Corporate Structure Proposal
Global Corporate Structure Summary
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Executive Summary
The AAPG Strategic Plan defines the overarching mission of the Association as advancing the science and profession of energy-related geosciences worldwide. To achieve this mission, the Strategic Plan has six Goal Areas:
- advance the science
- continuous professional development
- public awareness and understanding
- membership and member services
- financial strength
- global presence.
These are the basic principles behind achieving AAPG’s overarching goal of being “indispensible to all professionals in the energy-related geosciences worldwide.”
Of all of these Goal Areas, the sixth, global presence—defined as “evolution of a global strategy that demonstrates responsibility for, and has direct benefit to, the membership and upholds the goals of AAPG”—is perhaps the most far reaching. A single change cannot accomplish this goal. Whichever series of steps the AAPG follows, the following facts are clear:
- AAPG’s non-U.S. membership is growing
- AAPG must provide appropriate services in response to this growth
- worldwide growth will result in increased operations to deliver products and services.
In late 2008, an ad hoc Corporate Structure Committee chaired by Marlan Downey advised that AAPG should adopt a new corporate structure that would provide legal protection of the assets of the Association and enable AAPG to conduct its financial affairs and operations more effectively worldwide.
The recommended Global Corporate Structure will provide many benefits to AAPG members. These include expanded access to science and ideas; a broader membership base; worldwide professional contacts; global access to geology, industry, and governments with a worldwide financial network for the operations; and a global voice in energy policy. Members also benefit from the protection of assets accumulated through the generosity of members and many years of prudent fiscal governance.
A new structure is important for the Regions to encourage continued growth and provide their leadership with a clear framework to serve the membership. Sections and Affiliated Societies will benefit from a vibrant society that has the resources for their support. The AAPG Divisions and Committees will gain more volunteers and new opportunities.
This proposal recommends a three-step approach to “going global” with a new corporate structure. The first step is to incorporate each Region office in its host country to protect the parent organization from financial liabilities arising from regional activities. The AAPG already is taking these steps in the U.K., Bahrain, and Singapore. The second step is to develop a holding company under which the Region offices will be placed as part of the overall corporation. This provides another degree of separation for liability and from unknowingly violating special codes or laws that are not universal between countries. The third step would be to include the U.S. in the Region structure. This step would require a significant reworking of the AAPG Constitution and Bylaws.
Recommendations
This presidential committee conceptualized the ideal organization it would create today to form a brand new global association of petroleum geoscientists. With such an ideal for Legal, Governance, and Support/ Operations in mind, a plan to transition from the current structure towards the new structure can be better put in place.
A key for some organizations in defining a new corporate model is the realization that they can separate the legal and governance concepts. For example, SPE uses its legal office entities as the legal structure and its Constitution and Bylaws to define control of the legal entities. A second critical key is to have a unified, coordinated professional staff to handle operations through well-defined annual budgets with contractual obligations.
Considering the desired state and the current state of the Association, we recommend the following:
Legal Structure
A globally integrated structure provides the liability shield, versatility, and flexibility to serve members, protect AAPG’s assets, and provide for unified governance with equity for the membership.
The AAPG has already started incorporating its offices in key countries in the European, Middle East, and Asia Pacific Regions to provide a first line of liability protection. A globally integrated structure in which each Region is incorporated into a unified organization will provide an additional liability shield.
In this legal model, the Sections and Affiliated Societies would remain separate legal entities and would continue the same close relationship to AAPG as defined in the Bylaws.
Governance Structure
A new governance model must be unified and equitable, and will need to allow for appropriate decision making and action at the local level. The representative model is broad-based and enables representation to evolve with changes in membership. A global board would govern this model based on representation of AAPG membership. The AAPG House of Delegates and Advisory Council would be part of this new model, but they would move into the global governance structure. Some changes in delegate representation might be required. For example, HoD members in the U.S. currently are elected from the Affiliated Societies, while non-U.S. HoD members are elected from the Regions. In the future, HoD representation might need to be standardized.
The Executive Board of the representative structure might comprise:
- Officers elected by total membership (5): President, President-elect, Treasurer, Secretary, and Editor.
- Members Elected by representative groups (up to 7 plus possible additional members at large), including the HoD Chair and Presidents of Regions. The vice-presidents of Sections and Regions would be included in this group, although the vice-president positions in the governance could be represented by one or more of the Presidents of the Regions.
For a Region to have a voting Board seat, it would need to have a minimum percentage of AAPG Active members affiliated with the Region (e.g., 5%). Regions not meeting the minimum Active member requirement could 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.
Support/Operations
The globally coordinated model is the most efficient and effective with respect to the use of staff and ensures consistency and quality of AAPG member services. This model provides central control with oversight and direction by the executive committee working through an executive director. Global offices serve the Regions but chain-of-command is through Headquarters.
Implementation Plan
This presidential committee recommends that the AAPG proceed without delay to advance the globalization goal of the strategic plan. However, Marlan Downey’s ad hoc corporate structure committee recommended a slow transition to a global structure in consideration of potential concerns of the membership. No matter what time frame is set, there are three logical steps to achieving a global association:
Step 1. ratify the current business plan of incorporating offices
Step 2. incorporate the Region offices in each country and the Regions themselves under a holding company
Step 3. bring the U.S. into the Region model.
Step 1 The current model the AAPG is using to build a liability shield is to incorporate Region offices (Fig. 1). This step does not require constitution or bylaw changes.
