2017/02/28 Minutes

Minutes of the Meeting of the CIRA Board of Directors held at the Pinnacle Hotel in Vancouver, British Columbia on February 28, 2017 at 9:00 a.m.

Directors attending: Alex Beraskow, Kerry Brown, Andrew Escobar, Michael Geist, Rowena Liang, Louise Macdonald, Helen McDonald,  Susan Mehinagic, Marita Moll, Bill Sandiford, Rob Villeneuve, Faye West

Advisors: John Demco, Byron Holland, Pamela Miller

Corporate Secretary:   Paul Havey

Guests: Steven Barry, Dave Chiswell, David Fowler

Recording Secretary:   Lynn Gravel

1. Approval of Agenda

It was resolved that the agenda for the meeting be adopted as presented.

(Moved: M. Moll, seconded: K. Brown, unanimously carried.

2. Approval of the Draft Minutes of the November 16, 2016 Board of Directors' Meeting

It was resolved that the minutes of the November 16, 2016 Board of Directors' meeting be approved as presented.

(Moved: R. Liang, seconded: L. Macdonald, unanimously carried)

3. Chair’s remarks

The Chair noted that a consent agenda will be introduced starting at the next meeting of the Board and explained how use of a consent agenda would apply.

4. Financial and Operational Updates

4.1 Report on Statutory Obligations

This report was provided to the Board of Directors as information and tabled at the meeting.

4.2 Management Report

This report was provided as information and tabled at the meeting.

Staff highlighted two significant customer milestones since the last MD&A: our Swedish customer formally accepting the delivery of our D-Zone Managed DNS Solution; and our next generation Fury Registry platform is now supporting its first customer (.kiwi).

There was discussion regarding some recent market transformation and market concentration within the Registrar channel.

4.3 Review of Q3-FY17 Financial Results

The financial statements were provided to the Board of Directors as information and tabled at the meeting.

Staff gave a brief overview of the Q3-FY17 financial results as compared to the budget noting that Registration revenue was $83K higher than budget at the end of the quarter, inclusive of our YTD “Stretch Revenue Target” of $209K. It was noted that the cumulative New Domain Registrations at the end of Q3/FY17 exceeded budget by 18K units while cumulative Domain Renewals exceeded budget by 90K units.  Other revenue is comprised of $281K D-Zone Managed DNS Service revenue, $12K Municipal Workshop revenue and $11K Registry Lock revenue.

Overall expenditures for Core Operations were $1.21M under budget as at the end of Q3/FY17 due to timing of new hires, lower actual consulting spend, lower amortization and timing of expenditures on communication awareness & education and industry memberships.

5. 2017 Policy on Nominations and Elections

Staff noted that the changes to the 2017 Policy on Nominations and Elections dealt mostly with date changes. Also noted was the change to increase the time the Nomination Committee has to select the slate in order to provide additional time for the Nomination Committee to conduct interviews of applicants.

It was resolved that the 2017 Policy on Nomination and Elections be approved as presented.

(Moved: F. West, seconded: R. Liang, unanimously carried)

6. Committee Reports

6.1 Report from the Market Strategy Committee

The Chair of the Committee reported that the Committee met earlier in February. The Committee reviewed the current product development initiatives that are underway and staff presented an overview of the new product pipeline.

Staff provided an update on the domestic and international sales for the D-Zone Managed DNS service.  It was noted that while D-Zone domestic revenues were behind expectations, the domestic market is still showing steady customer growth and continued opportunity while international sales were presenting some partnership opportunities fueled by the success with IIS, .DK and .PT.

Staff also reported on the CITY IPT launch and noted that 10 trial customers were now complete. The CITY IPT launch did drive an increase in the number of tests but staff also recognized that the sales cycle is much longer than expected.

Staff presented an overview of the new products and pipeline to illustrate the new initiatives and where they stand in our corporate strategy.

7. Operational Plan and Budget 2017-2018

The Chair of the FAIR Committee noted that the Committee had met on several occasions to review the budget in greater detail. Overall the Committee was satisfied with the proposed FY18 budget plan, including the assumption of a $1 domain registration price increase effective October 1, 2017 (registration, renewals & transfers). 

Staff noted that two budgets were presented to the Committee, one with and one without a price increase. Staff noted their rationale for why now was the appropriate time to take a price increase. The full financial impact of the price increase will occur over time as the domain portfolio runs through its full lifecycle.  It was further noted that the current wholesale domain registration price of $8.50 has been unchanged since 2006.

Staff noted that the FY18 Operational Plan and Budget represents the second budget of the four-year Strategic Plan. The FY18 operating budget represents a fully balanced budget.

Staff presented a general overview of the key initiatives under the strategic pillars and strategic enablers the proposed balanced budget is intended to fund, including the carry over projects from FY17 to FY18 and the new initiatives to be undertaken in FY18. 

