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Proposal Summary

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Corporate Structure White Paper – 2008
(By ad hoc committee headed by Past President and AAPG Foundation Trustee Marlan Downey)

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Corporate Structure Proposal

Corporate Structure White Paper

December 10, 2008

Envisioned Future

To develop an overarching corporate structure for AAPG that allows the Association to grow  worldwide through its Regions, Sections and Divisions.  The structure must address three coordinated components—1) a comprehensive business structure for conducting international business with legal protection of the Association’s assets, 2) a versatile governance structure that engages members and can adjust for changes in AAPG demographics over time, and 3) an efficient framework for global operations that encourages growth while maintaining quality.

Current Reality

AAPG was established in 1917 by a small group of geoscientists in Oklahoma, U.S.A.  AAPG is a 501c(6) not-for-profit incorporated under older incorporation laws in the state of Colorado.  The following are facts or observations about the society:

• Currently, AAPG is not a global organization, but an international organization; i.e., a U.S. association with both U.S. and international members.
• AAPG enjoys an excellent global reputation and status in science and professionalism.
• AAPG’s membership is roughly one-third non-U.S.; the Association’s greatest potential for growth is outside of North America.
• AAPG has developed a significant financial portfolio (savings) primarily from U.S.-based operations, i.e., U.S. member dues, donations, and purchase of products and services.
• AAPG is currently operating conferences, workshops and short courses outside of the U.S.
• HoD delegates in the U.S. are selected by vote from U.S. Affiliated Societies (not the Sections), while HoD delegates in the Regions are selected by vote from the Regions (not the Affiliated Societies).
• AAPG’s Regions are increasing their activities, primarily in the form of conferences and have the potential to add products and services.
• Although originally U.S. focused, AAPG’s Divisions address global issues and have the potential for non-U.S. growth and relevance within AAPG.
• In addition to Region activities, AAPG is increasingly developing operations outside the U.S. through its global offices in the form of workshops, short courses, etc.
• European and Middle East operations are currently managed by AAPG Headquarters through two global offices—1) European Office and 2) Middle East Office.
• The European Office is incorporated in the U.K. as a charity with the UK Charity Commission.  The Middle East office is in the process of incorporating as a charity in Bahrain.
• AAPG Regions and Sections require accounting, general liability insurance, conference support, Web development and other business services.

Synopsis

AAPG’s current corporate organization is adequate for an association that is U.S.-based with international members, but it is not adequate for a global organization.  AAPG’s governance is primarily by leadership from areas of large membership in the U.S.  Typically, the AAPG Executive Committee’s non-U.S. to U.S. member ratio is 1:8. 

A new governance model will need to be considered that is unified and equitable, and one that allows for some decision making and action to be taken at a local level. The optimal corporate structure will be one that is flexible as Association demographics change, allows for seamless global operations, develops a comprehensive liability shield and provides the Regions and Sections with incentives to develop new programs.

Currently, none of the Regions are incorporated except Canada, whereas all of the U.S. Sections are separately incorporated.  The independent structure with the Sections has worked historically, but makes it difficult for AAPG and the Sections to develop unified strategies and tactics.  Most Sections do not have permanent staff and their operations are typically designed largely to develop an annual Section meeting.

AAPG global offices are an extension of Headquarters in Tulsa.   They are designed to work with the Region to develop AAPG’s global products, services and programs and provide the Regions with business services for their activities.

Currently, AAPG’s non-U.S. membership is approximately one-third of total membership and it is estimated that nearly one-half of members work on non-U.S. projects.  Any new model must be “representative” of current membership numbers and must be designed to accommodate future changes in AAPG’s membership demographics.

AAPG is conducting a growing business overseas as its non-U.S. membership increases.  As part of that growth, the AAPG Regions are becoming more active by developing new services.  Although these programs primarily consist of small- to medium-sized conferences, it is anticipated that more workshops and short courses will be developed.  In addition, there are several new Region initiatives for student programs, including the very popular Imperial Barrel Award. 

Financially, AAPG has been very successful and has developed a sizeable asset portfolio.   Outside of the U.S., AAPG routinely makes a “profit” on its International Conference and Exhibition (ICE).  Also, the Regions are starting to develop new ventures and are successfully creating new revenue.  AAPG expects its two global offices in Europe and the Middle East to add to its revenue base in two to three years .

Nevertheless, developing global operations is expensive and requires up front investment.  Legal, accounting and other administrative costs must be considered, as well as general overhead for operations.  In the new model, Regions and Sections will be asked to pay related costs for overhead and direct services through an annual budgetary process.

In many cases the liability of conducting business overseas is unknown and AAPG may be exposed to contract and tort actions.  In some cases, AAPG is working in countries where no standard “rule of law” exists; i.e., no judicial system for relief.  A new global structure is needed to provide a proper degree of separation and liability protection for AAPG as well as to provide a vehicle for AAPG’s foreign office staff and volunteer members to conduct business on a local and/or regional basis.

Several models are available for AAPG leadership to consider.  Many of those models are already in use by sister societies and can be used as analogues for key strategic decisions by AAPG.

