Midyear Report: First Take on Board of Directors Votes
May 14, 2011 28 Filed Under: In the News
This post, and this series of reports and opinions from NAR Mid-Year 2011, brought to you by:
The historic meeting of NAR’s Board of Directors is now over. I had the privilege of being able to listen in as a member of the “press” — which the blogosphere and RE.net can actually be. I hope I’m able to do the same at Annual Convention in Anaheim in November.
These are my unorganized thoughts on what happened here today. I wanted to get my impressions out as fast as possible, and compare them to how I might think about the issues with a few days of reflection. If you want my instant reactions from the meeting itself, you can find my tweets from the Board of Directors meeting here (or do a search for #rppsi and #midyear).
The REALTOR Party Political Survival Initiative
The highly anticipated, hotly debated topic of REALTOR Party Political Survival Initiative turned out to be hugely anti-climactic. After days of meetings, forums, conversations, and debates, the actual vote was moved, seconded, and passed so fast that many people — including quite a few Directors — did not realize what had happened.
The vote was that the Board of Directors passed the recommendations of the Executive Committee: to have RPPSI, under Option A, which means a $40 dues increase for the next three years. In fact, the only discussion/amendment was one gentleman who wanted the term “Survival” removed from the name of the initiative. So, we really need to call it #RPPI going forward.
I was shocked, because what I had heard throughout the past couple of days was that the Initiative would be approved, but the issue of funding was very much up in the air. A number of Directors actually said they didn’t realize they were voting on the whole kit and caboodle with that Aye vote. Leaving things in that state of affairs, of course, would have raised real questions of legitimacy for the decision.
Thankfully, a Director moved to reconsider the funding question of RPPI only. That motion was defeated pretty soundly. What that suggests is that the majority of Directors either (a) knew that they were voting on both the Initiative and the dues increase, or (b) would have voted for the dues increase in any event. The result of the initial vote was confirmed, if a bit indirectly.
The response from the Interwebz, at least the RE.Twitter, was instantly hostile and negative. Some of it was just wrong and unfair. I can personally attest to seeing and hearing dozens of conversations, where directors would huddle with each other debating the issue, debating the funding, thinking through the issue as best as they could. To call it a “foregone conclusion” and “backroom deals” and whatnot is simply too cynical, even for me. One is free to disagree, of course, but to ascribe such bad faith to the hundreds of Directors is unfair. If the vote itself went quickly, looked like a rubberstamping act worthy of the Chinese National People’s Congress, it’s because the Directors continuously talked to each other over the entire week about the issue. I’ve heard more than a few stories of Directors changing their minds and changing their votes as a result of all the talk.
Having said that, this vote really revealed a disconnect between perception and reality. I think there’s a perception among the membership, and “out there”, that the NAR Director is like a U.S. congressman — he represents his constituents. Much of the outcry was over the fact that the Directors did not “listen to the members” or “did not represent our views” and so on. The reality is that the NAR Director has a fiduciary responsibility to NAR, and to consider everything in light of, “What is best for NAR?” They are not, strictly speaking, representatives with constituencies.
Whether today’s decision to transform NAR into a political organization (more or less) will have an impact on that distinction between a Rep and a Director remains to be seen.
Something I am curious about is why the opponents of the measure, who obviously feel so strongly about it, did not show up to Mid-Year. They’re all REALTORS, with the right to come and be heard. Why just take potshots from the outside, instead of showing up in person and lobbying for their perspective? Real estate is all about relationships, or so I’ve been told again and again; why would this be any different? Maybe the disconnect between the active Members and passive Members is bigger than I had imagined.
The Franchise IDX Issue
By far the most interesting and most dramatic sequences was the debate over, and the series of votes on, the issue of Franchise IDX. The sequence and consequence are important, so let me explain it as plainly as I could, on little thought. (Yeah, how valuable could that be?)
The Franchise IDX policy passed in November was the official policy of NAR: franchisors had the right to use the IDX listings of any MLS in which one of its franchisees was a member/participant (we’ll be using these terms interchangeably) to put those listings on websites created, owned, and/or operated by the franchisor. There was no requirement to opt in or opt out of this “Franchise IDX”: if your listing was in the IDX, then the franchisors got it.
Protests by Realty Alliance, HomeServices of America, and Leading RE (“RAHL Group” henceforth) led to a raging debate at the MLS Policy Committee meeting on Wednesday. The result of that vote was that the MLS Policy Committee would recommend to the Board of Directors that the “Franchise IDX” rule be suspended until the Annual Convention in Anaheim in November, and that a working group be created to study the issue in depth.
