William H. Donaldson, HBS Century Club Distinguished Alumnus Opens Club’s 76th Year.
William H. Donaldson, immediate past chairman of the U.S. Securities and Exchange Commission addressed HBS Century Club’s student members on October 6, 2008 at the Charles Hotel in Cambridge, Mass. In the “Up Close and Personal” style for which the Century Club is famous, Mr. Donaldson took the students through his career path that he says “wouldn’t be right for everyone” and addressed current events, including the global credit crisis. The event marked the kickoff of the HBS Century Club’s 76th year.
Donaldson, a native of Buffalo, New York, explained he was instilled with a strong work ethic at an early age. “My father was wiped out in the depression. I learned right away that if I wanted something, I was to go out and work for it,” he told the students.
The 1958 Harvard MBA then took the students through his career journey, beginning with enlisting in the U.S. Marine Corps following graduation from Yale in the early 1950’s. “My time in the Marine Corps was perhaps the most important experience in my life. The Marines are built on esprit de corps and they give you an organizational ability that stays with you the rest of your life.”
Donaldson hadn’t expected to enlist in the armed forces. He was convinced it was the right move for him in a conversation with a returning Korean War veteran who although having been seriously wounded made a remarkably compelling case for serving in the corps. This unanticipated turn in his career path began a lifelong pattern for Donaldson, who has succeeded in many different fields in the private sector, the public sector and academia, frequenltly at the highest levels in each. “I’ve had an unusual career. It’s been right for me. It certainly wouldn’t be right for everyone,” Donaldson said.
After the Marines, Donaldson was accepted to Harvard Business School, where he was a selected as a member of the Century Club. Not long after earning his MBA with distinction, Donaldson teamed with fellow HBS grads Dan Lufkin (1957) and Dick Jenrette (HBS Century Club 1957) to found Donaldson, Lufkin & Jenrette, widely regarded to have been the most innovative Wall Street investment banking advisory firm of the time. As Donaldson explained, “It occurred to us that the quality of investment research was lacking and that if we offered a McKinsey level of research, particularly on (high growth potential) companies, institutional investors would see the value of that… It was the right idea at the right time.” Donaldson said. “Our business plan called for us to raise additional equity over the first five years, but we never had to. Things took off right from the start.”
Donaldson told the students that DLJ also departed from the industry practice by plowing earnings back into the firm, rather than taking substantial payouts the way many partnerships did (and still do). DLJ also differed from the pack by embracing technology at every turn. “We ran it like a public company even before we were a public company. We published our financial statements even though we didn’t have to, and that earned us a great deal of credibility.”
Sixteen years after co-founding DLJ, Donaldson next challenge came to him in the form of a phone call from then-Secretary of State Henry Kissinger inviting Donaldson to a chat in Washington.
“I said, ‘Dr. Kissinger, with all respect, if this is about a job, I have to tell you right now that I won’t be able to accept.’”
But, the early 1970’s were crisis years and Donaldson’s well regarded management skills were required by the nation. So, Donaldson was convinced to become Kissinger’s Under-Secretary of State. Later, he was asked to join the White House as special assistant to Vice President Nelson Rockefeller as well as to quarterback energy strategy during the 1973 Arab oil boycott. “Everything you are reading about now (regarding a national energy strategy), we were developing then. You should read the strategies we developed. It’s remarkable, the alternative fuels, the oil shale, everything you are hearing about now can be found in the documents we wrote back then,” Donaldson told the students.
Donaldson considered a run for governor of his home state of New York in the mid-1970’s.
“I decided that I liked the concept of governing more than all that goes with getting elected,” he said in explaining why he ultimately chose against seeking elective office.
Soon, Kingman Brewster, Jr., at the time the president of Yale University, approached Donaldson, who sat on the Yale Corporation. Brewster asked Donaldson to help form a school of public policy. Donaldson was hesitant at first, having not been an academic and not sure of what was involved in helping create a world class professional school. But, Brewster prevailed upon Donaldson, who then made numerous visits to many of the elite academic institutions around the country to shape his vision for what would become the Yale School of Management. He also became the school's first dean.
“Harvard had the Kennedy School and it didn’t seem to me necessary to duplicate that. But, if we could combine the best of a public policy education with the best of a business management education, then I thought that we would have something valuable and unique,” Donaldson said.
After Yale, Donaldson (DLJ had bought a seat on the New York Stock Exchange immediately upon forming the company. two decades earlier,) was asked to run the NYSE as chairman and C.E.O. It wouldn’t be the last time colleagues who knew Donaldson asked him to take the helm. When in sudden need of a C.E.O, Donaldson’s fellow board members of Aetna Insurance asked him to be the Chairman and CEO of that company.
But, the government wasn’t finished prevailing upon Donaldson for his service, as President George W. Bush asked him to become chairman of the Securities and Exchange Commission in 2003. Following the extreme decline of investor and public confidence that resulted from the Enron and WorldCom corporate scandals, I felt there was an urgent need to affect regulatory reforms, and to implement the expanded powers authorized by Congress.
Donaldson attributed the current credit crisis to a combination of factors, which include low interest rates and the change in the way that mortgages were created in America, the fashion of packaging and securitization in vehicles that few could understand.
“If you float the paper immediately after you create it, you don’t pay much attention to the risk you created,” Donaldson said.
