FAQs About Proposed Bylaw Changes

Q:           What is the purpose of the proposed bylaw changes.

A:            Primarily to facilitate better member participation in the governance of WDS through: (1) more open nominations of member director candidates; (2) direct election of member directors; (3) having an actual annual meeting of members.

Q:           Will these bylaw changes reverse the fee decrease?

A:            No.  But if we do not reform WDS, management may impose further fee decreases.

Q:           What are Exhibits A and B?

A:            The current WDS bylaws give Independent Directors special veto rights over many governance decisions, including bylaw changes.  We believe that these veto rights are against the law, specifically RCW 24.03.115, because they take decisions away from the full board of directors.  Rather than challenge that in court right now, we are asking the Independent Directors to do the right thing and approve the proposed bylaws that are Exhibit A.  If they refuse to do so, Exhibit B retains some of the special rights for Independent Directors, but still provides for the direct election of member directors and meaningful member meetings. 

Q:           What is the purpose of the proposed article XIII ("Information").

A:            To provide more timely, accurate information about WDS to its member dentists.  WDS members are relatively uninformed about the business of WDS and the current state of health care reform, yet these things have a dramatic impact on our practice as evidenced by the surprise and severity of the recent rate cut.  Additionally, WDS is not particularly financially transparent.  Its tax returns are available through third-party websites, but the most recent is for the year end 12/31/2009.

Q:           What is "compensation discussion and analysis"?

A:            Publicly traded companies are required by law to explain their compensation decisions for executives.  An example for Aetna can be found on page 40 of their annual proxy statement here.  We believe that greater transparency in the compensation decisions for WDS executives will help reduce mistrust and rumors, as well as provide WDS with an incentive to ensure that its compensation decisions further WDS's purpose of serving the public rather than private interests.  Jim Dwyer made almost $1.1 million in 2009.  What was his salary in 2010 and 2011?  Why?

Q:           What are all the proposed changes related to annual meetings?

A:            In the past, WDS has solicited member dentist participation through what are essentially mail-in ballots.   This prevented discussion and debate.   The proposed changes require a physical annual meeting and voting in person or by proxy.

Q:           WDS says that the current bylaws are a response to antitrust concerns.  Will these changes create antitrust problems?

A:            No.  The current bylaws establish a provider compensation committee to decide fee issues, and require that a majority of the provider compensation committee be Independent Directors (so member directors do not have control over their own compensation).  The proposed changes do not alter the structure or balance or procedures of the provider compensation committee.

Q:           WDS says that the proposed changes could adversely affect WDS' tax-exempt status.  Is that true?

A:            No.  WDS tax exempt status is conditioned upon its membership in Delta Dental, and, according to WDS, Delta Dental requires that a majority of the WDS directors be "independent."  Although we have not seen proof of this requirement, we have taken them at their word and the proposed bylaws continue to require that a majority of the directors be independent.  If there is something else in the proposed changes that could impact WDS tax-exempt status, we challenge WDS to be specific about what it is rather than engage in general scare tactics.

Q:           What is the purpose of the changes if the majority of the directors will remain independent?

A:            Member dentists can still have an appropriate and meaningful voice in WDS even if they do not control a majority of the board.  But that voice is not currently being heard because the member directors are hand-picked by the WDS management rather than elected in contested elections by the members.  Also, the information and meeting requirements will facilitate more involvement by member dentists.  Think about it: until recently, member dentists have comprised the majority of the board, but their selection has been so driven by management that member participation has been meaningless.

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