Different revenue scenarios (Pessimistic, Reference Plan and Optimistic) were presented with the noted assumptions. The FY18 Reference Plan reflects 497,000 new registration units (including 12,000 pertaining to incremental marketing/brand awareness program), an estimate of the FY17 Year-end DUM (YEDUM) assuming transactional activity for the remainder of the FY17 fiscal year and an estimated FY18 renewal rate of 79.8%. Other revenue is comprised primarily of D-Zone Managed DNS services (International & Domestic), Recursive DNS, Fury Registry Services, IPT City subscriptions, Smart Community workshops and Registry Lock. 

Staff presented the FY18 Core Operating Expenditures by nature and function. Assumptions for the core operating expenditures include the addition of a senior sales leader to further enhance the business development/sales capability and an application developer to further the Internet Performance Test (IPT) application that is of interest to Canadian municipalities; a 2.5% inflationary salary adjustment envelope, identified market adjustments and proposed benefit plan enhancements; and other OPEX expenditures permitted to increase where otherwise unavoidable, such as Computer Operations & Networking costs and a $500,000 incremental marketing/brand awareness program. 

The CIP budget has been recast to include indirect salary & benefits allocation.  The proposed CIP expenditure level and related mix remains at approximately $1.75M, consistent with the recast FY17 budget. Board members noted the possibility of applying similar costing approaches to new products.

There was considerable Board discussion regarding the price increase, including the impact on various stakeholders, whether a separate more robust Board discussion was warranted on strictly the price increase (similar to that previously held by the FAIR Committee) or whether the price increase should be subject to a separate Board motion given its underlying impact on the upcoming operating Budget and Corporate Plan. Board members also discussed the likely impact of the price increase on registrars and registrants as well as possible alternative pricing strategies. 

On the recommendation of the FAIR Committee, it was therefore resolved that the FY18 Budget (Operating and Capital Expenditures) and the underlying Corporate Plan be approved as submitted.

(Moved:  R. Liang, seconded: A. Beraskow, opposed: M. Geist, abstaining: R. Villeneuve, motion carried)

8. Committee Reports

8.1 Report from the Compensation and Review Committee

The Chair of the Committee reported that the Committee had met recently to review the Employee Benefit Plan enhancements and the recent results of the AON Best SME Employer survey. The CEO goals and objectives plan for FY18 has also been initiated and will be discussed during the in-camera session.

8.2 Report from the Governance Committee

The Chair of the Committee reported that the Committee had met recently to review the 2016-2017 work plan and the 2017 Board Election timeline.  The Committee also reviewed the Committee’s mandate and recommended the following changes: adding the review of risks inherent in the operation of the governance model; the first sentence in the Purpose be amended to indicate that the “Governance Committee is responsible for developing the approach of CIRA to all matters of governance”; and the last bullet in the Terms of Reference be clarified to indicate that “The Committee Chair, on behalf of the Committee, makes recommendation to the Board on all matters within its mandate by the making of motions”.  

It was further noted that the Terms of Reference of the other committees would be reviewed and amended as necessary to ensure that they considered their respective areas with respect to the risk management oversight.

It was therefore resolved that the Board of Directors approve the Terms of Reference of the Governance Committee, as presented.

(Moved: F. West, seconded: A. Beraskow, abstaining: A. Escobar, motion carried)

8.3  Report from the Finance, Audit, Investment and Risk Management Committee

The Chair of the Committee reported that the Committee had met several times since the last meeting.  The Committee reviewed the FY18 budget and operating plan as well as the FY17 audit plan.  The Committee also reviewed the current Statement of Investment Policy and Procedures (SIPP) to determine if it could be modified to provide CIRA with an enhanced return with minimal additional risk.

Staff noted that PH&N, the investment manager, was proposing minor changes to the eligible investment holdings/vehicles and asset mix.  The slight changes suggests increasing our equity exposure from 20% to 30%; moving our fixed income into an enhanced bond fund; adding high quality mixed income mortgages to the asset mix; adding low volatility global equities to the asset mix; and re-balancing the asset mix targets accordingly.

The FAIR Committee was therefore recommending that the Board approve the change in the Statement of Investment Policies & Procedures (SIPP) and instruct management to execute all such documentation required to bring the revised mandate into effect.

(Moved: A. Escobar, seconded: H. McDonald, opposed: K. Brown, motion carried)

8.4 Report from the Community Investment Committee

This report was provided as information and tabled at the meeting.

Staff provided an update on the current round of the Community Investment Program funding.  So far over 300 applications had been received and the deadline to submit an application was March 1, 2017. 

9. Other Business

The Chair noted that Directors would be asked in the coming week to refresh and submit their self-assessment form, indicating their level of knowledge in the different areas.

10. Next Meeting

The next meeting of the Board will be held in June 2017.   

S. Barry, D. Chiswell, D. Fowler, P. Havey, B. Holland and L. Gravel withdrew from the meeting.

11. In-Camera Session

The Board of Directors held an in camera session.

12. Adjournment

There being no further business, the meeting was concluded at 5:10 p.m.