Wednesday, September 3, 2008

What Happens if the Challengers Win Control of the SAG Board?

What happens if the challengers, Unite for Strength, win control of the SAG National Board? That would effectively happen if UFS (aka U4S) won a certain number of seats, apparently about 6 seats, displacing incumbents who are members of Membership First (MF), the dominant faction. There’s expected to be an alliance between UFS and the New York and regional branches of SAG that would then be in control. That would give UFS and its allies control of the SAG National Board.

That alliance would then want to take control of the negotiating process, and strike a deal with the studios. But there’s a persistent rumor spread by at least some members of MF that that’s impossible – that SAG rules would block a majority of the Board from taking control of the negotiating process. Is that true? Let’s take a look.

Control means directing the conduct of the National Executive Director (NED) and the negotiating committee. They’re supposed to take direction from the Board. But what if either of them refuse to follow new policy set by a new board? Then the Board might have to fire the NED, and might have to take control of the negotiating committee or of the negotiating process. The Board might also have to fire the NED if it decided he were too closely identified with MF to be an effective negotiator under a new Board.

Now, I don’t know if those things are what UFS plans (and UFS leader Ned Vaughn declined to say when I interviewed him on live streaming video), but they seem to be potential moves. Are they possible? Yes, it seems likely that they are, contrary to the rumor being spread.

National Executive Director

Let’s look first at the National Executive Director. Sec. V(1)(H)(2)(i) of the SAG Constitution and By-Laws gives the National Board final, nondelegable, exclusive authority over “all decisions regarding the employment of a National Executive Director, including the decision to appoint or terminate that executive.”

That means that the NED is unprotected by the SAG Constitution and By-Laws. Now, he certainly has an employment contract. Most executives making hundreds of thousands of dollars do. That contract is not public, and SAG declined to tell me its terms. Those contracts always allow the employer to fire the employee for cause, i.e., misconduct. That seems inapplicable here: the NED’s approach to negotiation, though ill-advised in my view, is what the Board wants.

However, those contracts, and common practice, usually also allow the employer to fire the employee without cause (i.e., even in the absence of misconduct) if he or she is paid a sum of money, which is often the remainder of the amount that would have been paid under the contract (in other words, the employer has to “pay out the contract”). Sometimes the contract provides that this amount is reducible by compensation the employee gets from any new job or consulting he or she takes during the remaining term of the contract. This is called mitigation. Sometimes the employee has a duty under the contract to mitigate (i.e., seek a new job); sometimes not.

We don’t know the terms of the NED’s contract, because it’s not public. However, if it contains these customary provisions, then the SAG National Board could indeed fire him, though at a monetary cost.

Even if the Board can’t fire the NED (which seems highly unlikely), Sec. V(1)(H)(1) vests in the National Board “The general management and the control of the affairs” of the Guild and the right and responsibility to “set[] the strategic direction” of the Guild. The Board could seemingly order the NED to take a different approach to negotiation, and if he fails to do so, that would probably be cause for terminating him.

Negotiating Committee

But what about the Negotiating Committee, to which the Board has delegated conduct of the negotiations? There’s a practice of keeping the Negotiating Committee the same, not just during the negotiating cycle, but throughout the three-year life of the contract. But there’s no rule that specifically requires this, contrary to some misperceptions to the contrary.

However, even though changing the membership of the Negotiating Committee is not impossible, it is difficult, as Steve Diamond explains in a blog post. Art. VI(7)(A) provides as follows:

Each Division Board shall have the authority to select its ... members, alternates, or co-chairs (if applicable) of any other committees which have been allocated to the Division. Other than the Vice President and any members of the National Executive Committee, members, alternates, and co-chairs so selected may be removed by the Division Board at any time. ... The National Board may remove any committee member, alternate, or co-chair by a two-thirds (2/3) vote of the Board.

This means there are two different ways to remove a Negotiating Committee member (or all of them). First, the Division Board that appointed them can remove them at any time. No supermajority is specified, so I presume this defaults to a simple majority. Arts. V(1)(J)(4) & (6) specifies "majority" as a default, but speaks only to votes of the entire Board. I found no discussion of whether Division Board votes default to simple majority.

However, control of the Hollywood Board will presumably not change in this election, because only a third of the Hollywood Division’s National Board seats are up for reelection. That’s because Board members have three-year, staggered terms. Only a third are up in any given year. Since MF has all but one member of the Hollywood Division’s Board seats, control of that portion of the Board won’t change even if UFS wins all of the seats that are up.

What about the National Board, where control will change this year if UFS wins the requisite number of seats? Here, a 2/3 vote is required to remove a committee member. Diamond describes that as “a recent change to the Constitution, reflecting the desire of the Hollywood Division – now controlled by MF – to retain influence in the [N]ational [Board].” My sources advise that the change was made in April 2007. Even if UFS wins all of the seats that are up, it appears that they can’t win a 2/3 majority, because the number of seats that are up for reelection is too small.

