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. Last Updated: 07/27/2016

Senators Should Avert A Snow Job

The year of the corporate scandal may be coming to a close, but corrupting boardroom cronyism lives on. As reported in last Wednesday's New York Times, chief executives at 420 of 2,000 major public corporations have a sweet deal going. Their boards' compensation committees, who determine their pay, include relatives or individuals with ties to them or to the company.

It is troubling that more companies are not strengthening the independence of their CEO paymasters. The law now requires them to name only independent directors to audit committees, but stock exchange proposals to extend the same rule to compensation committees have not yet been enacted. To their credit, plenty of companies have voluntarily revamped their governance practices in the last year. The remaining laggards should not wait for the Securities and Exchange Commission to force them to do so.

The universe of compensation committee members eager to ingratiate themselves with CEO.'s is diverse. Common examples of conflicted directors are consultants hired by management, a supplier's executive or a lawyer whose firm wants more business from the company. A cottage industry of compensation consultants ensures that innovative ways of enriching managers are adopted, as other boards feel pressure to keep up with the Joneses.

Or with John Snow. As chief executive of the CSX railroad, President George W. Bush's pick as the next treasury secretary profited from the whole catalog of compensation excesses. One of his biggest windfalls -- a $24.5 million loan forgiven by his board after the shares he'd bought with the money declined in price -- would be illegal today.

Although there may not have been egregious conflicts at CSX's compensation committee, the fact that two of its members purchased real estate from company subsidiaries would seem to compromise their independence. Snow was paid tens of millions in the late 1990s, a time when CSX became less efficient and its stock price lagged.

Sheepish perhaps in the post-Enron environment, Snow said he would forgo pay and benefits worth $15 million. Earlier this year, as investors' faith in the integrity of business plummeted, Snow was preaching what he hadn't practiced. As head of the Business Roundtable, he called for meaningful corporate-governance reforms. That is one reason he came to the White House's attention.

At Snow's confirmation hearings, senators should delve into his tenure at CSX. He should be asked to reconcile his track record as a chief executive with the Bush administration's professed determination to clean up business practices.