What’s Really Going on with EC’s By-law Changes?

EC’s AGM is scheduled for Sept. 28th where the 24 voting members (there should be 27 but there are two vacancies) are tasked with, among other things, approving the proposed by-law changes. In a summary of the proposed changes, EC outlined what the various changes would achieve, but the descriptions were quite brief. To help better explain the implications of the proposed changes, HorseSport.com has consulted with several industry and governance experts to create the following explanations of what’s at stake.

By-Laws VS Articles

Though it isn’t included in the AGM’s Agenda, EC is proposing to change both its by-laws and Articles of Continuance (Articles of Incorporation). The Articles are the legal documents that define EC and as such require a Special Resolution which will require approval of 2/3 of the Voting Members (17 votes) to pass.

Proposed Article Change #1: Section 8

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Current Wording: The Corporation shall have three categories of membership, to be designated as Category A (Equestrian Sports), Category B (Provincial and Territorial Sport Organizations) and Category C (National Equine Organizations). Each category is authorized to designate up to nine (9) delegates to be Members and each Member shall be entitled to one vote. The by-laws of the Corporation shall provide (i) the conditions for membership in each category, (ii) the manner of withdrawing from a category or transferring membership to another category and any conditions of transfer, and (iii) the conditions on which membership in a category ends.

Proposed Change: The Corporation shall have one class of membership, to be designated as Voting Members. The number of Voting Members and how they are apportioned will be determined by the Directors and approved at an annual meeting by the Voting membership. Each Voting Member shall be entitled to one vote. The by-laws of the Corporation shall provide (i) the conditions for membership, (ii) the manner of withdrawing or transferring membership and any conditions of transfer, and (iii)the conditions on which membership ends.

What Does It Mean?
• Instead of the current three categories of Voting Members there would be a single group.

What Are The Implications?
• Shifts the designations from the Articles to the by-laws which opens the door for EC to allow greater or fewer voting members and decide how they are chosen, including a different distribution of votes among the groups, subject to 2/3 Voter approval.
• In the summary of changes, EC noted that they are proposing changing the definition of Sport Committee in the by-laws to allow for sports other than solely FEI sports to participate. In the event they are able to attract more sports, the proposed change would allow EC to grant these sports voting rights which would dilute the voting power of the FEI sports, for example.

Proposed Articles Change # 2: Section 10.IV.5

Current Wording: Each category of membership shall not be entitled to vote separately as a Category on a proposal to make an amendment referred to in Section 199(1) of the Act to (i) effect an exchange, reclassification or cancellation of all or part of the memberships of the Category or (ii) create a new Category of members having rights equal or superior to those of the Category.

Proposed Change: (delete)

What Does It Mean?
• If the first proposed change is approved and there are no longer separate membership categories, Section 10.IV.5 is redundant.

What Are The Ramifications of the Different Voting Scenarios
Scenario 1 – Both changes are approved: This would further tip the balance of power to the EC board. The board could determine the number of Voting Members, who they represent and how they are elected, though still subject to 2/3 Voter approval.
Scenario 2 – Both changes are rejected: How many Voting Members, who they represent, and that each category designates their Voting Members remains baked into the Articles and out of the control of EC’s Board.
Scenario 3 – Change #1 rejected, Change #2 approved: This would have the same effect as Scenario 2 BUT with the added protection of Canada’s Not for Profit Act which states that any changes to membership categories requires a 2/3 majority vote of each category. For example, any changes to the Sport Category would require a minimum 2/3 approval of Sport’s Voting Members.

What Does EC Say?

When the articles were approved in 2015, EC stated they would make the organization more effective, efficient and result in a higher degree of accountability to the voting members.

Today, EC CEO Meg Kreuger speaks to an opposite reality, saying: “We believe the three class/category voting system increases bureaucracy and impacts effectiveness of the organization, and we still plan to ask the Voting Members to support moving to one class of Voting Member.”

To highlight her point she provided this example:

“If a substantive change was proposed for a vote, in the current system each category of 9 would vote separately, requiring 2/3 approval vote in each category. If 2 categories supported a change and voted in favour of the change, but 1 category did not support the change and did not vote in favour of the change, the change would not pass. So the vote of 9 would overpower the vote of 18. If all 27 Voting Members are in 1 class/category, then if the majority votes 2/3, the vote passes. This supports a more democratic approach to our voting system, creating more equality of the voices, avoiding situations where one class/category can prevent a change despite being in an overall minority.”

It’s worth noting that Canada’s Not for Profit Act does include protective measures to ensure that where membership categories exist, they are protected from other categories removing or altering their vote by requiring a 2/3 approval vote by each category. To use EC’s current structure, two categories could not create an alliance to change or remove a third category.

Changes EC Board & Staff Can Make Without Approval

Another important point is that the composition and eligibility for these groups is outlined in detail in EC’s Governance Manual and the Operational Committee Manual, not the Articles or by-laws. This means that EC’s board or staff can change either of these manuals as they see fit with no vote required. This would make it possible for the board or staff to change who can belong to a group without the group’s approval.

To be clear, this is not a new development and has been the case with the old Articles and by-laws but makes the definition of each group quite precarious and limited to what little is specified in the by-laws. Further, while the by-laws do define Sport Committees (by-law 4.29) and PTSOs (by-law 1.6v) they do not include a definition for a National Equestrian Organization leaving that Voting class open to interpretation.

