Title.
Wondering what happens if a vote fails, and there is sufficient traction to do another vote in the future.
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A vote cannot fail. An outcome is an outcome. But I see your point and I do not have the answer.
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I would suggest the vote/proposal consider the issue of removing him from his Directorship as a result of a separate cause of action - breach of fiduciary duty as a result of his conflict of interest by voting for himself.
Directorship is an office, which gives rise to a relationship of trust and confidence, and accordingly, to obligations of loyalty, honesty, and good faith towards the company. Directors and Officers of Foundations, owe duties - both fiduciary and statutory - as a result of their position of trust. Accordingly, corporate formation documents and law (in the case of the Foundation - Cayman Islands) stipulate what those requirements are to ensure trust in those leading organizations and their ethical and transparent workings. In almost every country, including in the Cayman Islands (where the Foundation is incorporated), these duties include a fiduciary duty relating to conflicts-of-interest, where a director may not put himself in a position where there is an actual or potential conflict between his duty to the company & his personal interests.
A situation where someone places a vote on his own removal, without requesting a waiver of a conflict-of-interest using proper procedures, places him squarely within this conflict, violating an important principle of corporate governance. Accordingly, it appears that the proper procedure of the Foundation (based on case law, articles of association of the Foundation), would have been for Brantly to request, via a General Meeting of the Foundation, a waiver of those conflicts to enable him to vote. In the absence of such a waiver being granted by the Foundation, it would seem that Brantly has breached his fiduciary duties to the Foundation, thus giving rise to a completely separate, corporate-related infraction of breach of his fiduciary duties that are clearly spelled out in the corporate formation documents and Cayman Islands Law.
As such, this vote would not be related to the previous vote relating to his statements, but a completely separate cause of action/reason for removing him from his directorship as a result of the breach of fiduciary duties. (Side note, although this post is not intended to be legal advice, I previously served as a General Counsel and Chief Ethics Officer - so fiduciary duties, conflicts-of-interest, international law, and corporate law are in my wheelhouse.)
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Side note - I think the DAO/community should also consider the issue of what procedures they want in place re any future conflict-of-interest situations - because, tbh, for an organization (DAO or corporate) to not have basic governance principles addressed (like conflicts-of-interest) is a significant issue for the trust and confidence in ethical dealings. There is a reason that corporate law has evolved to include them, and I think DAOs really need to catch up in this space (and governance in general). The fact that this cause of action only arises because of a breach to a formal legal entity under fundamental, entrenched corporate principles is a bit worrisome.
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I agree with you 100%; ENS DAO Articles of Association and the Constitution needs an update. There are simply too many loopholes.
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I will DM you since your input is extremely useful in the longer run. We need some corporate law guidance here.
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I disagree with you, because the vote is participation in the DAO’s vote, which is a singular vote, as the council. Brantly is not acting in his director capacity, but as an ENS Tokenholder. Moreover, to prevent him from voting his .36% would disenfranchise those that delegated votes to him.
I have almost 20 years in ERISA dealing specifically with claims and litigation pertaining to breaches of fiduciary duty by D&Os and Trustees.
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A delegate should not be a Director. There is a clear discernible conflict of interest. This clause is waiting to be written into the articles
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Only 25% of ENS supply is delegated. So the percentage is 1.452%. The effective percentage however is ~ 7% since the most votes any proposal has gotten so far is roughly 5,000,000 (except the constitution ratification which got an exceptional outlier quorum of 15,000,000)
Quoting one percentage number doesn’t help. If X is 0.36% and there are a million others with 0.000001%, it is not a fair distribution. You have to quote all the top 10 all the time to give 0.36% any relative comparative meaning, which is why such metrics are not quoted to represent ballot equity.
@berrios.eth I think you are making part of my point for me, actually - in that he is voting in his personal capacity. And I agree with you, and understand the differences between the Foundation as a legal/corporate entity, Brantly’s Director responsibilities/duties as a result of that (duties that he only has to the Foundation, not the DAO [which is another issue of DAO governance], and his personal capacity/voting in the DAO structure. (The DAO structure/governance here basically has limited capability to hold him accountable based on my review of the governance docs). I think there are probably a significant amount of items that we could agree on, and would wonder which of the following statements you might have an issue with, especially with your background. And would certainly welcome thoughts:
- As a Director of the ENS Foundation (incorporated in Cayman, under Cayman corporate law, with Articles of Association governing the ENS Foundation - a corporate entity legally established), Brantly has certain fiduciary duties to the ENS Foundation (as do all Directors of a legally organized corporate entity).
- There are a number of different fiduciary duties that Directors owe to the corporate entity for which they serve as a Director (ENS Foundation in this case), including those relating to conflicts-of-interest. Basic corporate governance.
- Only the corporate entity (ENS Foundation) can waive that conflict. An individual does not have that right (i.e., Brantly cannot determine on his own whether he has a conflict-of-interest - only the ENS Foundation (via a vote a the General Board Meeting in this situation) can make that determination. Corporate law and/or the Articles of Association spell out the requirements as to the proper, ethical procedure to follow relating to disclosure of any conflict, the procedure to undertaken in order to transparently address it, and requirements as to documentation relating to any vote (by the Foundation) that might be required in order to waive that conflict.
- I have drafted numerous internal memos relating to conflicts-of-interest, and the documentation generally tended to fall into one of the following categories: (1) a potential conflict was disclosed to the organization, and the organization (i.e., ENS Foundation) made the determination that a conflict (either perceived or actual) did not, in fact, exist. Accordingly, as there was not conflict, the individual could take X action; (2) a potential conflict was disclosed to the Foundation, and the Foundation made the determination that a perceived and/or actual conflict exists, however, notwithstanding the conflict, the Foundation can determine to waive the conflict. Generally the memo/vote/documentation would specify the facts and reasons for waiver; or (3) a conflict of interest exists, and the Foundation has confirmed a conflict exists and has advised the individual that they should not take X action as a result of the action, and if any action is taken, there would be a potential breach of the fiduciary duty. It does not appear that any disclosure has been made to the Foundation, nor has a General Meeting of the Foundation/vote has been discussed or occurred in this situation documenting the Foundation’s position.