Of course, finding that the Negotiating Committee is locked into place by a subsequently deposed Board would lead to protest within the Guild, because it would thwart the will of the majority. We might even see a complaint to the National Labor Relations Board that this situation amounts to a breach by the Guild of its duty of fair representation of each member. Whether such a complaint would have merit is unclear, but it would be a nasty and protracted fight.

So is UFS checkmated? No, for two reasons. First, committee chairs are appointed by the Board, and there’s no 2/3 requirement. See Art. V(1)(I)(4). The Negotiating Committee chair is in a position to strongly influence the conduct of negotiations.

Of course, this might not be enough, leading to a struggle between the chair and the committee members. Once again, is UFS checkmated? Once again, no.

That’s because there’s another way for the National Board to take control: it could dissolve the Negotiating Committee altogether and negotiate directly. Per Art. V(1)(I)(3), committees serve at the Board’s pleasure. That would appear to mean that the Board can dissolve the Negotiating Committee – and there’s no 2/3 requirement here either.

Moreover, per Art. V(1)(I)(4), the Board’s “delegate[ion] any of its powers and duties to a[] committee[]” is “revocable by the Board of Directors at any time.” Here too, there’s no 2/3 requirement. That means that, even if the Board can’t or didn’t dissolve the Negotiating Committee, it could strip it of its power to negotiate. The Board could then negotiate directly, which would mean that the new, moderate majority would have control of the process, albeit with, no doubt, plenty of interference from the MF back benchers.

If the Board were to do either of these things (dissolve the committee or strip it of its power to negotiate), the result could be unwieldy: the 70 member Board attempting to negotiate a contract would be quite a sight. As a practical matter, though, the Board might decide informally that certain people would take the lead. (Note, by the way, the President of the Guild would remain unchanged, since he’s not up for election until next year.)

In view of the unwieldy nature of the Board itself negotiating, the Board might be tempted to appoint a new Negotiating Committee with the same powers as the old one but new members. This would be an end run around the 2/3 rule and would be vulnerable to a challenge that it circumvented the rule. Alternatively, the Board could create a committee responsible for negotiation and some other functions, and delegate its power to that committee – i.e., a new committee with a different mandate that, among other things, includes negotiation. This would be awkward, but perhaps less so than expecting the entire Board to handle negotiations.

Amendment of the Constitution and By-Laws

Could MF amend the Constitution and By-Laws to block dissolution of the Negotiating Committee or other committees (for instance, requiring a 2/3 vote of the National Board to do so)? Unlikely. Under Art. XVIII(1), amendments can be effected either by a 2/3 vote of the National Board (Art. XVIII(1)(a)) or by a majority of the membership (Art. XVIII(1)(b)-(d)). If UFS and its allies win control (i.e., a majority) of the National Board, then MF won’t have a majority, let alone a 2/3 majority.

Alternately, MF could attempt to get the membership to amend the Constitution. There are several routes. They could seek a referendum of the SAG membership, per Art. XVIII(1)(b). However, a referendum may be called in only two ways, neither of which are likely. First, per Art. X(1), the National Board can call for a referendum. That won’t happen if UFS and its allies control the Board. Alternately, MF could attempt to initiate a referendum by petition, per Art. X(2). That takes a petition bearing signatures of 10% of the SAG membership, about 12,000 people. It’d be an expensive and difficult undertaking.

A second approach for MF, per Art. XVIII(1)(c), is a vote of the members at the Guild’s Annual Meeting, or at a special meeting. I don’t know when the next Annual Meeting is scheduled, so I don’t know the likelihood of an amendment being made this way. As for a special meeting, this could be called by the President, Art. VII(6). However, 15% of the Guild’s members is a quorum and would have to attend for any business to be done, unless the Board (by majority vote) waives the quorum, which they wouldn’t do if UFS and its allies control the Board and the purpose of the meeting was to amend the Constitution and By-Laws in order to dis-empower the Board from controlling negotiations.

Another approach for MF, also per Art. XVIII(1)(c), is a vote of the membership by mail, but only if the Board (by majority vote) calls for a mail vote, which, again, the Board would not do if UFS and its allies control the Board. Finally, per Art. XVIII(1)(d), MF would amend the Constitution and By-Laws “by the written assent of a majority of the membership.” The provision does not explain what this means, how it differs from a referendum, and how it works.


From the above, we can conclude that if UFS wins the requisite number of seats on the National Board, they and their allies in the other Divisions could take control of the negotiating process, notwithstanding rumors to the contrary.