Mar
01
2021
From The Blog
Decision to Expand KICA Board of Directors
Dear members,
After considerable thought and discussion, our board voted to expand from seven to nine directors for the reasons outlined below. This adds two property-owner directors, increasing representation to eight members while maintaining one developer-appointed director. Myself and directors Diana Mezzanotte, Sue Schaffer and Townsend Clarkson voted in favor of this decision. Directors Jerry McGee, David DeStefano and Brad McIlvain voted against the decision.
Serving on the board for the last year has been arduous, and regrettably we’re no less divided than we were in September, when our previous chair resigned. The key question is why are we so divided? The most significant disagreements have been rooted in a fundamental difference of opinion on the role of the board. The question here is whether the board’s role should be policy and governance or should it play a more operational role. While some on our board would like to make day-to-day operational decisions, I, and a majority of the board, disagree and believe this is not in the long-term best interest of the community. We are a relatively complex $16 million operation, which is best served by a board that focuses on strategy and a staff that focuses on operations.
Since the early 1980s the board has been the same size, while our membership, and the complexity of issues, has grown tremendously. I considered the board’s current and future composition, and read with interest the statements of the 13 candidates who offered their services to the community. I was impressed with all of the candidates, and that’s when I decided to propose increasing the size of the board to infuse our organization with much needed diversity of thought, along with considerable talent. While some have suggested that I made this recommendation because of the election results, the reality is that I informed the board of my proposal before the election was over or the results were known. I also felt it was important for this board to make the decision, as only it has the perspective of what our experience has been over the last year. A larger board diminishes the power of any single board member and encourages consensus building. A larger board is more likely to make decisions that consider all property owners and serve the best interest of the entire community.
According to KICA’s governing documents and confirmed by legal opinion, the board has the authority to set the number of directors to “three (3), five (5), seven (7), nine (9) or eleven (11) members as the directors deem appropriate.” The bylaws also state, “any vacancy occurring in the initial or subsequent Board of Directors may be filled at any meeting of the Board of Directors by the affirmative vote of the majority of the remaining directors…” The board has the authority to appoint new directors in the event of an expansion and can choose anyone who meets the requirements for board service. However, since we just had an election, we chose to use those results to guide our decision, and we selected the candidates who finished third and fourth in the voting. This means that Gaye Stathis and Sandy Devine have been appointed to serve and will join the board at the March 12 Annual Meeting along with directors-elect Alex Fernandez and Beth Zampino.
As you know, in an attempt to be sure we get feedback from our membership regarding KICA services, we have a survey in the field right now. It has a few days to go before it closes, but after 2,400 responses (Thank you!), the results are very favorable. A full report will follow, but here are some interim highlights:
While a full discussion of key insights will follow, the existing model of policy governance has delivered very positive results. We owe thanks to our staff, who have done an amazing job through frequently changing board of directors.
I firmly believe the actions of the board today are in the best interest of KICA staff and the community as a whole. We have drifted toward operational control by individual members of the board without community input or debate. This dramatic change in our governing model, I believe, would be a serious mistake and should only be done after a fulsome public debate. It has been suggested that some members of the community may take steps to try and overturn the board’s decision. I would hope people don’t take part in such an effort without having all their questions answered by a knowledgeable source (please feel free to reach out to [email protected]), and I will continue to address questions via our KICA email newsletter. However, if such a process were successful, I would be satisfied that the will of the community was determined in a well-informed fashion. Additionally, because I wouldn’t want to be a lightning rod for controversy in the community, I would then step down as Chair of the board and resign. It is my hope that today marks the beginning of a more positive and productive era for the KICA board.
Sincerely,
Dave Morley
KICA Board Chairman
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According to Article III Section 12 of KICA’s bylaws, the dissenting directors may share their view with the membership.
Directors’ Dissenting View
BRAD MCILVAIN AND DAVID DESTEFANO
On March 1, KICA Board Chairman Dave Morley sent out letter about the Board’s decision to add and appoint two new members of the Board. We voted against the Board’s decision but Chairman Morley’s letter mischaracterized the reasons for our vote. The KICA By-Laws permit dissenting directors to write to express our reasons for dissent and provide that any such dissents shall be sent “as part of” the mailing announcing the Board decision. Because the Board decision was announced so hastily, we were not allowed to append this dissent to the announcement as required by the By-Laws so we write separately now to explain the reasons for our votes. Contrary to Chairman Morley’s letter, no Board member has advocated the Board be involved in KICA’s day-to-day operations. Rather the dispute is over whether the Board members can properly fulfill their obligations under South Carolina law and the By-Laws under the restrictions being imposed by Chairman Morley. We realize the background in this letter is long but encourage you to read it all so that you may fully understand what led to this decision and our dissent.
