News: Analysis & Commentary: CORPORATE GOVERNANCE
HANGING TOUGH WITH CARLOS SALINAS
Despite the scandal, the former Mexican President remains a Dow Jones director
In late 1994, Dow Jones & Co. Chairman Peter R. Kann invited outgoing Mexican President Carlos Salinas de Gortari to join the company's board. It seemed a natural step for the Harvard-educated Salinas, who left office enjoying wide acclaim for modernizing the Mexican economy, privatizing scores of state-run companies, and negotiating a free-trade agreement with the U.S. and Canada. Indeed, he was widely expected to be named president of the new World Trade Organization.
Today, Salinas' value to Dow Jones is a lot less clear. His brother, Raul, sits in a Mexican jail, accused of orchestrating a murder and of financial wrongdoing. Officials continue to investigate Raul's activities, and the ex-President's reputation has been tarnished by the probe. Adding to the bad vibes: The U.S. Justice Dept. is investigating Citibank's channeling of large sums of money to Raul's offshore accounts. The scandal dashed any hopes Salinas had of heading the WTO, and he has apparently not been invited to join any other corporate boards. Salinas, who could not be reached for comment, now lives a shadowy, peripatetic existence, though he recently surfaced in Ireland. That country, perhaps significantly, has no extradition treaty with Mexico.
NO CONTACT. So why does Salinas continue to hold his prestigious position as a Dow Jones director, drawing a $26,000 annual retainer and serving on the board's audit and nominating committees? His effectiveness almost certainly has been diminished. Many prominent Mexicans, including former Cabinet members, have cut off all communication with him. He attended only 56% of Dow Jones's board and committee meetings last year--the lowest attendance rate of the company's 17 directors. He also has not bought a single share of stock.
Some outsiders think Salinas should resign "for any number of reasons," says corporate-governance activist Nell Minow of the Lens Fund. "He's an embarrassment to them." Typically, notes Stanford University law professor Joseph A. Grundfest, "boardroom etiquette" obliges a director to quit whenever he or she faces a significant change in circumstances. Salinas has made no such gesture, says a Dow Jones spokesman. "His resignation has never been an issue."
Three outside directors tell BUSINESS WEEK that Salinas' altered circumstances have not been discussed at board meetings. "There's never been any question of his full participation, full integrity on the Dow Jones board," says retired Bekaert Corp. CEO James Q. Riordan. Adds director Christopher Bancroft, a major shareholder whose great-grandfather once owned the company: "To this date, he has not been indicted. He certainly has my support at the moment."
Maybe. But a headhunter specializing in director searches says Salinas had been an attractive prospect for many U.S. companies before the scandals broke, but only Dow Jones made an offer. Why the caution? It is very tough for a U.S. company to tap informal channels of communication in a foreign market to probe a prospective board member's character, the headhunter says. "Companies are particularly sensitive in a culture where they don't even know whom to ask. People were afraid this would happen." Now it has.By Elizabeth Lesly in New York, with bureau reports