1.Discussion of PLF Governance matters

Chair Ed Harnden described the work of the Special Committee on PLF Governance which includes BOG members Joyce Cohen, Angel Lopez, and Charlie Williamson, and PLF directors Gary Ackley, Bill Martin, Bob Theummel and Ric Weaver. Management consultant Steven Hacker has done an outstanding job to facilitate the meetings to: (a) Align the missions, goals and values of the PLF and the OSB. (b) Define communications channels and formats. (c) Delineate authority of the BOG and the BOD in various areas. Mr. Harnden indicated the committee is nearly two-thirds done with its work and discussed the attached graphic which summarizes a packet of information being developed. The evaluation started with reviewing the past in regard to what has been done well (Encores) and what has not been done well (Never Agains). An evaluation of the present situation itemized 'What's Working' and 'What's Not Working.' The 'Lessons Learned' represents the initial items proposed to be resolved short term and long term. The committee is at the point where it's beginning to define additional activities and make recommendations on how to move forward, assign timelines, and measure progress.

EXHIBIT, p. 1

Mr. Harnden indicated the committee will begin delineating authority and addressing bylaws at its next half day meeting on June 10. Its most difficult task may be to address hiring and termination authority for the PLF CEO, as well as input to and management of that person’s performance evaluation process. A concept being considered is a super-majority vote by those in authority to take action on termination matters. Ways to jointly facilitate BOG/BOD input in the evaluation process were discussed.

Mr. Davis asked, 'Why should it take a super-majority vote to terminate the PLF chief executive officer when it takes a majority vote to terminate the OSB executive director.' There was agreement that this process should be held to the same standard for both executives.

Mr. Baldwin indicated that the ultimate question should be whether the PLF CEO feels accountable to the PLF Board or to the BOG. He felt one of the big problems over the past several months was that Mr. Hall had no accountability to the BOG. Mr. Harnden explained the focus of the special committee has been broad up to this point and the 'nitty gritty' issues will be addressed at the next meeting.

Mr. Lopez suggested that two members of the BOG (with overlapping terms) be appointed as liaisons to attend PLF board meetings to maintain a sense of institutional memory and improve communications. Conversely, there should be a PLF director assigned to attend BOG meetings and keep the board informed about PLF issues. He also proposed a 'radar screen committee' to proactively address issues before they get out of control, comprised of two attorney members and one public member from the PLF and the same from the BOG. The charge of the committee would expect the PLF CEO to give notice when unique issues arise relating to claims defense strategy.

Ms. Cohen discussed confusion regarding the titles for the top executives of the Oregon State Bar and the Professional Liability Fund. She and Ms. Burrows felt it made little sense to use the title of chief executive officer for the PLF because it is perceived as having higher status than the executive director of the Oregon State Bar. Ms. Rinehart suggested the titles might be Director of the PLF and Executive Director of the Oregon State Bar. Mr. Davis expressed his agreement and felt the organization has structured itself incrementally over time without careful regard to such matters. He asked the committee to take these concerns on and to include them in its broad recommendations to the board.

Action:Mr. Davis moved, Mr. Baldwin seconded, to waive the one meeting notice and to direct the PLF Board of Directors to terminate all relationships with Kirk Hall, effective June 9, 2000. The motion was subsequently withdrawn.

Action:Mr. Davis moved, Mr. Baldwin seconded, to direct the PLF Board of Directors to retain Ed Harnden as interim CEO of the Professional Liability Fund until December 31, 2000; and if the CEO position is not filled permanently by that time, that Mr. Harden continue until it is filled.

Discussion about the motion included the following: (1) Get over Kirk Hall and move on. He's signed his resignation and there is an effective date. His sole purpose is to assist the BOD with its June 23 board meeting and the reinsurance matter in London. Don't micro-manage the PLF. (2) Not certain it makes sense to appoint an interim CEO in view of the current executive search process that is underway. This runs counter to the spirit of cooperation in progress with the BOD and BOG. (3) The thing the board really wants to know is when will Mr. Hall be done?

Mr. Peachey explained that Mr. Hall is no longer the chief executive of the PLF, his resignation was accepted, and the BOD directed and appointed an interim executive committee to act in his place, effective June 1, 2000. Mr. Peachey indicated he is not serving as the interim director. Mr. Hall is finishing up some work that will be completed next week, he will not be at the June 23 PLF board meeting, and he will probably conduct the PLF reinsurance meeting in London in mid-October as an independent contractor. Mr. Davis responded that his second motion would leave the decision to Mr. Harnden whether Mr. Hall works as an independent contractor for the PLF.

