Cofounder & Former Chairman & Chief Executive Officer, Donaldson, Lufkin & Jenrette
Former Chairman, Securities and Exchange Commission

• Return to Alumni Achievement Awards main page
 

EARLIER EUDUCATION
Yale University, 1953
B.A., American Studies

LIFELONG LESSON FROM HBS
“The case method and study groups make it clear that there are always approaches and angles to a problem that you can't think of by yourself. They make you appreciate other people's points of view. That carries over into business, where it's advantageous to surround yourself with the best minds possible and listen to what they have to say, especially if they disagree with you.”

ADVICE TO STUDENTS
“Keep an open mind about what you want to do after you graduate. You may discover areas of interest that you didn't even know about before you came to HBS. And once you've taken your first job, don't worry about five- or ten-year time frames for your next move. It's better to focus on what you're doing and stick with it until it becomes redundant or isn't fun anymore.”

CURRENT READING
Team of Rivals: The Political Genius of Abraham Lincoln, by Doris Kearns Goodwin

Following an entrepreneurial bent that began when he was a boy, Bill Donaldson went on to cofound the investment banking firm of Donaldson, Lufkin & Jenrette. After fourteen years there, he began to take on a series of other leadership challenges in business, government, and academia. Most recently, as chairman of the SEC, he oversaw reforms during one of the most turbulent periods in the history of corporate America.

Bill Donaldson’s glittering résumé reflects the career of a man who has spent more than 45 years at the highest levels of business, government, and academia. Consider some of the highlights: cofounder, chairman, and CEO of the investment banking firm of Donaldson, Lufkin & Jenrette (DLJ); undersecretary of state in Henry Kissinger’s State Department; founding dean of the Yale School of Management; chairman and CEO of the New York Stock Exchange; chairman, president, and CEO of Aetna, Inc.; and most recently, chairman of the Securities and Exchange Commission.

Underlying this array of prominent positions are qualities that have long been constants in Donaldson’s life: an affinity for entrepreneurial leadership, a penchant for problem solving, and a dedication to public service.

Beginning with a lemonade stand in front of his family’s home in Buffalo and then a neighborhood newspaper route, Donaldson went on to bigger things in high school. “Another fellow and I put together a company that did everything from mowing lawns to painting houses,” he recalls. As an undergraduate at Yale, he was publisher of the Yale Daily News. And as soon as he graduated in 1953, he joined the U.S. Marine Corps and became an officer.

Fast forward to 1959. Just out of Harvard Business School, Donaldson, 28, was rooming with Dan Lufkin (MBA ’57) in New York and working in the mergers and acquisitions department of an investment bank. They both saw an opportunity for a new kind of research geared toward the professional investors who were on the rise at mutual and pension funds. At the time, institutions accounted for less than 25 percent of equity ownership, but the way Donaldson and Lufkin saw it, these professionals would benefit from something more thorough than the brief statistical reports that were then the typical product available.

“We wanted to do research that added value by analyzing a company’s strengths and weaknesses in long reports that provided an in-depth understanding of the business,” Donaldson explains. With the addition of Dick Jenrette (MBA ’57) as the third founder, the new firm was ready to be launched.

DLJ made a name for itself as a pioneer in several other ways as well. Rather than following the crowd and focusing on high-priced blue-chip stocks, the new firm turned its attention to smaller companies that would eventually become big successes in the 1960s, including ACNielsen, Dun & Bradstreet, and Xerox.

During those years, as DLJ began to diversify by managing corporate pension funds in its Alliance Capital Management unit and trading large blocks of stock through its seat on the New York Stock Exchange, the growing firm also felt the need for access to more capital. As a result, DLJ wanted to go public. Problem was, the NYSE didn’t allow member firms to do that. “We decided to challenge the exchange,” Donaldson says. “We prepared for a year, showing why Wall Street was too undercapitalized to meet its new demands and why public ownership was an important solution. When our public offering went through, many other firms followed suit.”

In 1973, a call from Henry Kissinger, who was about to become Secretary of State under President Nixon, appealed to Donaldson’s interest in public service. He worked as the administration’s point man in dealing with that year’s crisis in the world oil supply. After Nixon resigned in 1974, he went to the White House to serve as counsel to newly appointed Vice President Nelson Rockefeller.

All this proved to be perfect preparation for Donaldson’s move to Yale in 1975 to help his alma mater launch a management school that would bridge the gap between the public and private sectors. “I had seen tremendous conflict between corporate America and Washington,” he observes. “I thought it would help if one school could train students from both arenas.”

Having agreed to a five-year term at Yale, Donaldson returned to Wall Street in 1980 to run his own international investment fund. But when the NYSE came calling in 1990, he couldn’t resist another opportunity to upset the status quo, keeping the exchange competitive by adding new technology and listing a record number of foreign companies.

After Donaldson left the NYSE in 1995, stints at DLJ (as a senior advisor) and Aetna (where he turned around a company suffering from ill-conceived acquisitions, class-action suits, and government cost-cutting) followed. In 2003, at the age of 72, he was considering some “new directions” when President George W. Bush (MBA ’75) asked him to head the SEC, which was reeling from the resignation of its chairman and criticisms about its effectiveness in fighting corporate corruption. Believing that the commission was at an inflection point in its history, Donaldson regarded it as an offer he couldn’t refuse.

Soon after he arrived, the SEC tackled a scandal in the mutual funds industry. But his agenda was also filled with many other pressing items—refining and implementing the Sarbanes-Oxley Act, establishing an Office of Risk Assessment to help anticipate the next flash point, putting into practice significant enforcement actions, and introducing new management structures. Although he thinks Sarbanes-Oxley needs some adjustment to lower the compliance costs for smaller companies, “it has made boards more effective,” says Donaldson, who stepped down from the SEC in 2005.

What continues to excite him is “the satisfaction that comes from making a difference, working with others, and seeing a team work toward a common goal.” Donaldson has clearly had extraordinary success in doing all that.