By-law Changes of Note

Click here to see the complete marked-up version EC’s proposed by-law changes.

• 1.6(m) – Definitions – “Equestrian Sports” – As noted earlier, this change allows the addition of sports other than those recognized by the FEI.

• 3.1 – Categories – These proposed changes assume the changes to the Articles are approved and defines the new single class of 27 Voting Members and the three groups they come from with no change to the current composition.

• 3.15 and 3.15 (b) – Fees – These proposed changes assume the changes to the Articles are approved and offers minor updates to the wording to reflect that change. However, the current 3.15b by-law states that PTSOs must first have 2/3 approval of such changes which they don’t.

• 4.7 – Nominating Committee (for the election of EC Board Directors) – Removes the specified number of people to be on the committee (currently set at seven); removes the details of the committee being composed of people from the three voting groups; removes the ability for the board to appoint a person in the event of a vacancy.

• 4.8 – Competency of Nominees – Related to by-law 4.7, this section is deleted entirely and had included: that the Nominating Committee endorses nominees, that the list of candidates shall exceed the number of vacant positions, that candidates aren’t eligible unless reviewed by the Nominating Committee and included on the list.

• 4.14 – Filling EC Board Vacancy – Allows the EC Board to appoint someone to fill the balance of a term vs letting the Voting Members fill the vacancy at the next election. For example, if the vacancy happened two months into a three-year term, EC’s Board could fill the position for the remainder of the three years instead of including the spot in the Director election the following year.

• 5.4 – General Meeting – The proposed change makes it easier to call a General Meeting of the Voting Members if requested by 5% of the voting members, down from 25%.

• 5.7 – Persons to be Present – The proposal removes the right for Registered Participants to attend any Meeting of Members without the invitation of the chair making meetings more exclusive, rather than inclusive. This is a further step backwards in disenfranchising the general community and removing transparency and accountability

• 9.2 – Enactment – This by-law says that any by-law can be changed with a simple majority (50% plus one vote) of Voting Members except for the Articles and by-law 3.15. EC is proposing to delete the reference to by-law 3.15 which says that the PTSOs have to pay a variable fee to EC based on “a formula established by the Board and approved by two-thirds of [PTSOs]”. Deleting the reference to 3.15 would make it possible for EC to change the fee that the PTSOs pay to EC without a two-thirds approval by the PTSOs and would only require a simple majority of the Voting Members. However, by-law 3.15 specifically notes that any changes to this by-law, or references to it, must first be approved by Special Resolution of 2/3 of the PTSOs, which has not happened.

Trust, Transparency & Accountability

As noted in their summary, EC is working toward the ability to more easily add members. While the organization was able to save save a good amount of money last year, those savings were likely artificial given the global pandemic. Looking at the five years prior, the organization lost almost $800,000 so it would be safe to assume that EC is looking to broaden their membership base to increase their revenue streams.

Adding more members and voters comes with risks that the community would be wise to examine. The FEI provides a good case study in the potential pitfalls of including more votes. Those familiar with the FEI will recall that they have a one country, one vote policy. On the face of it this seems very democratic, but in practice it gives nations with very few FEI participants the same voting rights as equestrian super-powers. This imbalance was showcased at the FEI’s 2009 AGM when many of the smaller countries voted in favour of allowing Bute in competition despite impassioned pleas to the contrary from significant global players such as Germany, Ireland, Britain, and the United States. Shockingly, the motion passed and the FEI bureau had to later apply rarely-used special powers to reverse the decision.

Aside from adding additional voters, the proposed changes also attempt to limit the voting power of the PTSOs. EC has had a tumultuous relationship with this group forever. Many of the provinces will tell you that EC has failed to provide the services they committed to deliver, while EC will say that they are working hard towards those goals and doing the best they can. Limiting PTSO rights might make bureaucratic changes easier, but it will reinforce the PTSOs long-held distrust of EC. In fact, all but Ontario have signed on to this letter notifying EC of the issues they have identified with the proposed changes. Several sources have told this writer that at least two provinces have confirmed with their provincial sport ministers that they do not need to belong to EC in order to continue to receive provincial funding.

If EC were operating smoothly with minimal complaints from its various stakeholders there may be less concern about the proposed changes, but that’s not the case. The sports are frustrated with the lack of communication and collaboration with their volunteers and many of the PTSOs are unhappy that EC has failed to deliver on projects outlined in the previous Memorandum of Agreement (the last MOA expired in March 31, 2020 and they still haven’t reached an agreement on a new one). All of this discord leads to a sense that EC is not willing to work with others which leaves little confidence that they will not overstep wherever they can if given the opportunity. It could be argued that instead of focusing on recruiting more members and alienating vast swaths of existing members, EC should focus on addressing the issues of its current members: communication, consultation, transparency, and respect.

~ Thanks to Kerri McGregor, the Equestrian Marketing Coach, for her help and insights with this article. Kerri has an extensive history with EC in a number of roles including several that directly relate to sport and board governance including: Former Dressage Canada Chair, Former Sport Council Chair, Former EC Board Director and Secretary, Former EC Chair of Ethics, Former Canadian Olympic Committee Session Member, and Former Canadian Equestrian Team Leader