Discussion continued as follows: (1) Disagreement with the PLF Board's resolution and Mr. Peachey's comments about all the reasons they don't need an interim director. They do need a director and public perception insists they have one until the position is permanently filled. (2) This doesn't mean Ed Harnden should fill that role. Before voting on the motion we need to know a lot more about his credentials and competence to fill the interim PLF CEO position. (3) This is a damaging precedent in the working relationship between the BOG and the BOD. (4) This is a way for the BOG to exercise its oversight responsibility, finally. This situation has needed clarification for nearly a year. Ed is a person who can provide the stability needed to manage this crisis.

Mr. Harnden's qualifications to be the interim PLF CEO were presented as follows by various board members: (1) He has served on the PLF Board and was its president. (2) If you're concerned about public perception and seeking a quality individual that everyone respects, you couldn't ask for more than Ed. (3) He was the managing partner of Lane Powell for nearly 20 years and is the current managing partner of Barran Liebman. (4) Ed is a litigator. (5) He's willing to served in this interim position. (5) He's universally respected by members of the bar and is the past president of the Multnomah Bar Association. (6) Let's take time to consider this proposal. The PLF has invited the BOG to its June 23 meeting, let's have a joint discussion about the merits of having an interim PLF director.

Mr. Peachey said that directing the BOD to have an interim PLF director at this time would be destructive. He expressed his frustration and the possibility that this action may result in the PLF Board resigning. Under the current governance discussion, the appointment of a member of the Board of Governors would be the last person the BOD could consider asking to serve as interim PLF CEO, in spite of the outstanding person that Mr. Harnden is. The BOD has invited the BOG to attend its June 23 meeting in Grants Pass to discuss interim management. He requested the BOG consider postponing action on the motion until a joint discussion can be held with the PLF Board.

Mr. Lopez commented that it was also inappropriate for the PLF Board to approve a resolution on May 17, without involving the Board of Governors, to not have an interim director and to appoint an executive committee to oversee PLF operations. Ms. Sowle discussed her displeasure about receiving a letter regarding the PLF's interim management resolution without sending a meeting notice to the BOG and also violating the public meetings law. In the same letter OSB staff is blamed, once again, for proposing consideration of an interim director. In the BOG minutes, this was clearly proposed by board members. The process isn't working. Mr. Peachey responded that action has been taken to ensure that the BOG and staff will be notified in the future of PLF Board meetings and conference calls.

Ms. Cohen stated the BOG hasn't taken decisive action and Mr. Davis's motion places on the record the intent to do so. Mr. Peachey’s letters about the PLF resolution (approved at a non-noticed meeting on May 17) and 'staff bashing' remarks made it clear that joint cooperation was not going as smoothly as thought. Mr. Riemer indicated that since the PLF is being criticized for not giving proper notice, the BOG should give the PLF fair notice of further BOG discussion about an interim director.

Action:Mr. Williamson moved to table the main motion. The motion to table was approved by the board (7-6-3; no Baldwin, Cohen, Davis, Naucler, Rinehart, Sowle; absent Harnden, Sumner, Tyner).

Ms. Garst explained that, in the best interests of the organization and with a great deal of experience dealing with governmental relations matters, she and Ms. Pulju spoke with Mr. Peachey recently about what appears to be a train wreck coming at the legislature. There is a legislator that has been contacting Mr. Harnden to inquire how PLF matters are progressing. It seemed appropriate to express these concerns with Mr. Peachey, Mr. Rew and Mr. Harnden. At the May 12 BOG meeting staff said nothing about the appointment of an interim PLF CEO and let the BOG express its views. She explained how the cheap shots at staff have deeply impacted herself, Mr. Riemer and Ms. Pulju over the last six months. Ms. Garst is tired of her integrity being insulted. Staff recommendations were given in the best interest of the organization for the BOG to consider. Mr. Peachey's recent letter brought it all back again. Better communication is needed between the two boards to resolve this problem. Mr. Hytowitz indicated that greater understanding is needed from both boards regarding the toll this situation has taken on the OSB and PLF staff.

Mr. Peachey apologized to Ms. Garst for his letter which he described as a quick response to information he had received about Mr. Harnden being considered as interim PLF CEO without input from the PLF Board. He felt that did not excuse his choice of words and indicated that poor communication has been a problem in dealing with these issues. Mr. Peachey also apologized to the board that his letters have resulted in further misunderstanding.

Ms. Rinehart requested that the BOG schedule a special meeting prior to June 23 to discuss these PLF matters. The meeting recessed at this point on Friday and resumed Saturday morning.

Ms. Cohen distributed the attached resolution to demonstrate the Board of Governors’ support for the tireless efforts of Ms. Garst and Mr. Riemer over the past several months to assist with PLF related issues. Mr. Lopez also proposed a performance bonus for Ms. Garst and Mr. Riemer. It was decided that the Budget & Finance Committee would consider this request at its next meeting.

Action:Ms. Cohen moved, Mr. Williamson seconded, to approve the attached resolution in support of Karen Garst, Executive Director, and George Riemer, General Counsel. The motion was approved by the board (13-0-3; absent Hytowitz, Rinehart, Sumner).

