Thanks everyone for the feedback. Responses and suggested amendments below.
Individual Reporting of Director Salaries & Token Grants
While we will not budge on aggregating employee salaries, we concede that individual reporting of directors salaries will help the DAO with oversight in the long-run. The beginning of the relevant clause will be changed to the following (the remainder is being amended as described further down in this post):
4.43 Annual budgets should be published by way of DAO Notice at least 4 weeks prior to the start of the 12 month period that they relate. The budget should include director remuneration reported on a per-director basis, total contractor remuneration, and any other material expenses categorized as the directors reasonably see fit. …
We will also report POKT token grants on a per-director basis as part of this.
Director Remuneration Cap
We are happy to reintroduce the cap if it will reassure the DAO. However, it should be noted that the cap itself refers to total remuneration, not just salary, and therefore we are going with a $300k total remuneration cap.
Rather than remove 4.38 c) we will amend it to the following:
4.38 A director or officer shall only be remunerated for services rendered. Any agreement between the Company and a director or officer concerning the remuneration of such director or officer shall be null and void where such agreement:
…
c) agrees to remunerate the director or officer for an aggregate sum exceeding US$300,000 per annum (as of January 2023), adjusted annually for inflation by reference to the Consumer Price Index as measured by The Bureau of Labor Statistics, where such aggregate sum includes the annual vesting amount of any POKT token grant, and the value of the per annum vesting of such POKT grant will be determined by the prevailing market price as at the time of the grant and shall not exceed 50% of the director’s US$ salary.
As an example of how this would be applied in practice, if a director is being paid $250k per annum in salary, at a price of $0.1/POKT, this would allow them to receive a token grant of up to a maximum of 1.5M POKT vested over a 3 year period. For directors being paid smaller salaries, their token grant would be limited such that the value of their per-annum vesting cannot exceed 50% of their salary.
Constraints on Remunerating Directors in POKT
We reject the notion that directors should be refused any POKT as part of their remuneration. However, in addition to the cap above, we recognize the concerns about the possibility of directors including one-sided terms in their grants. While we have already indicated our plan to use standard terms of at least 3 years vesting, we understand that it would be better to have this standard be legally enforced. Therefore we have amended 4.38(a) to set a constraint on the permission to remunerate directors in POKT, by requiring that such grants should be subject to at least 3 years vesting:
4.38. A director or officer shall only be remunerated for services rendered. Any agreement between the Company and a director or officer concerning the remuneration of such director or officer shall be null and void where such agreement:
(a) entitles such director or officer to participate in any distribution, dividend or transfer of assets of the Company or awards or entitles such director or officer to any profits or any assets of the Company, except where the transfer or entitlement of assets is in the form of a POKT token grant subject to at least 3 years vesting; or
As for concerns about the quantity of POKT granted, this is constrained by the Director Remuneration Cap above and will also be disputable by the budget amendment process below.
Budget Amendment Process
We will amend the relevant clause as follows:
Edited 12/28/22 and 12/29/22 to incorporate feedback
4.43 Annual budgets should be published by way of DAO Notice at least 4 weeks prior to the start of the 12 month period to which they relate. The budget should include director remuneration reported on a per-director basis, total contractor remuneration, and any other material expenses categorized as the directors reasonably see fit. The budget shall be automatically approved in full unless there is a DAO Resolution contesting any line item, subject to the vote starting within 2 weeks immediately following the date of the DAO Notice, the vote lasting no fewer than 14 days and no more than 15 days, with a quorum of at least 25% of DAO participants who have cast a vote within the 12 months immediately prior to the date that voting commences on such DAO Resolution. DAO Resolutions may only contest existing line items (not propose new line items), may only contest 1 line item each, may only reduce (not increase) the value of a line item, and shall not call for the transfer of resources from one line item to another. In the event that any line item is contested, the remainder of the budget shall proceed. The directors must amend any successfully contested line item(s) by way of DAO Resolution (no quorum required), subject to any limitation imposed on them by existing contracts or obligations. If a line-item amendment is rejected by the DAO, votes on further amendments to the same line-item shall continue until DAO approval or until the directors abandon the line-item.
To enable us to introduce a quorum to the DAO Resolution, we need to amend the definition of the DAO Resolution as follows:
DAO Resolution shall mean a resolution validly passed on the DAO in accordance with the governance protocols of the DAO with at least 50% approval by DAO participants who voted on the resolution. There will be no quorum requirement unless otherwise specified in these Articles.
Changes:
- Changed supermajority to a majority but retained the quorum requirement (which was the reason we used the Supermajority DAO Resolution for this in the first place).
- Set constraints on budget rejection proposals to be limited to 1 line item each and only reducing existing line item values, not creating new line items, increasing line item values, or attempting to transfer value between line items. It is the DAO’s job to check overspending by directors, not to micromanage strategy.
- Specified that a line item amendment by the directors needs to be approved by a 50% majority but does not need a quorum. Using a quorum for the amendment(s) risks deadlock on the contested item(s).
- Since there is a possibility of the DAO rejecting line item amendments multiple times, specified that the directors can go through as many cycles as is necessary to get the line item to a level that satisfies the DAO.
- Retained the caveat that the directors will not be expected to abide by the DAO’s dispute if there are pre-existing contracts/obligations, e.g. the current contract with Copper for integration of their custody platform.
Special Transaction Rejection Process
The special transactions clause wasn’t mentioned in any feedback but this should also be a simple 50% majority if we are following the same reasoning as the budget rejection process above. Therefore:
4.44 Subject to any limitation imposed on the directors by any confidentiality agreement, financial regulation, or related laws, the following special transactions shall be published by way of DAO Notice no fewer than 4 weeks prior to the transaction date and shall be automatically approved unless there is a DAO Resolution rejecting them, subject to the vote starting within 2 weeks immediately following the date of the DAO Notice, the vote lasting no fewer than 14 days, and a quorum of at least 25% of DAO participants who have cast a vote within the 12 months immediately prior to the date that voting commences on such DAO Resolution:
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Voting Recusals
@Dermot has advised that recusals in the Articles would not be binding on the directors, since the Articles bind the directors only where the proper running of the Foundation is concerned, not activities outside of the Foundation.
If we want recusals like this, this standard should apply equally to all DAO stakeholders. For example, @zaatar would be forbidden from voting on changes to GRIP’s compensation. This is worth exploring for future amendments to the Constitution but are outside the scope of this proposal.
A Process for Director Appointments/Renewals
We will add to our roadmap in the proposal that, by Q4 2023, we will design and propose a process for the nomination/consideration of new/existing directors. This is not a commitment to a specific model but a commitment to evaluate all of the mechanisms available to the DAO and work with the DAO to choose the one that makes the most sense for Pocket.
Inflation Adjustments
While working through amendments to the remuneration cap clause, we realized that the cap would become outdated due to inflation, and subsequently added an inflation adjustment to the clause. This same inflation adjustment should be added to every similar clause where a US$ value is referenced:
“(as of January 2023), adjusted annually for inflation by reference to the Consumer Price Index as measured by The Bureau of Labor Statistics,”