Should the DAO Create COI & Self Voting Policies?

[pedrob]

Hi! Thank you once again for proposing the type of discussions that the DAO needs.

The first thing this discussion makes me ask is, what do we want to avoid? And secondly, what are the undesirable side effects of prohibiting certain conduct?

What we want to avoid:

Voting for oneself per se is not bad. If a delegate is convinced that their proposal benefits the DAO and can demonstrate this with arguments, there is a net positive benefit for the DAO if that delegate votes for themselves or the proposal they are pushing.

Why would someone be forced to vote in a way they believe is less beneficial for the DAO or Arbitrum users?

So, the problem itself is not the direction of the vote but the potential conflict of interest that may arise as a consequence of the vote.

So, despite the explanation…

@Entropy

We would argue that within a DAO’s operations, the majority of instances involving COI are the result of an individual/company using their delegated voting power to engage in self-voting or “self-enrichment”

Although self-voting can sometimes be the most obvious form of conflict of interest, it is not always the most manifest in practice. The transparency of votes makes it easy to see who is operating solely for their own benefit without adding any value to the DAO, which ultimately would be the most objectionable action.

What are the undesirable side effects of prohibiting certain conduct?

Suppose we establish the premise that self-voting = COI and therefore prohibit it. In that case, we will be forcing delegates to vote for options that are not optimal or necessarily the best by default.

According to the Arbitrum Constitution: “The Arbitrum ecosystem should be managed for the benefit of all Arbitrum users.”

And that has to be the guiding principle that determines the direction of the votes. There must be a net positive outcome from the proposals for all Arbitrum users.

Another undesirable side effect would be the one already discussed in the post by immutable lawyer, and raised by @DisruptionJoe and myself. We would be creating situations with low transparency.

For example, I don’t vote for myself for a position in the DAO, but I coordinate with another delegate with similar voting power to vote for me in exchange for my vote for them. What would that be? These situations are encouraged by such a prohibition.

For this reason, I am against a rule that directs the votes of the delegates. Even though these rules may seem noble and well-intentioned, in practice, they make the DAO less transparent.

@Entropy

We would argue that within a DAO’s operations, the majority of instances involving COI are the result of an individual/company using their delegated voting power to engage in self-voting or “self-enrichment”.

Also, I think this is not necessarily the biggest problem. Conflict of interest situations manifest during the discussion and voting stages of a proposal, but they materialize and are only possible during the execution of the proposals.

What do I mean by this?

Consider a proposal where voting is taking place to onboard a service provider to perform a specific task (e.g., @Entropy).

Is there a COI if Entropy or its members vote in favor of the proposal? There are arguments to support both yes and no (the latter being the viewpoint I agree with more).

Now, during the execution of the proposal, it will become clear whether a COI actually existed. Essentially, this is because they might fail to fulfill the agreement, take the ARB tokens, and show that they were voting in their own interest at the expense of Arbitrum users.

When it comes to more complex proposals that involve committees, the execution of the decisions made by these committees will reveal whether their members are making decisions based on the greatest benefit to Arbitrum users or using their position to benefit themselves over the users.

How do I think COI should be minimized?

In the first place, I support your Disclosure and Transparency Policy.

@Entropy

Disclosure and Transparency Policy: If a potential COI exists, it is expected that proposal authors or delegates disclose the nature and extent of the interest. While it may not always be clear if an individual stands to gain “directly” or “indirectly”, it is recommended to lean on the side of over-communication in the name of transparency. Delegates are not expected to abstain or alter their voting preferences in any way, but are free to choose to abstain.

But second, I think the DAO should have a consensus on the Minimum Viable Proposal (MVP). A framework should be established outlining the minimum content that a proposal must contain in order to be submitted to Snapshot.

We should work on turning this “Incomplete Guide to Submitting a Proposal” by @Sinkas (which is very good) into a complete guide that includes the necessary requirements for a proposal to be voted on.

The Incomplete Guide to Submitting a Proposal to Arbitrum DAO

TL;DR Although the below contains parts of the official and ratified governance process, it is not in and of itself the officially recognized process for submitting a proposal to the Arbitrum DAO. Instead, it’s a compilation of knowledge and experience from existing participants that could be seen as ‘tips and tricks’ to submitting your proposal. You don’t necessarily have to follow every step word-for-word. Each individual and/or group as well as their proposal is unique and might need fewer o…

Within that minimum content, there should be a section on Conflict of Interest explaining who cannot be involved or take actions related to the proposal due to a conflict of interest.

This is not an enforceable rule that prevents proposals from going to Snapshot (similar to the rule that proposals must be published on Thursdays). However, a significant number of delegates agree on the minimum content a proposal must have to be approved:

• The work will be more efficient and effective, saving delegates time.
• Proposals can be rejected solely for not meeting this rule.

By including conflict of interest rules within the proposals themselves, we can determine prior to the vote who cannot benefit from it or be part of it. This way, we are not limiting how to vote but rather what can be voted on.

I hope this makes sense