DEC2007TrusteeMtg

Dec 2007 Board of Trustees Meeting

The Board of Trustees for the U.S. Naval Academy Alumni Association met on Monday, December 10, 2 007, for its winter meeting. This meeting was changed from its planned date of November 30 because of the Mid-East peace summit held at the Naval Academy that same week. Although the dates were not the same, the planning required for both showed direct conflict, and the Alumni Association naturally took a back-seat to national security and international peace.

The change in dates was problematic for several trustees because of previously scheduled events that caused conflicts. Several of us joined
the meeting by telephone conference call because we could not attend in person.

The biggest thing we did was vote on several minor, but technical changes to the By-Laws to clean up "ambiguities" in wording. The genesis of this
issue harkens back to the election of a couple years ago.

As you may be aware, last Spring a group calling itself NAAG (Naval Academy Action Group) formed and sent a letter to the Board of Trustees
demanding the removal of the Chairman, Vice Chairman, and Past Chairman from the Board of Trustees, and that new elections be held immediately.
Failure to comply with their demands would result in attempts to embarrass the Alumni Association and the Board of Trustees, and they threatened to
sue the Board.

The Board of Trustees examined their complaints and, based upon our own analysis and with the advice and analysis from three superb attorneys
(John Nolan '51, John Simcox '73, and Herb Frerichs '80), found their complaint to be without merit. Nevertheless, because of the concerns
about the last election and to comport with the Plan 2010, the Chairman of the Board directed the Governance Committee to review the by-laws to
identify and any ambiguous language that could be misinterpret ed and lead to conflict, and propose changes.

The Governance Committee had three formal teleconferences and met face-to-face for a two-day session, in addition to numerous emails and
phone calls between one another over the course of five months. Despite this good faith effort, the NAAGs sued the Board of Trustees anyway,
proving the adage that no good deed goes unpunished.

The Governance Committee's recommendations were voted upon at the meeting last week. Several Trustees were initially uncomfortable with the notion of voting for the by-laws changes, as there was discussion that they did not have enough time to discuss among themselves and make recommended changes. They proposed by-laws changes had been worked by the Governance Committee and forwarded to all Trustees nearly a month before the meeting. Comments were called for and there were some e mail and telephone conversations among the Trustees. When the Board met, the proposals were discussed openly, and to assuage concerns, the proposed by-laws changes were addressed in four parts, rather than take in toto. This allowed for the Trustees to address specific concerns and change verbiage in the proposed By-Laws.

One of the lead voices initially expressing concerns about the procedure, Steve Andres '67. But Steve announced that his concerns had been
satisfied by actions of the Board. His concerns were assuaged by the Board's willingness to hear and act on feedback from members, and the
decision to break the proposal into four manageable chunks.

BY-LAWS CHANGES (With Vote and Summary)

The four by-laws changes that were voted on were:

Change #1: Clarifies Term Limits of Chair and Past-Chair
Approved: 24 Aye ; 3 Nay; 2 Absent

What the change does: The changes to Bylaws §§ 4.7, 4.8, and 4.9 clarify that the Chair may serve two elected terms and that the Past-Chair may
serve as Past-Chair during the term of his successor.

Why the change was needed: The previous Bylaws were ambiguous and had repeatedly been interpreted over the past ten years to permit the Chair to serve two elected terms and the Past-Chair to serve during the tenure of his successor. The change eliminates an ambiguity and incorporates the
interpretation of this issue that had long been adopted by the Board.

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Change #2: Provides that board-selected trustee positions may be filled at
the discretion of the Board.

Approved: 27 Aye; 0 Nay; 2 Absent

What the change does: Provides in Bylaws § 4.2 that there may be board-selected tru stees, not to exceed two in number. Reduces the vote
required to elect a board-selected trustee in Bylaws § 4.4 from two-thirds or the entire Board to a majority of the entire Board.

Why the change was needed: The previous Bylaws were ambiguous in that Bylaws § 4.2 stated that the Board consisted, in part, of two Board
selected trustees, while § 4.4 made the selection of the board-selected trustees optional. The revised Bylaws conform the two sections by
confirming that the Board has the discretion to name zero, one, or two board-selected trustees. The Governance Committee recommended reducing
the vote required to select a board-selected trustee from a two-thirds supermajority to a majority of the entire Board to promote the selection
of well qualified board-selected trustees.