On Monday, March 1 during what had been identified as a KICA Board planning retreat (i.e. NOT a Board meeting), Board Chairman Dave Morley rammed through a vote to expand the KICA Board and to appoint two members to the KICA Board who had run, but not won, the election concluded on February 5. The retreat was not public and, therefore, none of you had the opportunity to be heard. The four Board members voting for expansion and appointment (two of whom are lame duck members [Sue Schaffer and Diana Mezzanotte] and two of whom were not elected by the members [Townsend Clarkson and Diana Mezzanotte]), claimed that the extensive member comments against the action, with no comments in favor, did not represent the views of the members. Demonstrating that they were not interested in meaningful discussion, and that the decision was a foregone conclusion, without notice to the rest of us and while the retreat was still underway Chairman Morley sent out his several paragraph letter via email to the KICA members announcing the decision to expand the Board, and to appoint the new board members.
The expansion/appointment issue was first mentioned by Chairman Morley at the end of the week of February 1, just days before the February 8 Board meeting and the day of, or the day before, the Board election closed on February 5. Although agendas for KICA Board meetings are routinely posted on the KICA website, there was no agenda posted for the February 8 meeting and, therefore, the community was never informed by KICA that this important issue would be discussed. When asked about the lack of agenda during the February 8 Board meeting, Chairman Morley claimed ignorance. Absent published notice of the expansion proposal, nearly 100 KICA members still attended the February 8 Board meeting via Zoom. Members choosing to speak expressed opposition to the plan and many questioned (1) the impetus behind the Chairman’s desire to expand the Board immediately after an election, as well as (2) the motives of those Board members in favor of expansion and appointment.
Three Board members, including the two of us, spoke against the expansion/appointment effort, noting that (1) the topic of Board expansion should be addressed by the Board that will be seated at the annual meeting on March 12 and (2) any new Board members should be elected by KICA members. The four Board members favoring expansion claimed that immediate expansion, without notice to the community, would follow the wishes of the members because the persons to be appointed placed 3rd and 4th in the election. When it was noted that had KICA advertised that 4, rather than 2, Board seats were “open,” each member would have had twice as many votes, others might have run with double the positions available and that members would have voted differently if the election had been for 4 instead of 2 positions, certain of the four Board members stated, matter-of-factly, that the election results would have been the same.
No vote was taken during the February 8 public meeting and there was no indication that a vote would be held. Immediately following the public meeting, the Board went into “executive session” and there was a strident press by four Board members to immediately conduct a vote to expand and appoint. When it was pointed out that the KICA members were universal in their opposition, Chairman Morley summarily dismissed the expressed concerns of the KICA members by claiming they were not representative. The executive session discussion was pointed and at the last moment a vote was averted.
There were no further meetings of the current Board scheduled until the KICA Annual Meeting scheduled for March 12 when the newly elected Board members will be seated. However, KICA’s non-public Board planning retreat was on the calendar for March 1; included in the retreat were the current Board, Roger Warren of the Resort and the two newly elected Board members, Alex Fernandez and Beth Zampino.
In preparation for the retreat, on February 11, 16 and 18, the Board held Community Outreach Zoom meetings with members of the community. Like the February 8 Board meeting, member comments during the Outreach Meetings were universally against the current Board (1) deciding the expansion issue and (2) appointing new members. Comments on iKiawah and the Kiawah Property Owners Facebook page were similarly united against the proposal, with only two comments noting that there may be issues on both sides. Additionally, between February 8 and the retreat, a large number of members wrote the Board voicing their opposition. Although a number of the postings and emails directed to Chairman Morley requested that he respond, to our knowledge he did not.
At the March 1 retreat, Board members who favored expanding the Board, and hand-picking the two new Board members, summarily dismissed the concerns expressed during the Community Outreach Meetings and in postings and emails as not being representative of the views of KICA members. When asked why the vote had to be taken before the new Board was installed in less than two weeks, it was basically conceded that in order to pass, the vote had to take place before the two Lame Duck Board members left the Board. Indeed, while claiming there was no reason to wait, it became apparent that, if given the chance, at least one of the two newly elected Board members would not vote to appoint two members because of transparency, among other, concerns. Stated differently, it was clear that the expansion/appointment proposal could only “pass” before March 12.