- The Council (i.e., ENS Tokenholders as defined in the Articles of Association of the ENS Foundation) have the ability to remove a Director of the Foundation for a broad range of reasons pursuant to Article 15.
- As you stated, Brantly took the vote in his personal capacity, as an ENS tokenholder - a direct conflict between his fiduciary duty as a Director to the Foundation & his personal interest - especially considering the Foundation does not appear to have been advised and/or provided informed consent. Again, basic corporate governance - you cannot take action personally that might have an impact or influence on a corporate entity for which you serve as a Director if those two positions might conflict (unless the Foundation agrees). I assume this is where you/I might disagree. I firmly believe that this is both a perceived conflict (see, discourse on twitter and this forum re the ethics of his ability to vote, articles re this situation from external sources, other tokenholders ‘abstaining’ from voting as a result of their own ‘perceived’ conflicts). I also believe this to be an actual conflict. Either way, perceived or actual, he has a duty to the Foundation not to take personal action that might conflict with his corporate duties, or at the very least, the Foundation should make a transparent determination on their right re whether the conflict exists. Such ethical guidance on the appropriate determination regarding that potential (now perceived/actual) conflict can only be provided by the Foundation.
- The Council, (i.e. votes by ENS holders in the DAO), can remove him from his Director position in the Foundation (a legally incorporated entity), as a result of the breach of fiduciary duty he owed to the Foundation and pursuant to the Foundation’s own Articles of Association. This is similar to how shareholder derivative action suits are instigated against directors when the directors breach their fiduciary duties in other corporate contexts (which can include monetary and other damages that may have occurred to the overarching entity as a result of those breaches). Brantly disregarded his duty when he voted for his personal interests in the DAO vote without obtaining a determination/waiver from the Foundation, and with a flagrant disregard for the Articles of Association, corporate law, and general ethical governance principles that exist for all Directors of corporate entities, including those at the ENS Foundation.
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The ENS Foundation Company directors were very aware of the issue, as the issue was discussed in the drafting process (w/o brantly’s involvement). The decision was made not to disenfranchise his delegators and permit brantly to vote his votes. Brantly did not have input into the decision.
I’ve been involved in over a hundred ERISA class actions, D&O breach of fiduciary class actions, and USDOL/SEC actions. I was integral part of the decision making process over litigation strategy and settlement.
@berrios.eth I appreciate the reply. Although I do not agree that Directors ‘being aware’ or ‘discussing’ is the legal standard of care required in this situation (see my lengthly comments above). But let’s assume the Directors have the ability to waive the conflict on behalf of the Foundation (again, I don’t believe they do - but I do love a good - hey, let’s look at the other side/assume it may be this way.). They all have a fiduciary duty to “at all times act in the interest of the Foundation.”(Article 24).
Assuming they have the right, the normal standard of care and basic corporate governance would be to document the decision in writing, formally (perhaps they did?). The Directors should weigh all issues impacting the Foundation (not just those of Brantly/Brantly’s delegators). That analysis would go something like: (i) the Directors recognize that not waiving the conflict may disenfranchise certain voters (300,000+) who have delegated their votes to Brantly. (ii) The Directors also recognise that there may be another significant part of the community (potentially millions of voters, likely at least the number who voted for his removal) who might feel that his ability to vote casts a negative shadow on the democratic and trusted process of the DAO and it’s Governance in an ethical manner - a principle which is of instrumental importance to the healthy functioning of a decentralised, democratic DAO, (iii) that his vote may generate adverse publicity relating to the governance of the DAO and/or potentially damage the reputation of the DAO as a result, and (iv) that other voters (including those who delegated to them) who have ‘abstained’ from voting, due to conflicts, may also be disenfranchised bc their votes will not be counted because they followed good governance practices by abstaining. And, the Directors should then consider the ability to mitigate any of those potential adverse impacts (i.e., votes can be re-delegated by those that might be adversely impacted, etc.)
If, as you said, they considered the potential disenfranchisement of Brantly’s voters - without considering the wholistic, overarching impact to the entire Foundation of all the consequences mentioned above (not just considering Brantly/his delegators) - your argument could actually now potentially place all of the directors in a position where they have violated their duties under the Articles of Association by not adequately ensuring they are putting the interest of the Foundation at the forefront - versus only looking at the situation from the standpoint/interest of one individual/one small class of voters (to which the Directors have zero duty.)
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You have some hurdles, which I won’t get into. Your best course of action is to advocate for change.
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Are you interested?
Absolutely. I love this sort of governance/legal stuff. Relatively new to web3 (give/take 6 months), and new to ENS - so absolutely looking for ways to participate with guidance along the way. And would certainly love to take forward-looking action to help improve the community along the way.
Side note - I’m on the core governance team over at she256 (I am the COMP steward, but involved in the ENS discussions re votes/governance). And, although I would not imagine they would have any issue with my participation, I would want to throw it out there to them to make sure I don’t step on the toes of the ENS Steward or have issues on their side.
I will try to read/engage a bit more on the other discussion threads here to get up to speed quickly on the current status of everything, and different discussions/proposals surrounding governance in general. Any other suggestion for direction/actions that I could take would also be welcome.
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I knew there was a connection. @ENSPunks.eth has also agreed to participate. Let me know, if you have she256’s blessing and we can go from there.
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