Guidelines

As our envisioned future includes the overarching goal of encouraging growth while maintaining quality, the following are guiding criteria for a new corporate structure.

Legal

1. Protect assets
2. Global operation
3. Provide liability coverage

Governance

1. Unified model
2. Clear chain-of-command (President and Executive Board)
3. Equity (some components based on member numbers and some on representation)

Operations

1. Integrated and coordinated
2. Incentives and shared risks
3. Clear chain-of-command (Executive Director and Headquarters)

Recommendations

The committee recommends a new corporate structure that takes a major step toward comprehensive governance and worldwide operations. In particular, it is anticipated that the new structure would be designed with emphasis on providing a liability shield for the organization and, in particular, Region operations.  In this model, AAPG would be the operating partner of a global “umbrella” structure.  It is recommended that the new global board be composed of at least four members of the AAPG Executive Committee.  Both the Regions and Sections would have representation on the global board.  Operations will be global and coordinated.

The committee does not recommend a formal name change, but rather the use of the acronym “AAPG” for the new global corporation.  To differentiate in this document the new global corporation will be referred to as the “Global AAPG.”

This new Global AAPG would be a combination of the globally integrated legal structure with an umbrella type governance model and the globally coordinated operations:

Legal Structure

AAPG would form a legal “umbrella” or “shell” corporation and most likely incorporated in Holland or the United Kingdom.  It would be a globally integrated corporation with broad representation, similar to SPE.  Unlike SPE, this structure would have a board with no more than 11-13 members.  The following are key characteristics of this legal structure:

1. A global board would be formed for the umbrella organization:
   1. The global board would be primarily responsible for review of key programs and strategic recommendations of future operations to the managing partner.
   2. The board would be composed of three groups of AAPG members—1) at least four (4) elected members from the AAPG Executive Committee, 2) a representative from the House of Delegates, and 3) members elected by the membership in their respective Sections and Regions.  It is anticipated there would be no more than seven (7) representatives elected by the Regions and Sections.
2. The current AAPG structure would be the “managing partner.”
   1. The managing partner’s primary purpose would be strategic planning, budget approval and oversight of all operations.
   2. The managing partner, governed by the AAPG Executive Committee, would not change from its current design

Governance Model

The overarching goal for the governance structure is to develop one that unifies the organization, is equitable and, to a degree, representative of the various populations within AAPG, and provides for a clear chain of command for the AAPG leadership and staff. 

1. As with the current AAPG, the House of Delegates would be responsible for the modification and development of the Constitution and Bylaws and the overall governance for the Global AAPG.  The primary duties of the HoD would be to:
   1. Approve the legal structure of the new Global AAPG.
   2. Determine the structure of the Regions and Sections.
   3. Approve the structure and membership representation of the new global Board.
2. A Board would be formed for the umbrella organization that unifies the Global AAPG with a diverse representation.  Optimum board size is generally considered 7-9 members and the maximum size should be 13.  The following are recommendations for representation on the global Board:
   1. Officers elected by membership at large.
      1. President, President-elect, Treasurer, Secretary (1-4)
      2. Editor (non-voting?)
   2. House of Delegates Chairman (5)
   3. Members elected by representative groups (up to 8, plus possible at large):
      1. Presidents of Regions, possible at large (6-13).  The following are recommended criteria for representation.
         • For a Region/Section to have a voting Board seat requires a minimum percentage of total membership (e.g. 5%) as active members.
         • Regions not meeting the minimum active member requirement would have a non-voting member on the board. 
         • Each Region that exceeded a certain percentage of total membership (e.g. 35%) would have an at large voting seat on the board.
3. It is anticipated that Region/Section boundaries may need to be redrawn to reflect an equitable distribution of AAPG membership.

Operations

Operations should be globally coordinated and managed by a central Headquarters staff with a global network of offices strategically located around the Regions and Sections that offer local and regional services.  This model provides central control with oversight and direction by the executive committee working with an executive director.  The offices are designed to serve the Regions/Sections, but chain-of-command is through Headquarters to the AAPG Executive Committee.  It is designed to provide seamless operations worldwide. 

1. Chain-of-Command
   1. Headquarters, through the Executive Director, would report directly to the AAPG Executive Committee through the AAPG President.  Global office staff is an extension of Headquarters and would report to the AAPG Executive Director.
   2. Each Region and participating Sections would be subject to a written membership agreement identifying operational methodology.
   3. Region activities would be scheduled and coordinated with Headquarters staff and all major events would be reviewed and recommended by the new global board for budget approval by the AAPG Executive Committee.
2. Budget
   1. All revenue and expenses developed by global operations would be handled though central accounting by AAPG staff.
   2. Each Region and participating Sections would be required to submit a detailed budget for each fiscal year which includes all revenue and related expenses.
   3. Global Offices would submit a budget in concert with both Region and Section activities.
3. Global Offices
   1. Global offices are designed to—1) promote and enhance AAPG global products and services, and 2) support Region/Section activities.
   2. Although staff in AAPG Global Offices would report directly to AAPG Headquarters they would be expected to work directly with the Region/Section leadership in the development and support of programs.

 

Figure 1—Global Model with Umbrella Structure without changes to Region/Section structure.