Minutes of the Meetings of the Audit Committee of the Internet Society

A meeting of the Audit Committee of the Internet Society (ISOC) was held on October 23, 2008. The meeting was held by teleconference. In attendance were Ted Hardie, ISOC’s Treasurer and Chairman of the Audit Committee, and Raul Echeberria as a member of the Audit Committee. Patrik Fältström, a member of the Audit Committee was absent.

Also in attendance, as invited guests, were Lynn St. Amour, ISOC’s President and CEO; Greg Kapfer, ISOC’s Chief Financial Officer; Dale Peck, PIR’s Treasurer; David Maher, PIR’s Senior Vice President of Law and Policy; Larry Martin, PIR’s Director of Finance; and Richard Sills, PIR’s outside counsel with the firm of Holland & Knight.

Dr. Hardie called the meeting to order. As the Audit Committee Charter states that a quorum consists of one-half of the members of the Committee, Mr. Kapfer noted that the two members of the three-person Committee constitute a quorum for the meeting.

Audit Committee Charter Review

Mr. Kapfer noted that the Audit Committee Charter calls upon the Committee to review the Charter at least annually. Dr. Hardie asked for any comments or changes appropriate for Committee consideration. The Committee members present stated that they had reviewed the Charter and had no changes. Mr. Kapfer also noted that no changes were suggested by Management or Patrik Fältström (via email). Therefore, the Committee has performed the annual review, and no further action was necessary.

Approval of Independent Auditors

Dr. Hardie then called for discussion regarding Management’s recommendation that the firm of Grant Thornton be appointed as ISOC’s independent auditors beginning with the audit of ISOC’s 2008 financial statements, and that Grant Thornton also be appointed to prepare and review ISOC’s annual tax returns for 2008. Upon discussion, Mr. Echeberria presented the following resolution:

Resolution: Appointment of Grant Thornton as ISOC’s Independent Auditors and Tax Preparers for 2008.

RESOLVED: The Audit Committee approves the appointment of Grant Thornton as ISOC’s Independent Auditors for 2008, including preparation and review of ISOC’s annual tax returns.

FURTHER RESOLVED: The Audit Committee Chair and ISOC’s CFO are authorized to execute engagement letters as presented to the Audit Committee for consideration.

Dr. Hardie seconded and carried the motion, and the resolution passed by acclamation. According to the Audit Committee Charter, formal action shall be by vote of a majority of the persons present at a Committee meeting at which a quorum is present. Therefore, the motion passed.

Review of Compensation Proposal for PIR’s Board of Directors

Mr. Sills presented the following proposal from PIR to ISOC’s Audit Committee:

Proposal to ISOC Audit Committee by the Public Interest Registry

The Board of Directors of Public Interest Registry (PIR) has approved certain changes to the PIR Bylaws that would allow compensation to be paid to those directors of PIR that are willing to accept compensation for the time and effort that they undertake individually and collectively on behalf of the corporation. The PIR Board has approved a proposal to pay to each PIR Director who is willing to accept compensation a sum paid in arrears quarterly. The Bylaw changes are subject to approval of the Board of Trustees of the Internet Society (ISOC). If the ISOC Board of Trustees approves these changes, the Board of PIR is required to appoint an independent body to approve the compensation. This is a request to the Audit Committee of ISOC to act as that independent body and to review, discuss and approve the compensation proposed by the PIR Board to be paid to its members, effective 1 January 2009.

The proposal by the PIR Board was formulated after consideration of a study conducted by an independent consultant, Watson Wyatt World Wide, concerning compensation paid to directors of US based non-profit organizations. The amount approved by the PIR Board is less than the amount that Watson found to be the average compensation for individual Directors for the time and effort that they undertake individually and collectively on behalf of the corporation.

If the ISOC Audit Committee is willing to act as the independent body described above, PIR expects that the Committee will be asked to reexamine the question and amount of compensation to PIR’s Board of Directors on a periodic basic.

Following Mr. Sills’ explanation of the requirement for independent review by a disinterested committee, the Audit Committee members discussed the plan and the level of compensation proposed. The Committee had been supplied on October 17 with the following supporting documents:

  • PIR’s request to ISOC’s Audit Committee to act as an independent committee for this purpose;
  • A summary from PIR’s outside counsel, Holland & Knight, of the process by which the Audit Committee would act and the plan of Board compensation would be approved;
  • A study by Watson Wyatt Worldwide conducted for the purpose of determining a reasonable and supportable compensation level.