article 4.4 of the ICANN Bylaws requires periodic review of all supporting organizations and advisory committees, as well as the Nominating Committee. The bylaws state three objectives for the review:

1. to determine whether that organization, council or committee has a continuing purpose in the ICANN structure;
2. if so, whether any change in structure or operations is desirable to improve its effectiveness; and
3. whether that organization, council or committee is accountable to its constituencies, stakeholder groups, organizations and other stakeholders.

Organizational reviews are conducted by independent examiners, selected through a competitive bidding process. The independent examiner works in consultation with a working group assembled by the board, who will act as implementation shepherds once the final report of the independent examiner is submitted. The review parameters are set by the ICANN Board, and those parameters as well as other avenues of inquiry are typically included in the request for proposals (RFP) for independent examiners. Reviews can take anywhere from three to five years to complete. The full review process includes seven phases, including the implementation of recommendations from the review. Reviews must be conducted at least every five years, measuring from the date that the final report of the previous review was accepted by the ICANN Board.

The ICANN Board, in developing the parameters of organizational reviews, determined that it would be a "good practice" for the board to also participate in an independent review process. This "Article 4" review took place only once.

Initiation and Appointments

The board drafted a Terms of Reference (ToR) for the review in September 2007. The ToR contained many questions for consideration, ranging from inquiries into best practices for nonprofit organizations generally to specific questions about the operations and strategic direction of the ICANN Board. In April 2008, the board issued an RFP for an independent evaluator for the Board review. On June 26, the board appointed Boston Consulting Group (BCG) as the independent evaluator. It also formed a working group for the Board review, and appointed seven members to the group. The RFP posed two central questions for the review: whether the board is fulfilling its purpose within the ICANN structure; and if so, whether there are any structural or operational improvements that the board should implement to increase its effectiveness in fulfilling its mission.

Review, Findings, and Recommendations

BCG utilized four main strategies for conducting its review of the board:

1. interviews with current and former board members, ICANN executives and other staff who frequently interact with the board, and a representative group of leaders and volunteers from the SOs and ACs;
2. a survey regarding the board's role, people, processes, and behaviors, directed at the ICANN board, ICANN org, and members of the SOs and ACs;
3. benchmarking ICANN board performance against comparable organizations, based on comparative analysis of survey data and other metrics; and
4. adapting and applying best practices for boards in other contexts and comparing ICANN's process and potential for improvement with such practices as a model.

With regard to the last point, BCG made a point of acknowledging that ICANN's process, including the multistakeholder model has unique features, such that recommendations regarding "best" practices may or may not be as useful as in other situations:

[O]ur strong view on governance models is that many of the so-called ‘best practices’ are simply ‘common practices’ and, in any case, only include those practices that can be monitored by analysts who are outside the boardroom. Rather, while working inside boardrooms we observe different structures and different processes working successfully in similar situations. The professionalism and goodwill of individuals involved also tends to overcome any inherent structural difficulties. As someone once put it – "good people will compensate for a bad structure but the reverse is certainly not true". That said, we also have observed many good ideas and practices which are transferable and any appropriate to ICANN have been included in this report. But we make the important point that we come to this review with few dogmatic views about board structures or practice. To the extent that ICANN’s governance structures are unique and in some instances seem to run counter to conventional governance thinking, this isn’t a problem for us. Rather, we are interested in whether it works or can be improved. And we do understand and appreciate ICANN’s mission which is to ensure bottom-up control and avoidance of ‘capture’.

BCG's final report was largely complementary of the board's actions. Focusing on the core issues of the board's role, people, processes, and behaviors, the report found that "the ICANN board is working well given its organisational model and board structure." It offered eight recommendations that were categorized across three broad themes: structure; capability; and purpose. The recommendations each contained multiple implementation suggestions or action items.

Recommendations

Structure

1. Reduce the size of the board.
2. Reduce the frequency and increase the length of board meetings.
3. Consolidate board committees and be judicious in the formation of new committees.

The most impactful recommendation was #1, regarding board size and composition. At the time of the review, the ICANN Board had twenty-one members. BCG believed that to be too large, and presented findings that indicated that the ICANN board, org, and community agreed:

Our interviews in the course of this project as well as the responses to our questionnaire also indicate a widespread view that the board size is an issue. Only one third of board members and less than 15 percent of management agreed that the board size (21 members) works satisfactorily (Proposition B2). In the Supporting Organisation survey, only 5 percent of respondents agreed that the current board structure and membership rules are the best way to protect the public trust.

The report provided two possible routes for reducing the number of board members. Option 1 suggested a reduction to fifteen members, converting "liaison" seats to a group of experts separate from and available to the board and directors for reference, eliminating the GAC seat and replacing it with a board observer (and, optionally, an observer representing the technical community), reducing NomCom seats from eight to six, and creating one or two ALAC-nominated seats. Option 2 went further, proposing a reduction to nine members: one seat from each of the SO/ACs (including, optionally, a seat for ALAC); four from the NomCom, and the ICANN President; with observers from the GAC and technical community. This option suggested considering a majority of NomCom appointees (five instead of four), which could be implemented by either not instituting an ALAC seat or removing one of the other SO/AC seats.

BCG described a similar "overgrowth" of board committees, and recommended consolidation and reduction of existing committees into four standing committees: Audit, Governance, Remuneration, and Risk.<rep name="finalrep" />

Capability

4. Broaden the skills of the board.
5. Make board membership more sustainable.
6. Build a "high performance" board culture.