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Change #3: Provides that officers, employees, committees of the Board, and individual trustees are bound by the provisions of the Operating
Manual, but that the Board may take any action during a duly constituted meeting that is consistent with the Bylaws.

Approved: 25 Aye; 2 Nay; 2 Absent

What the change does: Adds language to Bylaws § 8.1 to provide that the Operating Manual guides the behavior of officers, agents, and employees of
the Association, but that the Board is not required to comply with provisions of the Operating Manual that conflict with any reasonable
interpretation of the Bylaws.

Why the change was needed: The Board is charged with managing the Association and needs to be able to use its judgment. If the Board may
take an action under the Bylaws and wishes to do so, it makes no sense to require the Board to also determine whether such an action also complies
with each provision of the Operating Manual. The Operating Manual serves the useful purpose of providing guidance, between Board meetings, to the
officers and staff of the Association, as well as committees of the Board. However, when the Board is in session and is acting as the Board, it
should act on the facts before it rather than on the generic guidance provided by the Operating Manual.

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Change #4: Housekeeping Changes

Approved Result: 27 Aye; 0 Nay; 2 Absent

The Board also voted to amend the Articles of Incorporation regarding the number of Trustees by a vote of 27 Aye; 0 Nay; 2 Absent.

What the change does: Streamlines and conforms the use of language throughout the Bylaws. For example, the "immediate predecessor of the
Chair" has been renamed as the "Past-Chair."

Why the change w as needed: Over the years, a number of similar, but slightly differently worded, provisions were adopted to specify the vote
required for certain actions of the Board. In addition, there were a number of provisions that became archaic and needed to be updated or
streamlined. These changes were recommended by the Governance Committee as non-substantive and were adopted by the Board.

- - -- - - - - - -

NOMINATIONS COMMITTEE
The other large item of interest was the Nominations Committee report.

The Board of Trustees unanimously approved the ballot for the 2008 election recommended by the 2007 Nominating Committee. The ballot will
be:

Candidates for Vice Chairman:
CAPT Neil Block USNR (Ret) '61
LtGen Jack Klimp USMC (Ret) '68

Candidates for Eastern Region:
Mr. Richard Glickman '49
CAPT Willi am Rentz USN (Ret) '55 [incumbent]
Mr. Telmo Ortega '59

Candidates for Central Region:
CAPT Stephen Ingram USN (Ret) '73
LtCol Alex Plechash USMC (Ret) '75
CAPT Robert Jones USN (Ret) '64

The 2008 ballot will undertake a new procedure emulating the way corporate proxies are voted. Instead of the practice of sending ballots in the
Shipmate magazine, they will be separately mailed this election allowing sufficient time for all alumni to vote in any one of three methods: mail;
internet; phone.

As mentioned above, I will distill the more mundane issues into a separate email. But I hope this provides information of use to all of our members
on the Board issues of By-Laws, and the upcoming ballot for vice Chair and Regional Trustee.

Mike Collins '84
Mid-Atlantic Trustee

Ps: Thanks to Steve And res '67, Western Regional Trustee, and Skid
Heyworth '70, Board Secretary. I used their respective reports and
summary in the compilation of my report.

Report of the 10 December Board of Trustee Meeting follows.

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EXECUTIVE SUMMARY

Rescheduled Meeting and Meeting Highlights

Superintendent’s Address

Executive Session

Chairman’s Remarks

President’s Remarks

Financial Reports

Committee Reports

Council of Class Presidents Report

2008 Ballot

Board Bylaws Changes

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Report of Fall Board of Trustees Meeting

Electronic Meetings

There were occasions for several electronic meetings since the Spring BOT Meeting which I’ll summarize here. The Executive Committee met twice electronically and once in person. The two electronic meetings were to discuss legal strategy on the members’ lawsuit. The ExComm also met 12-10-07 for the annual briefing by the Chairman of the Joint Compensation Committee on officer compensation. The full Board met once electronically in July on the occasion of the first set of demands from the two alumni suing the Board.

Rescheduled Meeting Date and Meeting Highlights

This meeting (12-10-07) had to be rescheduled on short notice due to the Secretary of State’s decision to site a Middle East Conference at USNA during the normal meeting time. Security constraints for that conference required rescheduling. Thus, the normal set of Committee meetings were spread over the period between the original meeting date and the rescheduled date.

