The Treasury Gets a Big-Business Pragmatist

John Snow likes balanced budgets--but he'll back tax cuts

Bouncing among academia, government, and business over the last 35 years, CSX Corp. (CSX ) Chairman and CEO John W. Snow has learned to make the most of every side of an issue. He has argued for shareholder rights even while moving against his own stockholders at rail giant CSX. And he espoused free-market principles while welcoming government- imposed limits on corporate takeovers. "He's not doctrinaire," says longtime colleague John C. Bogle, founder of mutual-fund outfit Vanguard Group Inc. "John is a pragmatic guy, and you don't have to be a genius to know the President is your boss."

As Paul H. O'Neill found out the hard way, Bush demands results. And Snow has been named to take over the Treasury at a critical juncture. With debate on how to get the economy humming heating up in Washington, Snow, who has spent years lobbying for balanced federal budgets, must get squarely behind Bush's program of tax cuts. Just as crucial, Snow will have to work hard to rebuild bridges between the Administration and Wall Street after a severely strained year, even though he lacks strong ties to the financial community.

Is Snow, 63, up to the job? Friends say his ambition, smarts, and pragmatism will carry him through. Says John P. Clancey`, chairman of Maersk Inc. and the former head of Sea-Land shipping, once a unit of CSX: "John is a team player, and John will do what the team wants done."

But don't try too hard to figure out what Snow stands for. A PhD in economics, Snow has shown he'll quickly toss aside economic theory when it gets in the way of his business interests. In 1996, he invoked a Pennsylvania antitakeover law that let him shut out a higher bidder when he tried to buy up all of Conrail Inc. for CSX. "He has principles. He has views," says Linda Morgan, a Democrat on the Surface Transportation Board when it O.K.'d the Conrail deal. "But he also understands that you have to advance the ball."

To some, of course, such agility has the whiff of putting self-interest ahead of all else. In the wake of recent scandals, Snow co-chaired a Conference Board commission urging corporate directors to discourage "excessive" use of stock options, make such pay more performance-based, and advance shareholder rights. His work on corporate governance, in fact, helped Snow get the Treasury job. But some shareholder activists fault Snow and his CSX board for refusing this year to toss out a poison-pill antitakeover defense even though most shareholders approved a nonbinding resolution to do so. Shareholder advocate John Chevedden grouses that Snow has "set himself up as a champion of good governance, but when it comes to performance on his part, he falls short."

Critics also fault his hefty pay at CSX, where he has been CEO since 1989. Snow has collected at least $25 million in cash and stock in the last four years, even as earnings proved erratic amid the troublesome integration of Conrail. And in 2000, the company forgave a stock loan valued at $4 million. Shareholders watched their stock skid from more than $53 in early 1999 to about $28 now. At the same time, Snow served on the Conference Board task force, where he called for better measures to link executive pay to corporate performance.

Still, backers say he'll be an ideal liaison between the White House and Corporate America. Snow has moved easily in government circles ever since he joined President Richard M. Nixon's Transportation Dept. as an assistant general counsel. He went on to become administrator of the National Highway Traffic Safety Administration under President Gerald Ford.

Snow is wasting little time lining up new allies. On Dec. 9, just after his appointment was announced, the railroad CEO rang up Intel (INTC ) Chairman Andrew S. Grove, whom he got to know on the Conference Board task force. Among the subjects discussed: introductions to other high-tech leaders to gauge their concerns. "I feel good that he has reached out," says Grove.

Diplomacy will be crucial as Snow tries to win over Congress and Wall Street alike. After the blunt but prickly O'Neill, Snow's smooth style may be just what George W. needs.

By Joseph Weber in Chicago, with Richard S. Dunham and Lorraine Woellert in Washington and Ben Elgin in San Mateo, Calif.

    Before it's here, it's on the Bloomberg Terminal.