The report was complimentary of the skills and commitment of the seated board members, but concluded that the board needed to broaden its skill set, and to do so strategically, in order to maintain board effectiveness. BCG observed that, in its experience, the only people who truly understand the capacity and capabilities of the board members are the board members themselves. In a context of transparency, BCG noted, this was somewhat ameliorated by community perception and attendance. However, for the board to aspire to a broader knowledge base and more effective composition, it should take opportunities to both review current composition, and dream of the "ideal board" five to ten years in the future. This would require engagement with and communication to the NomCom:

[W]e recommend that the ICANN Chairman and the Chairman of the ICANN Governance Committee be formal and full members of the Nominating Committee’s process that leads to ICANN director selection. Their views about the skill gaps that should be addressed are important. Any process that only chooses board members from outside the boardroom fails to deal with the true dynamics of boardroom effectiveness.

The sustainability of board service was seen as directly interrelated with the depth and breadth of skills on the board, and BCG noted that the workload on non-executive board members on the ICANN Board was "beyond anything we have seen in other boards." The final report made many recommendations regarding issues that impacted the continuity and sustainability of service on the board, which it considered "a serious issue at ICANN."

On the topic of a "high performance" culture, the report found a surprisingly diverse set of opinions, even among board members, regarding board performance:

For example, the board is quite divided in its view on whether it effectively reviews implementation of policy, monitors ICANN’s business performance or has adequate focus on risks (Propositions A8, A9 and A12). There is no agreement about whether the board is well-informed about the health of the ICANN Community (A13). Only two-thirds of the board members are confident that the board understands the scope of its role, how its role differs to that of management and whether the board does indeed avoid inappropriately stepping into management territory (A1 to A6). The board is split on whether ICANN’s policy development process works well (C5).

The report considered that now was an ideal time to addresses these differences of opinion, as board culture was friendly and cooperative, with solid trust in the leadership of the board and ICANN. In the view of the report, it was important to address these differences of opinion while the environment was hospitable, as "[t]he risk is that such divergent opinions can easily become the source of conflict and dysfunction inside the board, particularly if business conditions get tough."

The report also grappled with the issue of board member compensation, arguing ultimately that it may be an effective tool in ensuring an increase in length of tenure and willingness of qualified volunteers to join the board.

Purpose

7. Strengthen the strategic purpose of the board.
8. Clarify the board's accountabilities.

BCG identified some issues regarding the board's role and strategic focus that were reflective of the relative youth of ICANN as an institution, and what BCG considered to be growing pains common to many organizations. These recommendations and their sub-parts were the least controversial from the perspective of the ICANN community.

Public Comment on Final Report

BCG's final report received nine public comments via email. There was also some opportunity for comment at ICANN 33 in Cairo, where the final report was the subject of a presentation by BCG representatives. However, as was noted in some of the submitted comments, the length of the session impeded public input.

A common theme among public commenters was that BCG did not understand ICANN or its unique role and circumstances. The review working group took pains in their own reports to acknowledge that the text of the final report demonstrated an understanding of ICANN's purpose and goals, noting also that the report (as quoted above) clearly articulated that the goal of the review was to identify and improve what works for ICANN. This undercut one main line of criticism from the public comments - that the review focused on treating ICANN's board like "any other corporate board." Many commenters took issue with certain recommendations in the report, notably the proposal to reduce the size of the board. Others, however, agreed with the report and its objectives.

Working Group Reports & "Implementation"

In its draft report to the board, the review working group agreed with the recommendations in the final report, but noted that in some cases (Recommendations 2 and 3), events had outpaced the arrival of the report, and the board was already implementing changes that addressed the issues raised. In the case of Recommendation 1 (board size and composition) and Recommendation 5 ("high performance" board culture, and specifically compensation of board members), the working group noted that these were complex issues that required input from the community before adoption of a specific plan. The draft report was discussed at ICANN 34 in Mexico City.

Public comment on the working group's draft report was again mixed, with strong support shown for certain topics (board compensation) but a persistent theme of disappointment that the review did not "understand" ICANN or its operations. There was sufficient diversity of responses that the working group saw fit to issue a second interim report for public comment. This second report was presented for public comment as well as a discussion session at ICANN 35 in Sydney. In the second report, the working group stated that it was narrowing the focus of discussion exclusively to the issues of board size, board member compensation, and the timing of appointment and length of tenure of board members. The report stated that the board was already addressing the issues raised in Recommendations 2-4, and that the working group was in support of implementing recommendations 6-8, with some caveats regarding the feasibility of specific proposals within BCG's final report.

The vast majority of discussion of the second interim report occurred at the ICANN 35 meeting in Sydney. Only one substantive comment was submitted via email. In its draft final report, the working group discussed the comments and feedback received in Sydney as well as via email. Of the three outstanding issues listed in the second interim report, the following changes occurred:

• the draft final report did not recommend a reduction in board size until a period of at least three years had passed, on the theory that this would give other improvements and changes a sufficient amount of time to affect positive change;
• the draft final report did not recommend any plan to compensate board members. It did, however, recommend an increase in the term of board service to four years, with a limit of two consecutive terms of service, and an option for the board member to resign after two years of service in a second consecutive term.

Public comment on the draft report was minimal. The working group submitted its final report to the board in January 2010. In nearly every recommendation category, the working group notes that either the board, a committee of the board, or both, are "already working" on the recommendations of BCG's final report, or something like them, in response to the issues raised by the report. As a result, the final report of the working group contains a great deal of support for the recommendations contained in BCG's final report, but very little implementation guidance.

The Board accepted the final report in March 2010, along with two other Article 4.4 organizational reviews (SSAC1 and NomCom1), and instructed the SIC to develop implementation plans for each. In June 2010, the board again addressed the three reviews from the March meeting, and instructed the SIC to present "final implementation plans" for each.

ICANN's Board Review dashboard indicates that the June 2010 board resolution was the end of the implementation phase for the first and only Board Review. Implementation details are unavailable, likely because the working group's final report did not recommend any specific implementation plans.