[OpenID board] April 19, 2010 OpenID Executive Committee Call Minutes

Mike Jones Michael.Jones at microsoft.com
Sat May 1 02:49:24 UTC 2010


April 19, 2010 OpenID Executive Committee Call Minutes

Attendees:
Don Thibeau, Executive Director
Mike Jones
Nat Sakimura
Chris Messina
Brian Kissel
Mike Ozburn

Absent:
(none)

Visitors:
John Ehrig, Global Inventures


1.      Budget and membership structure discussions and recommendations
This entire call was devoted to budget and organizational structuring discussions resulting from the possibility that Facebook and Yahoo! are both considering reducing their membership classes from sustaining (the $50,000 level) to corporate (the $10,000 level), and due to a request from Facebook that we consider revising the organizational governance structure, because of their perception that the current board is too big for effective decision making.

The decisions made and issues discussed follow.  The executive committee recognizes that the budgetary decisions below are actually recommendations to the full board's budgeting process, other than the decision about Executive Director compensation, which the board explicitly delegated to the executive committee.

Budget Decision:  Retain a full-time Executive Director:  The executive committee thanked Don for his offer to reduce his salary and go part time as a way to save costs, but the committee was unanimous in requesting that Don take this offer off the table and propose different cuts.  We all agreed that we need a full-time Executive Director at this phase of the foundation's life and that we want Don to remain as that full-time Executive Director.  Furthermore, we agreed that he should continue to have the budget to travel as seems strategic and prudent; the committee observed that Don's in-person representation of the foundation and its mission has almost certainly been net-revenue-positive, as new memberships can be directly attributed to his face-to-face conversations with decision makers at companies that joined.

Budget Decision:  Continue outsourced association management services:  The committee next communicated that we likewise need to continue adequately funding outsourced organizational management services in order to keep the foundation in good working order.

Budget Decision:  Maintain adequate legal support:  The committee agreed that we must maintain sufficient legal support to address IPR and governance issues for the foundation. The Executive Director shared his plans to retain a "general counsel" approach to consolidate legal fees in the last board meeting.

Budget Decision:  Fund product market research:   The committee agreed that it makes sense to continue activities that inform the directions we need to pursue for OpenID to succeed.

Agreement:  N+1 rule problematic:  The current bylaws state that when there are N sustaining members that there must be N+1 community board members.  There was agreement that the N+1 rule is problematic. For one thing, it dilutes the value of sustaining membership, possibly resulting in fewer sustaining members.  Some also felt that it makes the board too large for effective decision-making.  The committee also observed that, effectively, most of the community board members are already working at companies invested in OpenID.  The committee recommends that the bylaws be revised to replace the N+1 rule.

Replacement options discussed include:

  *   having working groups elect a limited number of board members from among their members, as some other organizations do,
  *   having a limited, fixed number of community members elected by the foundation members,
  *   eliminating community board memberships.
No matter which replacement options might be chosen, we agreed that it would make sense to grandfather existing community board seats despite any restructuring - respecting the decisions of the members who elected them.

Agreement:  À la carte funding problematic:  Facebook has stated that even if they reduce their membership class from sustaining to corporate, that they would plan to continue to spend a total of $50,000 on foundation activities, with $40,000 going to designated projects.  The committee agreed that while sponsorship of designated projects is always welcome, that it would be unworkable for this to become the primary funding model for the foundation.  Were many board members to also choose this "à la carte" funding model, it would reduce the funds available for budgeting of regular foundation activities to below a sustainable level.  Furthermore, funding for designated projects tends to be one-time, and thus fade away over time.  Thus, the executive committee recommends, for the health of the organization, that sustaining members renew at the sustaining level, providing the organization predictable, budgetable income, and then sponsor designated projects such as summits, interop work, etc. on top of that, as they see fit.

Agreement:  Only one short-term viable revenue-generating product:  In consultation with Global Inventures, we've learned that foundations almost universally derive revenue from one or more of three kinds of products:

  *   Conference Fees
  *   Licensing and Certification
  *   Memberships

The committee discussed the applicability of each of the three possible kinds of revenue that GI identified to the OIDF.

  *   Conference Fees:  We agreed that while we could investigate charging reasonable amounts for some OIDF events - perhaps for non-members to attend - that this both would not generate nearly enough revenue to be material to the operation of the foundation, and that doing this could work counter to our mission of building a widely deployed Internet identity solution.
  *   Licensing and Certification:  First, the OIDF formed the Open Identity Exchange (OIX) to do certification for OpenID, and so any certification revenues would accrue to OIX, rather than OIDF at this point.  Second, the ramp-up on certification is likely to take years, and so even if we were receiving the certification revenues, they would likely not be significant for at least two years.
  *   Memberships:  Knowing that the other two classes of revenue were either irrelevant or insignificant is clarifying, because it makes clear that the foundation must have a structure that allows membership revenues to almost wholly fund the organization.  Thus, the committee agrees that we should focus any restructuring efforts on a membership structure that both provides a stable funding basis for operating the foundation and for maximizing participation.

