(The following article by Keith Reed was published by the Boston Globe on September 3.)
BOSTON — Michael S. Dukakis, the former Massachusetts governor, criticized the Bush administration yesterday for not acting to fill vacancies on the Amtrak board of directors that are expected to leave the board with only three members, one less than the legally mandated quorum.
“From the standpoint of corporate governance, you don’t have a full board, you’re not doing the things that a board should do, and you don’t have the oversight that you should have,” said Dukakis, whose term as Amtrak vice chairman ended in June. The term of a second member, John Robert Smith, the former chairman, ended at the same time, and terms of two other directors will expire this month.
“The president hasn’t nominated anybody to succeed me or John Robert, let alone the two that are about to leave,” said Dukakis, who teaches at Northeastern University. “The question is: When you don’t have successors, what do you do?”
Appointees to the board of the struggling rail operation must be nominated by the president and approved by the Senate.
A White House spokeswoman would only say: “The White House is working to fill the vacancies.” The spokeswoman, who asked not to be named, declined to set a time frame for nominations.
Amtrak was set up by Congress in 1971 to operate the nation’s intercity passenger rail service. It runs like a private company, with its own CEO appointed by a board that also oversees auditing, executive compensation, and other fiscal matters.
The board must have at least four members to conduct official business, a requirement mandated by Congress in a 1997 overhaul.
The five-year terms of two Amtrak directors, former Virginia Governor Linwood Holton and Amy M. Rosen, a veteran of the transportation and financial services industries, expire Sept. 24, leaving three directors.
Regulations in the District of Columbia, where Amtrak is incorporated, allow sitting board members to designate an “executive committee” to handle oversight of the company in the event a legal quorum isn’t reached.
Amtrak’s board set up the committee before Dukakis and Smith left, naming chairman David M. Laney, vice chairwoman Sylvia de Leon, and Transportation Secretary Norman S. Mineta — the remaining directors as of Sept. 24 — to the committee.
Cliff Black, an Amtrak spokesman, said that will let oversight of the company, including the implementation of the $1.8 billion budget for fiscal year 2004, continue unimpeded.
“We’ve fulfilled the provisions of the law that will allow the board to operate,” he said. “We would anticipate that the administration would nominate some people soon.”
That doesn’t satisfy Dukakis and others, who are concerned that Amtrak, which lost a record $2.2 billion in fiscal year 2002, can ill afford to operate without a full board.
“It seems to me it’s very difficult that the management wouldn’t be able to work without a board that wasn’t functioning,” said Holton, who served as Virginia governor from 1970 to 1974.
Dukakis, a onetime Democratic presidential nominee and current supporter of Senator John F. Kerry’s presidential campaign, used the Amtrak board impasse as a chance to level criticism at Bush.
“You can’t do what a board of directors is supposed to do with three people. You can rest assured that if we had a president who cared about rail, we wouldn’t have this problem,” he said.
Specialists said it is possible, though not usually desirable, to operate a major company without a full slate of directors.
“Can the three of them oversee the company? Sure. They just don’t have the diversity of background and skill that they would have had with seven people,” said Jay Lorsch, a professor at the Harvard Business School.
Jeff Rudman, chairman of the corporate and securities litigation group at the Boston law firm Hale and Dorr, was more skeptical, saying that three directors are too few for any corporate board to function effectively. Still, he acknowledged that a board like Amtrak’s might be judged by a different standard. “If this were the board of a publicly held company, one would be very skeptical,” he said.