A big part of that decision by the MLS Policy Committee was the advice from Laurie Janik, the General Counsel of NAR, that under parliamentary procedural rules that NAR employs, a “repeal” vote at the Board of Directors would require a 2/3 majority vote, because the Board did not have prior notice that this issue would come before them. But she thought that a “suspend” vote might only require a 50% majority vote. The strong implication, then, is that the MLS Policy Committee was looking to prohibit the practice of franchise IDX indexing immediately, and chose the most efficacious way of doing just that.
The issue that immediately arose was that the franchisors, who had relied on the existing Franchise IDX rule in place, would almost certainly sue. They had spent millions of dollars relying on a rule that was duly considered, studied over 18 months, and passed a scant six months ago. Even the “suspend” motion would have resulted in major losses for the franchisors. So they made their displeasure known in the appropriate places.
The result is that as I reported yesterday, the Executive Committee would vacate the recommendation of the MLS Policy Committee and bring a motion to the floor that would keep the Franchise IDX policy as written in place, but require that the MLS allow a broker to “opt out” of such franchise IDX feed, and create a working group to examine the issue in detail for further action at the Annual Convention.
So the sequence of motions/votes today went:
- Executive Committee’s recommendation is moved, and defeated. It was explained at this time that the parliamentarian ruled that the motion to suspend is substantively the same as the motion to repeal, and therefore would need 2/3 majority vote in any event. So she ruled it out of order. A motion that is “out of order” cannot be brought to the floor at all.
- A motion to repeal the Franchise IDX policy is brought from the floor (I think by a Leading RE broker), debated at length, and defeated. This vote required 2/3 majority, and the proponents got 58%, falling short of the supermajority requirement.
- The Executive Committee’s recommendation was brought back under a reconsideration motion (which Ron Phipps fairly begged to do), and an amendment to that recommendation was made to change “opt out” to “opt in”. Both the amendment and the motion itself — leaving the IDX policy in place and in effect — were passed on majority vote. (I had to go to bathroom during the actual debate, but was told this was what happened.)
Net-net, what it means is that the Franchise IDX rule is in place, but substantially eviscerated of usefulness to the franchisors. The RAHL Group has to be pleased, in the sense that franchisors now have the right to index a bunch of nothing, but can’t be thrilled that their main point of principle — that of preventing access to the MLS to “non-participants” — did not carry the day. All of the anti-trust concerns, all of the “public utility” concerns, etc. are very much still alive. And they have no right to index any IDX whatsoever. So if the RAHL Group were really motivated by maintaining the bright-line separation between participant and non-participant in the MLS, then it has to continue to work towards full repeal.
The franchisors, I imagine, have to be pissed off. I’m not sure that this would stay their hand in filing suit. The millions of dollars they’ve spent is just as useless as if the policy had been repealed. Opt-in process will take time to implement at the MLS level; vendors have to get to work immediately, compliance would need to figure out how to monitor this, etc. Until that time, can they continue to index IDX listings on their national sites? I’m leaning towards No, given the opt-in provision that took effect immediately.
The immediate consequences are unclear. However, in my mind, there is little question that this issue will be very much alive at Annual. If the reason for the 2/3 majority was lack of prior notice, well, the RAHL Group will make sure that there is all kinds of prior notice for the Board meeting at Annual. The franchisors, knowing that 58% of the Board was willing to repeal the whole thing, should be lobbying and politicking like mad over the next few months. And mulling over what they do about their very expensive, very not-useful investment.
Mass Confusion
One thing I noticed, and verified in conversations with actual Directors, was that there was mass confusion on the franchise IDX issue. Parliamentary rules are partly to blame, since if you don’t have experience with how such things work, it’s all very confusing: speaking FOR a motion might mean speaking AGAINST the substance of what you’re trying to do, etc. Plus, one Director at the end got up and asked for the information to be delivered to them earlier, in more efficacious manner; Ron Phipps agreed to look into improving the process.
The result is that according to people I’ve spoken to, a number of Directors voted the way they did almost solely because of the threat of litigation by the franchisors. A number were not sure exactly what Franchise IDX meant, how it actually works, what the negatives and positives are, etc. They voted for “opt-in” because they knew that it amounted to getting consent of each broker, but more than one Director voted against the initial Executive Committee recommendation (which was ultimately passed on the second try, as amended to include “opt-in”) because they thought it didn’t include a working group (which it did).
Seems to me that training in parliamentary procedure could prove valuable for all NAR Directors, and that any technology-related issue brought before them probably should include a thorough briefing clearly explaining the policy, how it impacts various uses, and how the technology involved actually works.
More Later
As I said, this is just a top-of-mind first impressions post. I have to run to catch a flight, but will revisit this and other issues in the coming days and weeks. Please feel free to comment, ask, and if I got anything wrong, please correct me on any of this stuff.
Your tired scribe,
-rsh