Observation:  Sustaining member "plus" membership category already in operation today:  The committee observed that there is already a healthy dynamic in the foundation, where some sustaining members also donate significant resources to key foundation projects.  Examples are the legal work that was donated to establish the IPR policy and procedures and the hosting and sponsorship of OpenID Summits.   The executive committee hopes and expects to see this vital "membership class" continue.

Agreement:  The sustaining membership price is right:  In light of the fact that memberships are the only significant revenue-generating product that we have to sell, the committee agreed that (a) the price of sustaining membership at $50,000 is appropriate as-is.  Indeed, while a few existing members are considering lower membership classes, the track record over the past year has been that many more new companies have stepped up to pay this price as a demonstration of their interest in OpenID.  $50,000 is clearly a price that the market will bear.

Agreement:  The corporate membership price is too low:  The maximum corporate membership price is currently $10,000.  We discussed that this means there is a HUGE price jump between corporate and sustaining membership - a factor of 5 (or more).  From a pricing perspective, this means that if a company is wavering between sustaining and corporate membership, that we're currently giving them a significant and perverse incentive to join at the lower membership level.  We agreed that the price of corporate memberships should therefore be raised, to remove this disincentive to joining at the sustaining level.  Possible prices discussed were $25,000 and $20,000 for the largest companies.  The committee believes that we should continue to have a sliding price scale based on company size at this membership level.

Agreement:  Need for more differentiated benefits:  We believe that the foundation should investigate structuring the member benefits package so that the value of membership at different levels is more differentiated.  For instance, were we to charge for participation in some events, we could offer several free attendee slots to sustaining members and one or a few free slots to corporate members.  (Given that the current $25 individual membership price already doesn't cover our expenses to administer these memberships, this benefit may not make sense at the individual level.)  The executive committee did not make specific recommendations of particular differentiated benefits at this time.

Agreement:  Not at all a crisis situation:  The committee agreed that while it is unfortunate that we may not have the full level of funds anticipated during the April 5th board meeting, that even should two or even more sustaining members drop to the corporate membership level, that overall, the foundation will still have more resources and committed members than ever before.  We would have been thrilled a year ago to have that amount of committed revenue to budget against, and ecstatic two years ago.  While we may not be able to do everything envisioned on April 5th, we're still far ahead of where we've ever been, and the growth trends continue to remain positive.  It is natural and normal for members to evaluate their appropriate levels of commitment to any endeavor from time to time, and while some may choose reduce their level of commitment to the foundation and its mission, more are increasing them.  (Nonetheless, we also agreed that we should continue to endeavor to provide compelling value to as many members as possible, so the decision to renew or join is an easy one.)

Agreement:  Need for OpenID v.Next should inform our budgeting:  Given the widespread agreement that OpenID 2.0 will not take us across the goal line for a number of important use cases (although being perfectly adequate for others), and given the need to allocate scarce financial resources, the committee agreed that we should spend no money actively marketing OpenID 2.0 or developing new OpenID 2.0 libraries during this fiscal year.  Adoption will continue to occur in places where it makes sense and will be stalled until v.Next where it doesn't.  (Although as stated earlier, the committee believes we should be committed to market research that informs our v.Next endeavors and specifications.)

Agreement:  Experiment in allocating funds to committees not entirely successful:  This year, for the first time, we attempted to empower committees and increase involvement, by enabling them to request budget allocations for specific projects.  In practice, only three committees submitted requests and those requests were largely driven by committee chairs that were already deeply involved.  The executive committee agrees that many of the proposed projects are worthwhile and should continue to be funded; however, it also directed the Executive Director to include line items in the committee budgets along with all other budgetary line items when considering where we can allocate less so as to be able to live within our means and best fulfill our mission.

Moving forward:  Research, Recommendations, and Resolutions:  The committee agreed that our budgeting and restructuring discussions should have three components:  Research, Recommendations, and Resolutions.  Specifically:

  *   Research:  We are actively investigating financial and organization structure options open to the foundation.  This has included consultations with Global Inventures' CEO Deepak Kamlani about potential revenue sources and examining other foundations' structures.  In addition to the survey proposed by the ED, this research has also included discussions with Facebook and Yahoo! about what directions they'd like to see the foundation take.
  *   Recommendations:  The executive committee and Executive Director are producing a set of recommendations to the full board on the issues before us.  This call was part of that process.
  *   Resolutions:  These recommendations will be distilled into a set of specific board resolutions, to be voted on at the in-person board meeting at IIW, on the afternoon of May 19th.  (Please plan to attend in person if possible, by phone if not possible, or please designate a proxy as a last resort.)

Observation:  Bylaws can be changed by board action:  Mike Jones clarified that the Bylaws of the organization may be changed by board action (unlike changes to the IPR Policy and Procedures, which also require a membership vote).  Thus, the board does have the power to effect changes to the organizational structure in a timely fashion, given consensus to do so.  Specifically, the bylaws state:
Section 9.2 Bylaw Amendments. To the fullest extent permitted by the Act, the authority to make, alter, amend or repeal these Bylaws is vested exclusively in the Board of Directors and may be exercised upon approval of two-thirds of the directors present at a meeting duly held at which a quorum is present without the vote or consent of any members or third parties.

[Mike Ozburn joined the call near the end]

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