Re: Possible short-term paid contract with a director. Feedback welcome off-list.

Hi everyone,

I'm sending this update to spi-general in the interest of transparency
and allowing member input, but I am about to describe a potential
transaction to which our Conflict of Interest Policy would apply, to be
voted on at our March 1 in-person board meeting. The conflicted director
is not supposed to read the board's pre-vote discussion until after a
decision is made, though being a director he is of course aware of the
general situation. This explains why I am describing this in prose
instead of a resolution, and why I'm setting the Reply-To header
manually to president(at)spi-inc(dot)org(dot) Please respect that header.
-*-*-*-

The board has for quite a while been unhappy with our collective
volunteer output. For example, we realize it's unacceptable how long
it's been since we last produced monthly financial reports. SPI has
scaled beyond what an all-volunteer group can do. At the same time, we
want to keep the officer and director roles as volunteer roles.

We want to get paid help both in the short term and in the long term.
These are rather different constraints.

In the long term, we have more choice of technology and scope. We may
even want a paid executive director position at some point, reporting to
the volunteer board. This is undecided and not the focus of this email.

In the short term, we have the rather unusual situation of having a
workflow based on git and ledger-CLI, the specialized accounting
situation of being a nonprofit fiscal sponsor, and needing to collate
data from several different systems (e.g. PayPal and Click & Pledge)
with a mixture of double-entry bookkeeping and programming knowledge.

This means we can't use a typical bookkeeper, at least in the short
term. We have used a paid external independent contractor to process
some reimbursement requests via Request Tracker, but that person does
not have the required expertise or time for this need.

We've explored potential external candidates, but haven't found one with
the right mixture of availability and knowledge. We are considering one
potentially suitable candidate, but unfortunately that person has the
obvious conflict of interest of being on the board: Martin Michlmayr.

Nobody is eager to deal with the appearance of impropriety that this
produces, but there is a reason our Conflict of Interest Policy allows
certain exceptions if ratified by the non-conflicted portion of our
board. We may be in one of those cases. I should note that the conflict
is, at least, lower with his current non-officer role than a year ago
when he was President.

Therefore, the non-conflicted directors are discussing a proposal to pay
Martin Michlmayr for roughly 40 hours per month for three months as an
independent contractor, to: get our books and reports in order, explore
what we'd have to do to undergo a financial audit successfully, and
explore other funding possibilities for paid staff and donor system
improvements. We would not be paying him for his role as a director,
only for the specified services. This will be voted on at our March 1
in-person meeting, with Martin not present in the room.

We would, of course, re-evaluate the situation before any contract
extension, especially if viable external candidates are identified.

And yes, we've consulted with our legal counsel about this.

Please send any feedback directly to president(at)spi-inc(dot)org rather than
this list, so that Martin does not see your comments before the vote. I
will forward or summarize any opinions to the non-conflicted directors,
and then make them available to the whole board including Martin
following the vote (as indicated by our Conflict of Interest Policy).
Again, I have set the Reply-To header accordingly.

Everyone on the board appreciates your attention to and support of SPI.

- Jimmy Kaplowitz, SPI President
president(at)spi-inc(dot)org

On Thu, Feb 21, 2019 at 10:06:36PM -0500, Jimmy Kaplowitz wrote:
> Therefore, the non-conflicted directors are discussing a proposal to pay
> Martin Michlmayr for roughly 40 hours per month for three months as an
> independent contractor, to: get our books and reports in order, explore
> what we'd have to do to undergo a financial audit successfully, and
> explore other funding possibilities for paid staff and donor system
> improvements. We would not be paying him for his role as a director,
> only for the specified services. This will be voted on at our March 1
> in-person meeting, with Martin not present in the room.

Just a quick update on this: a quorum of 6 non-conflicted directors
discussed this and voted to proceed with such a contract. It was signed
on March 2 and began on March 4 with a term of three months. We did not
pre-approve any extension beyond that, though the possibility remains to
consider that in the future if warranted. The contract terms are
consistent with the summary quoted above, with a few uncontroversial
changes (e.g. our current charitable registration is insufficient to pay
for fundraising solicitation so we're not doing that in this contract).

Before that vote, the same group of directors voted to approve a minor
wording amendment clarifying what was already the intent (if not the
letter) of our Conflict of Interest Policy: the existing wording had
explicitly allowed the board to approve personal benefit by directors
serving as paid employees, but it was silent on the case of independent
contractors like Martin Michlmayr. We can't imagine why this should be
permissible for paid employees but not independent contractors, so we
believe this was a mere drafting oversight. We added the words "or
independent contractors" after the words "paid employees" in the
existing policy text. (For those of you who know that the IRS sometimes
considers officers as employees if they're paid for services, this rule
does not affect non-officer directors.)

I received several emails from members in response to my call for
feedback on this list - somewhere around 6 of you spoke up. Every single
one of those emails encouraged us to proceed. Some of you did express
that this was an unfortunate conflict of interest, and that it would be
better if we weren't contracting with a director. But you felt that
SPI's current circumstances outweigh those concerns in the short term.
We considered this input when making this decision, and we thank you for
commenting.

A bit more information will be shared in due course as we proceed with
the secretarial tasks resulting from the face-to-face meeting, including
a mention of this vote in the meeting minutes and the posting of the
approved resolution texts to the usual website.

Thanks again.

- Jimmy Kaplowitz
president(at)spi-inc(dot)org