AAA FAQ on Proxies Posted; Thoughts on AAA Election and Bylaws Petition

(h/t Mary Pat Campbell for the pointer to the FAQ)

The American Academy of Actuaries has posted a FAQ on its website to flesh out its view on the odd proxy battle emerging for next week’s AAA meeting in Boston.  A sampling:

Why is the Academy collecting proxies?

The Academy recently became informed through news articles and online message boards that a few members planned to collect proxies to oppose the Academy’s Nominating Committee’s nominees for regular director positions. We cannot speak for these members. However, the Academy’s Nominating Committee engaged in an extensive process to present to the members a slate that consists of four highly respected actuaries in their areas of practice. The nominees are exceptionally well qualified to help lead the Academy into 2010 and beyond. The Academy is collecting proxies from members, who wish to support the Academy’s Nominating Committee’s slate of candidates, but will not be in attendance on Oct. 26.[…]

Why doesn’t the Academy have an election?

Since its inception, the Academy has always held elections of regular directors at the Annual Meeting. This is the time and place for election of regular directors that is established in and required by the Academy bylaws. Members who cannot attend the annual meeting in person have the ability to assign their proxy

The existence of a Nominating Committee is to ensure that practice areas are evenly represented on the Academy’s board of directors and to ensure that board members have experience and familiarity with the Academy’s processes and practice councils.

An alternative point of view can be found at the Actuarial Outpost.  The short version of that alternative view is

• Some Academy members, even though they may have no objections to the slate of candidates nominated by the AAA, have a concern about how the AAA Board elections and operating procedures may not mesh well with current principles of good governance and transparency.
   
• Two particular examples of these concerns include:
   
  • The Academy Board, last May, amended the AAA’s bylaws to separate the office of Secretary-Treasurer into two offices, increasing the board-selected membership by one, and decreasing by one the the number of Board members elected by the membership.   The change was not widely announced, and the amendment to the bylaws was only published on the AAA website after the proxy drive began.  The change would result in members directly electing less than one-third of Board members.  As certain significant acts that could be taken by the Board require a two-thirds majority, this could be seen as a critical reduction in member input into Board activities.
     
  • Traditionally, Academy board elections are conducted by an acclamation of support among annual meeting attendees.  Prior to this year’s meeting, there has been no attempt to solicit confirmation by members not attending the meeting, and there has been no mechanism for contested elections.  Compare this to current SOA and CAS procedures, where members with voting rights are sent ballots to vote for Board members and Society officers, and where a procedure (other than via proxy fight) exists for elections to be contested.
     
• Some Academy members believe the split of the Secretary-Treasurer office, and the elimination of an elected Director’s seat constitutes an amendment to the Academy bylaws which would require a member vote.  Under this reasoning, the Academy’s recommended slate of candidates for Board membership would leave a vacancy.
   
• Tom Bakos is running for that vacant position.  He and others are collecting proxies in support of his candidacy. 
   
• In addition, Tom and others are circulating a petition to amend the bylaws to permit direct election of Board members and Academy officers by members, akin to what is already done in the SOA and CAS, except for the protection of representation from the four major fields of actuarial practice in the U.S.

Personally, I am sad, if oddly entertained, by the weird proxy battle underway.  I’m not a lawyer, so I can’t really say whether the bylaws amendment was appropriate or not, but I do find the the change and the way it wasn’t communicated troubling when the profession is under criticism internationally for needing better governance and improved transparency.  The way in which the Academy has responded to Tom’s candidacy (its silence on the  bylaws change in particular) provides fodder for conspiracy theories.

The actuarial profession in America is still small enough that there is an air of most actuaries knowing (or knowing of) most other actuaries.  That familiarity makes it very likely that anyone rising to a leadership position will have the respect of a sizeable portion of Academy membership, and that they will generally act in what they believe is the profession’s best interests.  Mistakes may be made, and there may be differences in opinion…but that would be true under the current governance structure as well as under a direct-election model.

However, I also believe philosophically that increased transparency and members’ having the ability to act as a check on leaders’ power is usually a good thing.  I wouldn’t want any actuarial organization to be bogged down by excessive surveys and member votes, but direct election of officers and Board members doesn’t seem to be too much to ask.

Given that we ask the American Academy of Actuaries to act as the public face of the actuarial profession in the United States for purposes of political, regulatory, and media relations, and given the challenges the profession has recently faced and will continue to face, including:

• Potential fallout from the Morris Report
• Social Security, Medicare, and pension funding and benefits
• Business and political ramifications of coastal catastrophic exposure
• Insurer solvency and bailouts
• Health care reform
• Possible federal regulation and the potential loss of antitrust
• The coming shift from GAAP to international accounting standards
• Differing opinions as to the expansion of the actuarial profession into other areas of practice

…it seems worthwhile to ensure that members have the potential for more direct influence over Academy leadership.  These are all very significant issues to American Actuaries, and it is important to ensure that we are appropriately represented to politicians, regulators, and the media.

Some of us in the actuarial profession make a living identifying worst-case scenarios, and assessing our employers/customers’ preparedness for those situations, unlikely though they may be.  With any organization, there is the chance that leadership could abuse its power and/or become nonresponsive to members’ needs and concerns.  So, even though it seems almost unthinkable that the Academy board could be untrustworthy, having a reasonable mechanism for competitive elections and for members to easily vote seems like a prudent precaution to take.

For that reason, I think the Academy bylaws changes proposed are an excellent idea, and I would encourage Academy members to support the petition.  Furthermore, I think it would be appropriate to have a member who is leading the bylaws amendment push fill a vacant seat on the Academy board. 

Although I would prefer that the change in board composition had been more widely discussed with the membership and put up for general vote (I assume that vote would pass), I don’t see that matter being resolvable from the floor of the meeting.  I think that a struggle or legal action over the appropriateness of how the bylaws were revised would not be particularly constructive, and I would worry about how a proxy-battle/contested board election might unfairly taint the effort to amend the bylaws to require direct elections. 

So, I would encourage members not attending next week’s meeting to not give their proxies to the Academy, and instead either withhold their proxies (in opposition to the idea of a proxy battle) or give their proxies to Mr. Bakos (to express support for transparency and responsiveness), as their conscience dictates.

(As always, the views expressed above are my own.  They should not be interpreted as an expression of the opinions of my employers past, present, or future.)