Corporate Structure Proposal
Letter from Rusty Riese
Dear HoD Delegates,
The following is a letter which was initially sent to the Section Presidents. It is published in this pre-annual meeting issue of The Delegates’ Voice in an effort to get information and thoughts out to the delegates in as timely a manner as possible. Please, follow up on the suggestion to think through the points raised in the letter, and discuss them with your membership.
This note is my attempt to open dialog with you on the issue of corporate structure, about which you have heard a bit lately (specifically in the most recent President’s teleconference). In particular, I want to try to break the topic into two or three distinct pieces so that it’s easier to get our minds around it. So, that said, please bear with me as I try to articulate an explanation of something which is, in large part, nowhere near being sorted through.
First: Corporate structure in its purest (legal structure) sense and why any need to change?
AAPG started out as a purely U.S. organization (and some would suggest that by virtue of behavior it still is, but that’s another story). Thru time, and as an organization, we accepted the necessity for engaging and embracing petroleum geoscientists around the world. This was the reason for establishment of Regions, splitting the VP position into two (one for Regions and one for Sections), for graduated dues, and for opening small service offices in non-U.S. locations. These non-U.S. offices provide a measure of outreach to the Regions in which they are located, but they also help provide some of the support structure and coordination which Sections provide in the U.S. when it comes to meetings. Sections draw heavily on (local) volunteer time to pull Section meetings together, but that is not so easily accomplished in the rest of the world where a Region’s membership is more dispersed and has access to fewer local resources.
AAPG has also been a very successful organization in that it has benefited greatly from both prudent fiscal governance through the years and great generosity on the part of many members. This being the case, AAPG has accrued a strong asset base.
The convergence of these two vectors - global expansion and large asset base – have now created a conundrum: the expansion required a strong financial position to enable it, but the expansion into non-U.S. jurisdictions has the potential to put that same asset base at risk. It is unfortunately the case that the legal frameworks in many jurisdictions do not offer the same advantages that we enjoy in the U.S. vis-a-vis asset protection from legal/liability actions which may be brought against us. Neither do they adequately protect the assets of the parent organization.
This situation of risk exposure–the risk of losing core AAPG assets to non-U.S. legal actions–cannot be allowed to remain the case, and in some cases, has already been handled by the ECs and HQ.What is needed, however, is a coherrent, forward looking approach and a thoughtfully constructed architecture that will facilitate further international growth while at the same time protecting AAPG’s core asset base and identity.
That is the first and primary reason why a change in corporate structure is necessary.
Second: How should AAPG’s present governance (structure) respond to this need?
In its simplest, it would appear that AAPG can simply continue to create offices in new locations, incorporate under local law, and continue on as it has. But the catch is “local law,” and the inadequate protection it presents to the parent organization.
So, what then? Well, what needs to be created is a global corporate structure (vs the current U.S. corporate structure with non-U.S. “extensions”) which will establish a legal and liability firewall between the non-U.S. “corporation” and the parent AAPG organization. That is the legal advice which SPE received when that organization started down this path several years ago, and it is the advice which we have also received.
Which brings us to present state governance and obligations. The ECs and HQ have identified the problem and dealt with it on an “as needed” basis so far, but that is not enough. Further, because the core of AAPG’s governance is the HoD, it is that body which will ultimately need to take action and formally authorize a change in AAPG’s corporate structure. That step seems to me to be easily (clearly) justifiable; and in my mind should be acted on quickly–sooner rather than later. But what then? What Pandora’s box will we have opened?
Third: Will a change in corporate structure require a change in governance structure?
Well, clearly something will need to happen if a truly protective firewall is emplaced: those non-U.S. offices will need to report to some sort of governing body. Who will it be? How will it be elected or appointed? How will it in turn relate back to the parent organization? These are the questions with which we are now grappling and which will be dealt with by the “new committee” which was mentioned in the last telecom with you – a committee which will represent all the areas of AAPG which may be affected: HoD, Regions, Sections, and Divisions. That committee will (I believe) be charged with:
- educating itself about the scope of the issue(s);
- framing a comprehensive set of recommendations for action;
- framing the timing and pathway those recommendations should conform to;
- helping inform the HoD and broader membership about their recommendations and why they should be implemented.
Meanwhile, you should each be thinking about these four issue points, discussing them with your memberships, and convey thoughts and fears to the EC and to the Committee when it is formed. These are important issues and they will require socialization with all the members. That is our job.
(Note: the committee was formed, has done much of its work and submitted a draft report. A final version will be available at or prior to the Denver meeting.)
Fourth: How will the Sections be impacted?
There is no impact foreseen with regard to the sections unless they choose to make changes. Having said that, allow me to make some observations and frame a few rhetorical questions (an activity often perceived as grenade tossing, but which I am definitely NOT trying to engage in):
- We have at least two Sections which appear to have insufficient active critical mass to sustain their primary reasons for being: the organization and conduct of meaningful conferences for the educational and professional benefit of their memberships. It would appear to me that a merger, or two, may be in order in the not too distant future. Have any of you considered that?
- Perhaps a cleaner structure would see the Sections reincorporate as part of the parent organization and become essentially another Region? This might have the advantage of bringing more centrally located resources to bear when conferences are organized? It may also require some changes in HQ staffing, I don’t know.
- Perhaps there should be a North American Region?
Folks, I don’t have answers to any of these points, and I’m certainly not pressing any of them at this time. But they are all issues which will have to be dealt with in the coming (few) year(s), and my sense is that if significant change is necessary, we should do it right the first time and be done with it. I say that in part because of the difficulties which attend changes like this when the people involved keep changing. These are complicated and, for some, very emotional issues; and I suggest that getting it all done while there is the possibility for some leadership continuity is in our organizations’ and memberships’ best interests.
Closure
The action points I ask each of you to take are to give the points I’ve raised some reflection and begin describing to broader groups the issues which attend the First topic at the head of this note. I also ask that you please call if you’d like to discuss this or brainstorm it or even just tell me it’s all crazy. I hesitate to call you first because you all have day jobs and I don’t want to intrude inconveniently on you; and secondly because it takes a heck of a long time to have this conversation eight or nine times or more, and I have a “day job” (or two) too!
I hope this provides some additional background for you on the topic and that you will be able to help move these very important issues forward to closure on AAPG’s behalf, and that we can do it together in 14 months.
Thanks for your time and help. Now, please talk to me.