While there is a division on the Board, the reason is not as Chairman Morley described it in his March 1 email transmission to the KICA Community. As noted earlier, no Board member has advocated or asked to be involved in KICA’s day-to-day operational issues. Rather, the issue is how does each Board member fulfill his/her fiduciary duties under both South Carolina law and our By-Laws? By way of example only, KICA’s By-Laws clearly state, “It shall be the duty of the Board of Directors to … supervise corporate officers, board agents and the chief operating officer [COO] of the corporation, and to see that their duties are properly performed….” By-Laws, Art. IV, Section 2. Over the course of the last year, it has appeared to a number of us that the Board was not fulfilling that duty. When we have spoken up in order to ensure that the Board was complying with the KICA By-Laws, and that we were fulfilling our fiduciary duties, we have been denigrated as divisive and openly criticized for supposedly “disrespectful” discourse.
Two recent examples highlight this problem, the first of which involves the pools at the Sandcastle. By way of background, a prior Board wanted to heat the family pool rather than the adult pool, but it was advised by the COO that heating the family pool was impractical. Following the COO’s advice, in the summer of 2020, the adult pool was heated. As you are undoubtedly aware, this past fall, KICA staff decided to allow families to use the recently heated adult pool, leading to wide-spread community upset and objection. One obvious way to calm the uproar and appease the Members’ concerns was to reexamine whether or not the family pool could be heated. In furtherance of a solution, and because we were both construction lawyers with mechanical engineering training, we asked to meet with KICA’s engineering staff to better understand the supposed limitations to heating the family pool. In a single meeting with the engineering staff, staff identified a simple solution that makes heating the family pool relatively easy to accomplish. In other words, heating the family pool is not impractical.
A second example involves improvements to the bike path. This year, the KICA Board made it a priority to replace and widen the bike path from the first gate to the first Flyway intersection, with an emphasis on getting it done before the PGA. Shortly before we met with KICA’s engineering staff about the family pool, the COO advised the Board that redoing the bike path would require cutting down 300 trees and would take at least a year to accomplish. Having ridden the bike path many times, the need to cut down 300 trees seemed grossly excessive to us. During our meeting with KICA’s engineering staff, we inquired whether the bike path renovations could actually be completed more quickly. Far from a response highlighting a year’s worth of tree work, KICA’s engineering staff advised us that they thought the bike path renovations could be completed before the PGA in May. When we reported back to the Board what we genuinely believed was good news – the family pool could be heated and the bike path could be completed before the PGA – Chairman Morley told us that while we could talk to staff about the pool, we “ha[d] gone way over [our] authority” when we talked to this same staff, in the same conversation, about the bike path. In other words, making sure the staff was “fulfilling its duties” was apparently off-limits.
Shortly thereafter we were told by Chairman Morley that we, as Board members, could no longer directly speak with staff, that all staff communications had to go through him, he would then channel the information to the COO who would then communicate with whomever on the staff was the proper person. In the face of repeated criticism from Board members, the Chair has somewhat walked back this edict, but the message is clear: although Members can routinely communicate directly with the COO and other KICA staff, the Board cannot. This edict presented a real dilemma for us in fulfilling our fiduciary duties. South Carolina law, like most states, provides that Board members fulfill their duties in good faith when they rely on information from officers or employees of the corporation but only so long as those officers and employees are reasonably believed to be reliable. Obviously, a problem arises once Board members are asked to balance statements we believe may not be reliable, against fulfilling our duties. For example, had we accepted the statements made by the COO without questioning them, we would not have the option to heat the family pool and the current bike path replacement and expansion would not be occurring this year. When Brad raised this issue with Chairman Morley he was told, among other things,
“Most of the board is willing to rely on Jimmy’s assessments in ‘good faith’. if you aren’t, then you have a personal decision to make about your future on the board…”
For obvious reasons, this “go to your room and think about it” message was very telling but also completely unresponsive to the overarching issue of the Board’s fiduciary duties to this community.
