Southern Metal Finishing

Re: Review of the Consolidation Documents

[color="DarkSlateBlue"]In late August, 2006 Dan McCormick, President and CEO of McCormick Group was asked to review certain documents pertaining to the planned consolidation of the Surface Finishers Industry Council (SFIC), Inc., the National Association of Metal Finishers (NAMF), the Metal Finishing Suppliers Association (MFSA), Inc., the Metal Finishers Foundation (MFF) and the American Electroplaters and Surface Finishers Society (AESF), Inc.

Mr. McCormick is a highly regarded merger and organization development consultant.  He is the author of “Nonprofit Mergers – the Power of Partnership” Aspen Publishers, 2001. His clients include: The American Cancer Society, The National Hemophilia Foundation, The Arthritis Foundation, Ford Motor Company, the Humanitarian Aid Foundation, the 5 Girl Scouts Councils of Colorado and many others.

It should be noted that Mr. McCormick is not commenting on the concept of the proposed Industry Reorganization or suggesting whether or not reorganization is a good or bad idea.  This report is simply a review of the documents designed, based on his experience, to highlight issues that may impede progress or cause potential problems at a later date.

The comments in this report are based on reading the documents that have been prepared in support of the consolidation that can be found on the SFIC website.  To read and download the entire report from Mr. McCormick; visit the AESF for the Future website.  The summary for his report follows:

It appears that the process for industry association reconfiguration is well under way. It seems that much good work has been accomplished and a number of major issues relating to the 5 component organizations streamlining their governance and operations into more efficient patterns have been explored.  That being said, there are also a number of significant, and potentially problematic components left under-addressed.  These issues include: questions about the support and management of Branches and Affiliates; the work and responsibilities of participating parties to the agreement post approval of the document; period and exit options of parties after the document is approved; ultimate control of the participating governing bodies, and; questions about finance, IRS codes and corporate.

Achieving support of the leadership and membership of all parties in consolidation activities such as this requires a significant amount of negotiations as well as in-depth educational activities to ensure that all participants are knowledgeable and comfortable enough with the issues to cast an informed vote.  The questions left unanswered in the documents along with inconsistencies in the consolidation instruments that raise even more issues makes this particular effort more difficult for the voting participants to support.

The consultant recommends the following actions for the group to consider regarding this particular industry reorganization effort:

1) Gather a representative group of all participants to address the issues and questions raised in this review and others that have emerged from the field or presented themselves in the course of discussion.

2) Consider either modifying the IRA, and or, developing a companion document that will become part of the IRA, that will clarify the concerns and issues raised in this review and or questioned by the field.

3) Re-consider the vote weighting formula that is presented in the IRA to one that provides a more equitable structural representation of all participants.

4) Modify the language concerning the approval of members of the councils as well as the authorities empowering the councils regarding the boards of directors and officers of their respective organizations.

5) If there is not the intent that NASF is to become the “parent’ organization and in essence “own” the other participants, restructure the method in which representatives to the board of directors of NAMF and MFSA are determined.

6) Consider a rewrite of the NASF bylaws as well as the bylaws of the participating organizations to correct the unresolved and inconsistent issues.

7) In that a super-majority of the Board of Directors of NASF (75%) is needed to amend the bylaws once this agreement goes into effect, it would be in the best interest of all parties to ensure that the original language of the NASF bylaws and the Industry Reorganization Agreement were consistent and addressed the concerns of each participant prior to signing.[/color]