The Nominating Committee submitted a recommended ballot for the 2008 election. The Governance Committee proposed Bylaws changes for a vote and the Communications Committee presented a new Communication Policy for the Board. There was also a report on the capital improvement building project from House.

The Council of Class Presidents (COCP) report contained a proposal to radically reform the Board composition.

Due to the rescheduling, not all Trustees were able to attend the meeting in person. This is very unusual—our attendance is normally 100%. The eight Trustees who couldn’t attend were offered the opportunity to call-in and participate/vote over the phone. Seven called in and participated in the meeting although not all could attend the entire meeting.

Supe's Address
VADM Fowler was not available to meet with the Board. There was no address to the Board of Trustees this time.

Executive Session

We had an Executive (Board only/Closed door) Session to discuss matters of litigation. A Resolution was passed on this topic which had previously been approved by the ExComm.

Chairman’s Remarks

ADM Trost reviewed the plan for the meeting and explained the need for the Executive Session to the alumni in attendance. He summarized the Executive Committee meetings for the Board. He noted the new and departing Board members and acknowledged the senior alumnus present.

President’s Remarks.

The President’s Remarks were delivered at the end of the meeting and contained no report to the Board. George stated that he preferred to send out a Leadership Report. George noted the difficult circumstances of the last six months and promised the Staff will stay on Mission and be good stewards of the assets. He called out several individuals for recognition: Chairman Trost; Skid Heyworth; Cam Bosworth and the entire Staff. He also said he was pleased to see the Board come together and the first set of ByLaws passed. He stated that our Charter is worth fighting for and we will do that and not compromise through fear. He thanked the COCP for their commitment and support in this matter.

Financial Reports
We have once again received an unqualified (perfect) opinion from our independent auditors. The Auditor noted some consolidated highlights: Total assets up 16.7% to $214.8M; Cash and investments up $27.5M to $161.7M; Net assets up 10% to $177.5M and a remarkable $22.4M (19.4%) gain in investments for 2007. A total of $21M was provided to USNA, up $6.1M.

The Alumni Assn. as a separate entity is in excellent financial shape with almost $51M in Total Net Assets, $9.8M in Unrestricted assets at year end (up almost $2.3M), and the Assn provided $1.98M in support to USNA in 2007. Regrettably, the Alumni Assn paid almost $90,000 in legal fees in 2007, a level of expense that is likely to increase this year thanks to two members who choose to use the legal system to make a complaint against the Board rather than handle it through the internal channels provided to all alumni.

Hank Sanford made an excellent presentation of the financial progress of the “amalgamated” organizations comparing 1999 and 2007 figures: 1999: AA-$55M; USNA Foundation-$18M and the Endowment Trust-$19M in assets for a total of $91M; 2007: the AA-$71M; Fdtn-$143M for a total of $215M. The AA has grown Net Assets from $39M to $51M and Unrestricted net assets from $7.3M to $9.8M plus an operating reserve. Membership has grown from 38.6K to 52.4K and there’s been corresponding growth in Chapters, active Classes and Parents Clubs as well.

Committees
Committees are where the work gets done. I'll be brief but I want to give you a sense of any issues within their responsibilities.
EXECUTIVE. (Committee authorized to act for the Board between meetings.) Covered above in Electronic Meetings.

JOINT FINANCE. (The joint committee which oversees the consolidated finances of the Foundation and the Alumni Association.) Covered under Financial Reports above.
JOINT INVESTMENT. (The joint committee which oversees the performance of the organizations hired to invest our money.) Covered under Financial Reports above.

JOINT COMPENSATION (The joint committee that reviews the compensation of the officers of the two corporations.)

HOUSE. (Committee which oversees the real estate assets of the corporation.) The Committee reported that the improvements to Ogle Hall are proceeding well, within budget despite being messy, noisy and disruptive to the Staff. Several change orders have been necessary to correct past wiring and plumbing problems. The estimated completion date is in March 2008.

COMMUNICATIONS. (Provides oversight of the Communications functions.) The Comms Committee presented the proposed electronic communications policy which they hope to get approved as an appendix to the Board Operating Manual as soon as the several review comments are incorporated. The committee is involved in several communications issues.