The Region governance structure does not change and the Regions continue to elect their officers as specified in their bylaws.
Each office will have a board of trustees for oversight of each corporation. The trustee chair and vice-chair will be appointed from the membership by the AAPG Executive Committee with advice from the Region Council and the Executive Director.
Regional office trustees will meet once or twice a year to make sure the office follows its requirements of incorporation. The Trustees will not be involved in the oversight or direction of AAPG Region activities, which are the responsibility of the Region Councils in coordination with AAPG headquarters management.
Step 2 places the Regions under a holding company, the most likely vehicle being a Dutch “stichting” (Fig. 2). This holding company will provide another degree of legal separation for AAPG’s assets, but this does not necessarily protect the Association from tort actions that could arise.
In Step 2, the AAPG Executive Committee would appoint the trustees of the holding company. Like the trustees of the offices, the primary function of the trustees of the holding company is to make sure the organization follows the requirements of incorporation.
Governance might need to change during Step 2 resulting from changing membership demographics. A bylaws change might be required to provide more proportional representation on the AAPG Executive Committee.
AAPG staff chain-of-command would be similar to Step 1. As Region offices develop, it is expected that office directors and Region Councils will have more autonomy. A comprehensive Memorandum of Understanding and an annual budget will be key to the management of AAPG operations in the Regions.
Step 3 is designed to provide greater legal separation and a standardized global governance structure for both Section and Region membership. Step 3 requires a significant reworking of AAPG’s constitution and bylaws: the composition of AAPG Executive Committee and the bylaws defining the Regions would require substantial modification. The House of Delegates and the Advisory Council would not need to change significantly because their membership already is based on AAPG’s global membership; however, there might be some modification of HoD guidelines to normalize the Region and Section/Affiliated Society models for determining representation.
A primary concern with this step is the timing of the U.S. or perhaps North America becoming a Region (Fig. 3). Currently 66% of AAPG’s membership lives in the U.S.; therefore, representation in any new governance structure is a key concern for Section representatives.
Schedule
The following schedule represents the shortest time period to move from Step 1 to Step 3.
2009 |
|
| May 1 | Data and reports due to AAPG for HoD packet |
| May 4 | Information packet mailed to HoD |
| June 7 | HoD meeting to introduce the plan for consideration, submit proposal to Constitution and Bylaws Committee |
| July-Dec. | AC/EC and HoD/CBL consideration of plan with member input |
| Dec. 10 | Bylaws changes to Explorer |
2010 |
|
| Jan 18 | Bylaws changes mailed to HoD |
| Feb 17 | Constitution changes published in Explorer |
| March 12 | Agenda and reports mailed to HoD |
| April 18 | New Orleans HoD meeting |
| June 16 | Ballots with Constitution changes sent to membership |
| Aug 16 | Constitution modifications approved by full membership (2/3 majority required) |
| Sept | File application with Dutch authorities |
| Dec | Receive approval from Dutch authorities |
2011 |
|
| Jan | New structure for Dutch company in place at AAPG |
| July 1 | New AAPG EC and stichting BoD in place |
Costs
The estimated direct cost for developing and maintaining a holding company such as a Dutch stichting is US$115,500. The majority of the costs are related to legal and audit fees required to establish the legal entity, after which there will be expenses related to annual financial audits, Dutch registration, and bylaw modifications. There will also be indirect costs associated with AAPG Headquarters staff time devoted to management and oversight of the legal counsel and auditing firm. This would include reviewing and approving any annual report filings or financial audits and coordination of any legal issues, such as bylaw modifications or legal changes to the corporation.
Recovery of the costs for developing the new corporate structure would be through increased membership and income from new and expanded projects and services. It is estimated that it would take at least three years to recover the costs.
The cost of not going forward with a new corporate structure could be significant. Although intangible, these costs could include lost membership and lost program opportunities around the world.
Outstanding Questions
Many concerns have not yet been addressed by the committees considering the corporate structure. If we continue towards the recommended global corporate structure, the following questions, among many others, must be considered:
- How will we clearly separate Governance and Operations, with the Advisory Council and House of Delegates remaining key venues by which Members retain control over the overall strategy and direction of AAPG?
- How will changing the corporate structure affect the budget? What is the business plan within the new structure? How much time will it take to amortize development costs?
- How will we normalize the models by which Sections and Regions elect HoD representatives? What will be the protocol for interactions between Sections/Regions, and the new AAPG structure? How autonomous will the Sections remain?
- How do we ensure that all AAPG members benefit from the proposed restructuring?
Conclusions
AAPG is moving towards the goal of its Strategic Plan to become indispensible to all professionals in the energy-related geosciences worldwide. The proposed structure emphasizes the technical and scientific interests of members and protects the assets of the organization no matter where it operates.
While the process of changing the corporate structure requires considerable energy and commitment from members, we expect it to deliver numerous benefits to members:
- expanded access to science and ideas for all members
- a broader membership base
- professional contacts for members worldwide
- access to geology, industry, and governments across international borders
- a global voice in energy policy.
- protection of assets accumulated through the generosity of members and many years of prudent fiscal governance.
An overarching benefit from this proposed structure is that AAPG will begin to mature into a society focused on providing technical and professional benefits to its members. We encourage your support of this proposal as it goes before the House of Delegates.
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Step 1 PDF
Step 2 PDF
Step 3 PDF