Chairman Morley’s reliance on the policy governance model as the reason Board members should not interact with KICA staff directly is also wrong. First, that model has been widely criticized because, in many ways, it conflicts with the legal duties of board members. Second, a policy governance model also abdicates any meaningful oversight of the COO which, in our view, flies in the face of the KICA By-Laws. In our opinion, it is that oversight obligation which is the elephant in the room. From where we sit, oversight of the COO catalyzed division on the Board and, seemingly, prompted the Board expansion/appointment power play just completed.
Stated plainly, we are an association bound by our Covenants and By-Laws. We believe the Board violated those governing documents with this expansion/appointment action in several ways. In response to those concerns, Chairman Morley relies on an “opinion” from an SC barred Atlanta lawyer, who was not selected by the Board, which letter he claims supports his position. As lawyers, each with more than 30 years’ experience, albeit not ones barred in South Carolina, we have reviewed the letter. While, out of an abundance of caution we cannot disclose its contents (even though its substance is probably no longer protected by the attorney-client privilege because it was shared with a non-member of the Board), we believe (1) counsel was asked the wrong question, (2) her letter (not an opinion) doesn’t address the relevant provisions of the governing documents and (3) she comes to the wrong conclusion. When we expressed our concerns, we were told our views on the legal issues do not matter. Additionally, Townsend Clarkson was permitted to vote on the expansion/appointment question even though he no longer lives on Kiawah Island and is, apparently, no longer an employee of the Partners. We believe this creates a problem with him serving on the KICA Board under the governing documents and affects whether he can vote at all.
In our view, we are where we are because Members’ views and wishes are ignored and only lip-service is given to transparency. Indeed, while Chairman Morley has said on several occasions that he embraces transparency, he has repeatedly pursued the opposite path. For example, Chairman Morley kicked off a more transparent approach to KICA Board meetings with the February 8, 2021 Board meeting but then didn’t ensure that the agenda for that meeting was available to the members. The important expansion/appointment issue was decided in private after members requested that all discussions be public. More generally, rather than share information with all Board members and try to build consensus, the Chair secures the votes he needs for any action in off-line communications, without consultation of, or input from, all Board members.
Having been the Chairmen of a number of non-profit boards, we know how difficult being Chair is. It requires leadership and significant effort to keep the group moving in the same direction. In our view, that leadership and effort is currently lacking. Differing views are not tolerated and those who have them are ostracized or, essentially, told they should consider resigning. From our perspective, the expansion/appointment vote is just one example of how much the KICA Board still needs to do “better” by our community. We remain committed to that goal despite the current headwinds against it.
If you are as outraged as we are about the expansion/appointment vote, let your voices and views be heard. Let the Board know how you feel and ask that this action be rescinded and left to the new Board after community input is obtained. Then the new Board can make a rational decision about expansion, and if expansion is warranted, can hold an election for the new seats. If you don’t speak up, the stifling of dissenting views in the current dictatorial atmosphere will continue. And the two appointed Board members will be hobbled by legitimacy questions which may well doom any service they want to give as Board members. For this reason, we are asking them, on behalf of the community, to decline accepting illegitimately created seats on the Board. In the long run, it is better for all of us, including the two appointed members, to hit reset, unstack the deck, and move forward after March 12.
Secretary Jerry McGee will be submitting a separate dissent but he has advised us that he agrees with the statements contained in this letter.
David DeStefano, KICA Board Vice-Chair
Brad McIlvain, Director
Director’s Dissenting View
JERRY McGEE
By now many of you have read the dissent from Brad and Dave, with which I agreed and did not sign, as it contained personal remarks which do not apply to me. But make no mistake, I completely support what they penned.
My dissent is personal. I ran for the board for one reason namely, to be a voice for you, our members.
Here goes. Remember the famous line in the classic movie Network, “I’m mad as hell and not going to take it anymore?”
Well, that’s what I am right now. Because four members of our board decided your voices don’t matter. And they, two lame duck board members, a Chairman, and a representative of the developer, in my opinion violated the by-laws, created a false narrative and voted to add two new board members, with the sole goal of watering down the Board to maintain their power base.
Do you remember how our chairman looked you in the eye and promised to give you a window into our processes and a voice In our decision making process?
Do you remember how you listened in on Zoom meetings and heard the same siren song?
Do you remember that many of you even wrote about how things seemed to be changing for the better – more transparency, more member involvement?
Well forget about it. Those were empty words and hollow promises.
Behind closed doors and in secret meetings, The chefs devised a recipe To neutralize the influence of Jerry, Brad And Dave D., who they believed wanted to run KICA’s day-to-day operations instead of thinking about strategic plans and strategies.