EXHIBIT, p. 2

The board discussed ways to get beyond the personal attacks and stay focused on the real issues and continue to do what is needed to establish more trust with the PLF. Ms. Garst described the nature of the personal attacks and her plans to meet with Mr. Peachey and PLF staff to work through these perceptions. It was agreed that Mr. Rew and Mr. Harnden would continue to answer letters criticizing staff by responding to each author and persons copied on the letter.

Ms. Garst described the PLF Board as very united and interested in maintaining its status quo. She suggested the BOG ask itself what needs to be done to build consensus and take action? What is necessary to be proactive and avoid the train wreck? Ms. Cohen asked the board to figure out a way to provide rational, deliberate, and steady directions to those working on behalf of the BOG. It's a governance issue - not a PLF issue. Mr. Baldwin commented that no implementation will happen without change and the PLF doesn't feel a need to make governance changes.

Mr. Lopez felt it was important to stay the course, come to agreement on a governance structure the BOG can live with, and when that is done have the president write a thoughtful and informative article for the Bulletin. He further proposed: (1) In the PLF executive search interview process to use the completed findings from the PLF Policies & Procedures Task Force and the Special Committee on PLF Governance to educate applicants about the governance expectations and to assure they are in agreement with them before being considered for the position. (2) Then, assure the Board of Governors that the PLF plans to make adjustments to its six-month review plan. (3) If the PLF Board shows any sign of not following the BOG’s directives, make affirmative effort to fill the PLF Board of Directors with individuals who will follow the directives of the BOG. Ms. Garst asked Mr. Lopez, what is the consensus of the BOG? How can a decision be made to line up with the BOG if the desired direction is not defined and agreed upon? Mr. Lopez indicated that the board is one meeting away from having the product she is asking about. He expects a 100 percent show of support from the BOG as it moves away from being split on these matters.

Action:Mr. Tyner moved, Mr. Williamson seconded, to approve the items proposed by Mr. Lopez in the preceding paragraph. The motion was subsequently withdrawn.

Mr. Davis asked board members to consider if any of them disagreed that the minimum expectation from the Special Committee on PLF Governance should be a bylaw amendment that places the PLF CEO under the direct supervision of the Board of Governors. Ms. Cohen wondered how the PLF Executive Search Committee can be expected to provide clarity to candidates about the governance issue and reporting structure if the decision will not be made until the July BOG meeting. Mr. Rew felt the interviews would not be conducted until August.

Discussion centered on adjustments to the recruiting process, the PLF CEO position description, and implementing changes to the existing PLF culture to align with changes to be made in the PLF governance structure. It was agreed that it is critical to identify whether the PLF CEO is accountable to the Board of Governors or the PLF Board - two bosses will not work. It was recognized that without this clarity highly qualified people will not be interested in the position. In regard to Mr. Lopez's motion it was expressed that more specific direction was needed rather than sending a group off to negotiate outcomes with the PLF. It's a governance issue - to decide who's in charge.

The discussion continued regarding how to reach consensus with the BOD and to effectively transition oversight to the BOG in the PLF CEO hiring, firing and evaluation process.

Mr. Davis suggested a simple motion that the BOG direct the Public Affairs Committee to draft legislation to separate the PLF from the Oregon State Bar. He felt it’s a clear, single issue - either the BOG is in charge or the organizations are separate. Ms. Garst proposed a compromise to wait until the end of June for the report the Special Committee on Governance, schedule a special joint meeting of the BOG and BOD, and to delay the PLF executive search until there is clarity on the governance issue. She described the governance issue and search process being at cross purposes that will discourage talented people from applying, according to Mr. Pringle.

The special meeting of the Board of Governors with the PLF Board of Directors will be scheduled on June 30, 2000.

1.Status of legislative races and judicial resource activities

Mr. Orf reported it appears the majority in the house will be narrowed to a 50/50 split between the parties. He also discussed the high profile judicial campaign between Gary Berne and Judge Paul DeMuniz for a Supreme Court vacancy.

2.Update on measure (SJR7) involving judicial appointments

Mr. Orf indicated that the revised pre-session version of SJR 7 (re judicial appointment process) is expected to be finalized this fall and submitted to the 2001 legislative session by the Interim Judiciary Committee. The bar’s Judicial Administration Committee will continue to monitor the evolution of this potential ballot measure.

3.Review of pre-session law improvement proposals from various bar groups

Mr. Orf presented recommendations from the Public Affairs Committee to ratify the 2001 legislative package. Mr. Orf reviewed the various legislative proposals from sections and committees. Interim bill drafting was initiated prior to the board meeting due to legislative deadlines.

Action:The Public Affairs Committee moved to ratify the OSB 2001 Legislative proposals shown on agenda exhibit pages 54-61. The motion was approved by the board (14-0-2; absent Burrows, Sumner).