J. Roberto B. de Marca

      In 2002 the IEEE Communications Society will celebrate our 50th anniversary, a time for celebrations and reflections on what we have done and what we should have done better over the years. Our success in recent years has been measured by rapidly increasing membership, programs, net revenue, and Society financial reserves. We have enjoyed distinct advantages including the corporate sales and marketing of our IP to institutions, the creation of the IEL, IEEExplore and other centralized activities. We have also had the good fortune to see our field of interest flourish as wireless, optical networking, and Internet technologies move from R&D to consumer products. Because we believe our success as an individual entity is tightly coupled to the success of the larger IEEE community, we are very concerned with the many signs that suggest a developing financial crisis, which may lead to an institutional one.
      Unfortunately, since the second half of 1999 the relationship between the IEEE Corporate leadership and the IEEE Technical Societies has been in constant turmoil. The most visible cause is the apparent mismanagement of the Institute finances by its Board of Directors (BoD). Underlying the financial difficulties there is a subtle but probably far more profound development: loss of society volunteer empowerment because of an effective transfer of decision-making authority to the corporate staff based in Piscataway.
      In my view the Institute BoD is losing its ability to run the Institute, having, over time, transferred most of its control to a subset of its members called the Executive Committee (ExCom), where six of its 13 members are not directly elected by the membership. While I am not sure this is the cause, I am sure of the result: a disconnection (and distrust) between the society leaderships and those truly running the Institute. In sum, we are seeing an erosion of the traditional and successful volunteer-driven decentralized modus operandi where technical societies were permitted to manage their affairs within reasonable guidelines and common goals established by the Institute.
      Focusing on the financial aspects, let's take a look at some of the figures. In the last eight years the IEEE has had deficits in its operational budget. It started at a modest $0.5 million in 1994 and has continuously expanded to a whopping estimated $27 million for 2001. During these years, in particular the last four, the IEEE Board chose to fund special initiatives that increased spending beyond normal and, as we have seen now, well beyond operating income. At the beginning some of these seemed to be a good use of increasing reserve amounts, such as investments in technology for the future. However, most of these new items were not short-term specific investments but long-term commitments with ongoing obligations to staff hired for special purposes. There was also little reduction of old expenses. Until 1999 the deficits were not perceived because the stock market was doing extremely well, and by year end when the full returns from investment were incorporated into the bottom line, the results were positive.
      In November 1999 the IEEE BoD approved an overall deficit budget amounting to $5 million, and this figure even assumed a forecast 9 percent return on reserve investments. (Some say such an approval went against BoD's own Policies Procedures.) Then came the March 2000 crash of the market and the initial $5 million budgeted mushroomed to a $15 million real deficit! What came next was indeed astonishing. In November 2000, fully aware of how poorly the market was doing, the BoD approved a $10 million deficit budget, again counting on a 9 percent return on its investments. There are only two possible explanations for this decision: gross financial mismanagement or a deliberate effort to plunder the reserves generated by the technical societies and until then controlled by them. (As far as I know the only dissenting vote in the voting of the budget motion was that of the Division III -- Communications Technology -- Director Tom Rowbotham.) Now it appears that IEEE's actual deficit for 2001 will end up close to $30 million!
      What is the impact on IEEE Communications Society finances? At the beginning of this year ComSoc was notified that its entire $1.34 million surplus for the year (in addition to a small portion of the reserves) had been diverted to the corporate coffers to balance the 2000 financial result. IEEE ComSoc is an efficient society and high revenue producer, and is being penalized rather than praised. The assessments to balance budget were distributed solely according to the size of the entity reserves. Does this rule drive good behavior? Certainly not! And we are already witnessing a change in behavior when new expenses are evaluated. It has happened in IEEE ComSoc and elsewhere in the Institute. For 2001, it will be much the same. It is expected that our Society will have to come up with close to $3 million (causing a significant reduction of reserves) to help stem the corporate hemorrhaging. And the history just goes on: for 2002 we are being asked to reduce our programs and benefit to members in order to yield a year-end operational surplus of $2.8 million. Right now the IEEE has put a freeze on all society reserves. We cannot use them to offset our assessment. In total, in three years time IEEE ComSoc was asked to generate over $7 million to fill IEEE budget gaps with very little information and no control over why this is happening. This saga is just the most visible sign of reduction in society volunteer management empowerment. Another, just as serious, example was reported in my message last month, in connection with our next-generation Web presence program (NGWP).
      In smaller dosages, similar bleeding is being experienced by all IEEE societies. High allocation costs threaten not just the societies, but the Institute itself. It is the IEEE Technical Activities Board (TAB), through its societies, which contributes the overwhelming share of intellectual property and revenues to the Institute. IEEE societies have been able to innovate and create by controlling their own budgets and reserves to fund development of new products and services. Under the current financial plans, money that would be used to fund these activities will be directed to pay for corporate expenses. It is not clear to us that funding corporate infrastructure rather than society activities has the same short-term or long-term return on investment. Societies lose the incentive and resources to initiate new activities, consequently drying up additional sources of revenue for the Institute.
      Volunteer contributions are IEEE's greatest strategic asset in the aggressively competitive and changing intellectual property business. and must be preserved and protected. Without its volunteers the societies (and IEEE) can do nothing, old or new. Any action taken that discourages volunteers will have the gravest consequences for all IEEE.
      IEEE's fundamental financial problem is that of taxation without representation. Societies cannot continue to be burdened if corporate expenses continue to increase unexamined. While technical societies are asked to pay for these expenses, Society volunteer leadership has virtually no influence or control over these expenses. IEEE ComSoc is committed to support a fair and reasonable financial model to resolve IEEE's financial situation, and it is my firm belief that other societies think likewise. However, if the technical societies assume such a liability for corporate infrastructure, we must be assured that all necessary steps have been taken to limit this liability by reducing or managing expenses, managing operations efficiently, and exercising prudence in new initiatives, particularly IT activities. In summary, technical societies should play a greater role in the governance of the Institute.
      The IEEE Board is ultimately responsible for the Institute's financial health and stability, and must act as any responsible corporate board would act in similar circumstances. It is also mandatory that the IEEE Board should be fully informed about corporate expenses before it approves an allocation model to distribute those expenses. The Board must end the drain on reserves in the best interests of the Institute and the profession. As in the fable of the golden goose, it is vital to recognize that if societies continue to be strangled, the Institute will someday be the one to die.
      A final thought: institutional behavior depends heavily on leadership. Therefore, it is very important that you, as a member, exercise care when deciding who is the best candidate for the 2003 IEEE President in the election now underway. This person will play a key role in the future of the Institute for three years. I plan to help you make your choice easier by inviting the three candidates to express their views on questions from the members of the IEEE Communications Society Board of Directors. The candidate answers to these questions along with our own views on what is important for the Society's future will be published in the October issue of this magazine. Please hold your vote until then so that you can get as much information as possible before casting this most important vote.