Don’t believe it, then read on. Do believe it, then read on for sure.
Here’s how it went down. No holds barred.
On February 8th Dave Morley chaired a KICA Open board Zoom meeting. He made a lame excuse for not providing an agenda beforehand blaming it on a bureaucratic fumble. Don’t believe it, it was all part of the plan.
Item one on the freshly-minted agenda was a discussion of why it was a good idea to expand the board by immediately adding two new Board Members. He read a prepared multi-point rationale supporting their immediate addition by using the current board election results.
Fact: He had not shared this thinking beforehand with the Board for their reaction/input.
Fact: The agenda showed up, just before the commencement of the meeting so there was no board input as to its content, and no time for you to formulate questions and reactions beforehand. Even to decide to attend based on the content!
After the public portion concluded, the board went into a private executive session where all hell broke loose.
Fact: Jerry, Brad and Dave D vigorously oppose expanding the board in this manner saying it violated the member trust and in our opinion the by-laws and more importantly, there is no pressing reason to do it now without involving our members for their input as he has promised he would do.
Except there was. It’s all part of the Chairman’s plan to eliminate or water down the opposition.
So contentious is the argument that one member suggests that this item be shelved and no vote taken at this time. It is agreed to, and the meeting ends.
Here the following facts are in dispute. Brad, Jerry, and Dave D firmly believed that the decision to expand the board had been deferred to the next formal board meeting where the new and ongoing directors would take up the issue. Our reason for believing that was there was only a board retreat and planning meeting scheduled for the current Board but no remaining formal Board meeting.
The Chairman had other ideas. Using a parliamentary maneuver he cleverly deferred the “discussion” to our next meeting thus magically turning the planning retreat into a de facto voting board meeting. I missed that point. Lesson learned.
At the closed “board meeting” on Monday March 1st a sincere and spirited debate occurred where four members defended their reasons for a “yes” vote, and Jerry, Brad and Dave D. offered rationale for their “no” votes.
There is also a contentious discussion about why this meeting is a Board Meeting instead of a planning meeting and the Chairman informs me that I am mistaken in my view about the by-laws interpretation and that he has legal opinion that disputes my contention. I stood corrected as I’m not a lawyer. I still think I’m right and am pursuing my own legal opinion.
And here is a point you should really pay attention to: I brought up the fact that many members had reached out to ask that we delay the decision about adding new board members until the new board was seated.
Further, that many of you had questioned the need to expand the board but all agreed that it should not be done in haste but only after the new and ongoing Board members views were heard and, more importantly, only after holding either a special or regular election to determine who the new members would be and not using the results of the prior board election to determine the two new board members.
Now note this carefully. It was pointed out by our chair that the dissenting voices from our members were only from a group of malcontents who did not represent the majority of our members and further were part of an orchestrated attempt to falsely influence the board.
That’s what they think of you. Maybe you should read that again.
The vote was 4 to 3 and the motion carried.
I felt a great sense of loss but realized you do the best you can in these situations, but you have to live with the results, win or lose. So I stood up and said to the board that although I was bitterly disappointed, the vote was the vote and we must carry on as best we can in a civilized manner so that the community would get the best out of the current board and the new incoming members. But here’s what’s made me so disappointed.
Immediately after I made those remarks I saw the announcement that was sent out by KICA from our chairman. It obviously had been written well before the meeting vote and I’m guessing after review by the three who voted for the addition.
I won’t pull it apart point-by-point, but will only say that it was extremely inaccurate and disappointing to see so biased and post-rationale sentiments lacking any conciliatory tone and only further aggravating those who were opposed to the board action.
I’ve had my say, so now it’s your turn. You have voices. You have power. You have influence. You can make a difference but you can’t do it by sitting on the sidelines and doing nothing. I ask you to express your views and suggested actions (as some of you already have) both positive and negative to what the board has done with this vote.
Many of you may be unwilling to speak up or pen a response, but I hope you realize this is a tipping point for this board and going forward you deserve to have a group of directors that represent you and not their own self interests. So write, encourage your friends to do the same so that I can make sure that I represent all viewpoints even though they may disagree with mine. It is my duty to serve you and I do so proudly humbly and with dedication.
Thank you very much for reading this lengthy dissent.
I will do my best going forward to make sure everything the board does is in your interest.
Jerry McGee, Board Secretary