Today we will be examining current governance issues at Amtrak. Although it may come as a surprise to some, Amtrak is not part of the government, but is a District of Columbia corporation. It has a board of directors, shareholders, articles of incorporations, and bylaws.
One of the board’s responsibilities is to hire Amtrak’s officers, including the President and CEO. Last week, the current Amtrak board – and we’ll come back to whether there really is one – fired the CEO, Mr. David Gunn. I happen to believe that Mr. Gunn was doing a reasonable job with the hand he was dealt. As matter of law, Mr. Gunn or any CEO “serves at the pleasure of the board.” But there are deeper issues here, whether one is a supporter or opponent of Mr. Gunn.
The key issue we will be examining today is whether Amtrak’s board of directors is legally functional, with the quorum required by law. That affects, among other things, the company’s authority to fire Mr. Gunn, and to hire a new CEO. But that’s just the tip of the proverbial iceberg.
There a number of complex legal issues here, which we hope to discuss. But the sad reality is – even using the quorum standards and personnel count of Amtrak and the Administration – the company has been without a quorum for at least part of the time since June, 2003 – nearly two and half years.
The best word I can think of for this situation is pathetic. The Administration knew from Day 1 exactly when each prior director’s tenure ended, and did not make timely nominations.
The Administration wears two other hats in this saga – as the optional holder of one seat on the board, and as Amtrak’s preferred shareholder. Yet neither the DOT legal establishment nor Amtrak’s general counsel apparently took any preventive action -– except the very thin reed of authorizing so-called executive committees – when disaster loomed.
There was a substantial period of time prior to June 2003 when the board’s full legal functioning and quorum were beyond question, and when any corporation that was not totally clueless would have done something while it still had a fully functional board. The quorum requirements, for example, probably could have been lowered by joint action of the board and the shareholders before the board lost its quorum. Also, Amtrak’s board could have rescinded a number of self-imposed restrictions requiring board action for all kinds of transactions, including labor contracts.
None of that was done. As a result, the damage and chaos were maximized, and the company is now in a “Catch-22” posture where it can’t even reduce the damage from losing a quorum without first reacquiring a quorum. The situation now is such a mess that I have heard it said that you couldn’t think up a hypothetical case this loony if you tried.
Besides Amtrak’s dereliction in following normal corporate procedures, we still have a “denial” psychology by the Administration. Right now, there are no nominations pending in the Senate other than those of the two individuals now serving under claimed recess appointments. That’s it. To put it another way, if all the Administration’s pending nominees were confirmed this afternoon, almost none of the legal issues about the quorum “head count” at Amtrak would be resolved. This late in the session, the Administration has left itself with virtually no options other than more legally suspect recess appointments.
The saddest part of this picture is that its potential victims are people who have control over this situation. The employees in unions who have signed labor contracts since mid-2003, the companies that do business with Amtrak, even parties who sue Amtrak, cannot be assured that when Amtrak the corporation signs on the dotted line, it really means anything legally.
I hope that by exploring these issues today, we will spur Amtrak and the Administration first to take prompt corrective action as soon as possible, and – equally important – send the message that this should never be allowed to happen again.