MEMBERSHIP/ALUMNI SERVICES (Committee which oversees the attainment of the membership goal and provision of services to alumni.) Committee meeting focused on increasing non-grad membership through several initiatives and developed two thrusts in measuring alumni service.

ADMISSIONS. (Committee responsible for the second mission element oversight.) Report noted the importance of Chapters in the 16 targeted urban areas to support the CNO-level initiative to increase minority applications. USNA Admissions wasn’t available to participate in the meeting this time but we viewed the USNA Admissions’ Diversity presentation from earlier this year.

GOVERNANCE. (Committee responsible for the governing documents of the Board—the Bylaws and Operating Manual.). Covered under Bylaws Changes below.
OTHER CHAPTER (Committee which oversees the process to select the smaller Chapter Trustees.) There was no report this time.

NOMINATION (Committee responsible for recommending the ballot for the next election.) The Board approved the recommended ballot submitted by the NomCmtee which included a petition candidate for each Region and two candidates each for Vice Chairman, East and Central Region.

Council of Class Presidents (COCP) Report

The President of the Council of Class Presidents reported on their recent meeting in which three issues were discussed: (1). Lawsuit against the Board of Trustees (2). Caterers at stadium tailgates and (3). Reforming the Board of Trustees under an entirely new aegis. The Council resolved to support the Board in the lawsuit and submit the proposal to revamp the Board representation to the Chairman. Chairman Trost said he would refer the proposal to the Governance Committee for consideration.

2008 Ballot

The Board unanimously approved the ballot for the 2008 election recommended by the 2007 Nominating Committee. The ballot will be:

Vice Chairman: CAPT Neil Block USNR (Ret) ’61 and LTGEN Jack Klimp USMC (Ret) ‘68

East Region: Mr. Richard Glickman ’49; CAPT William Rentz USN (Ret) ’55 [incumbent]; and Mr. Telmo Ortega ’59

Central Region: CAPT Stephen Ingram USN (Ret) ’73; LTCOL Alex Plechash USMC (Ret) ’75; and CAPT Robert Jones USN (Ret)

Chairman Mike Haskins noted that the Board needs to develop a plan to get better diversity among the nominated candidates.

The 2008 ballot will undertake a new procedure emulating the way corporate proxies are voted. Instead of the practice of sending ballots in the Shipmate magazine, they will be separately mailed this election allowing sufficient time for all alumni to vote in any one of three methods: mail; internet; phone.

Board Bylaws Changes

There have been Bylaws changes coming for some time stemming from the normal review cycle, Plan 2010 Review recommendations and improvements to remove ambiguities identified in the alumni lawsuit. To facilitate passage, the Governance Committee divided them into two sets holding controversial issues until a second set which was discussed briefly, later in the meeting. In this meeting we discussed the first set, the Governance Committee made several modifications based on Trustee comments. Twenty votes (2/3 majority) are required to pass a Bylaws change. We voted on four groupings of changes with the following results:

Bylaws Set#1

Vote I -- Articles: 4.7, 4.8 and 4.9 (Past Chair Tenure and Succession)

Result: 24 Aye; 3 Nay; 2 Absent

Vote II -- Articles: 4.2 and 4.4 (Board Selected Trustees)

Result: 27 Aye; 0 Nay; 2 Absent

Vote III -- Article: 8.1 (Operating Manual)

Result: 25 Aye; 2 Nay; 2 Absent

Vote IV -- Articles: Miscellaneous terminology and wording Changes

Result: 27 Aye; 0 Nay; 2 Absent

We also voted to amend the Articles of Amendment regarding the number of Trustees by a vote of 27 Aye; 0 Nay; 2 Absent.

The Governance Committee did not call for a vote on the Indemnification Article 8.5 which was previously in Set#1.

Bylaws Set#2 – Governance Committee is recommending the following major points:

eliminating the Trustee position of Past Chairman (has been a Trustee position since 2000).*
changing the selection of the Chairman and Vice Chairman candidates to mandatory single slate without a write in option, elected by the Board (currently each position may be single slate, but regardless, the membership elects them now).
Term limits of six consecutive years and maximum of six in any eight year period for all Trustees (term limits now are two terms = six years, generally)

*ADM Trost stated that he will not be a Past Chairman.

I’d like to hear what you think about these recommended changes. Trustee comments will be submitted between now and the next meeting and there may be a vote on them in the Spring.

All the best and BEAT UTAH!