Today, Donaldson heads a private investment firm based in New York and he serves on the board of numerous companies and organizations. Donaldson's optimism and excitement for the future burns brightly. “Opportunity springs from the kinds of things you have before you now. Institutions have to change and change creates new opportunities.” Donaldson cited a trend to boutique investment banks that focus on areas that bigger banks have missed.
Jet Hollander, president of Pre-Eminence Strategy Group of Clemmons, NC, and HBS Century Club alumni president, introduced Donaldson. Hollander said of Donaldson, “Bill Donaldson has had a career that is unmatched for its breath of success. Again and again, he has reached and succeeded the very highest levels of business, public service and academia. The hallmark of everything he does is exquisite quality married with breakthrough innovation.”
Donaldson, a native of Buffalo, New York, explained he was instilled with a strong work ethic at an early age. “My father was wiped out in the depression. I learned right away that if I wanted something, I was to go out and work for it,” he told the students.
The 1958 Harvard MBA then took the students through his career journey, beginning with enlisting in the U.S. Marine Corps following graduation from Yale in the early 1950’s. “My time in the Marine Corps was perhaps the most important experience in my life. The Marines are built on esprit de corps and they give you an organizational ability that stays with you the rest of your life.”
Donaldson hadn’t expected to enlist in the armed forces. He was convinced it was the right move for him in a conversation with a returning Korean War veteran who although having been seriously wounded made a remarkably compelling case for serving in the corps. This unanticipated turn in his career path began a lifelong pattern for Donaldson, who has succeeded in many different fields in the private sector, the public sector and academia, frequenltly at the highest levels in each. “I’ve had an unusual career. It’s been right for me. It certainly wouldn’t be right for everyone,” Donaldson said.
After the Marines, Donaldson was accepted to Harvard Business School, where he was a selected as a member of the Century Club. Not long after earning his MBA with distinction, Donaldson teamed with fellow HBS grads Dan Lufkin (1957) and Dick Jenrette (HBS Century Club 1957) to found Donaldson, Lufkin & Jenrette, widely regarded to have been the most innovative Wall Street investment banking advisory firm of the time. As Donaldson explained, “It occurred to us that the quality of investment research was lacking and that if we offered a McKinsey level of research, particularly on (high growth potential) companies, institutional investors would see the value of that… It was the right idea at the right time.” Donaldson said. “Our business plan called for us to raise additional equity over the first five years, but we never had to. Things took off right from the start.”
Donaldson told the students that DLJ also departed from the industry practice by plowing earnings back into the firm, rather than taking substantial payouts the way many partnerships did (and still do). DLJ also differed from the pack by embracing technology at every turn. “We ran it like a public company even before we were a public company. We published our financial statements even though we didn’t have to, and that earned us a great deal of credibility.”
Sixteen years after co-founding DLJ, Donaldson next challenge came to him in the form of a phone call from then-Secretary of State Henry Kissinger inviting Donaldson to a chat in Washington.
“I said, ‘Dr. Kissinger, with all respect, if this is about a job, I have to tell you right now that I won’t be able to accept.’”
But, the early 1970’s were crisis years and Donaldson’s well regarded management skills were required by the nation. So, Donaldson was convinced to become Kissinger’s Under-Secretary of State. Later, he was asked to join the White House as special assistant to Vice President Nelson Rockefeller as well as to quarterback energy strategy during the 1973 Arab oil boycott. “Everything you are reading about now (regarding a national energy strategy), we were developing then. You should read the strategies we developed. It’s remarkable, the alternative fuels, the oil shale, everything you are hearing about now can be found in the documents we wrote back then,” Donaldson told the students.
Donaldson considered a run for governor of his home state of New York in the mid-1970’s.
“I decided that I liked the concept of governing more than all that goes with getting elected,” he said in explaining why he ultimately chose against seeking elective office.
Soon, Kingman Brewster, Jr., at the time the president of Yale University, approached Donaldson, who sat on the Yale Corporation. Brewster asked Donaldson to help form a school of public policy. Donaldson was hesitant at first, having not been an academic and not sure of what was involved in helping create a world class professional school. But, Brewster prevailed upon Donaldson, who then made numerous visits to many of the elite academic institutions around the country to shape his vision for what would become the Yale School of Management. He also became the school's first dean.
“Harvard had the Kennedy School and it didn’t seem to me necessary to duplicate that. But, if we could combine the best of a public policy education with the best of a business management education, then I thought that we would have something valuable and unique,” Donaldson said.
After Yale, Donaldson (DLJ had bought a seat on the New York Stock Exchange immediately upon forming the company. two decades earlier,) was asked to run the NYSE as chairman and C.E.O. It wouldn’t be the last time colleagues who knew Donaldson asked him to take the helm. When in sudden need of a C.E.O, Donaldson’s fellow board members of Aetna Insurance asked him to be the Chairman and CEO of that company.
But, the government wasn’t finished prevailing upon Donaldson for his service, as President George W. Bush asked him to become chairman of the Securities and Exchange Commission in 2003. Following the extreme decline of investor and public confidence that resulted from the Enron and WorldCom corporate scandals, I felt there was an urgent need to affect regulatory reforms, and to implement the expanded powers authorized by Congress.
Donaldson attributed the current credit crisis to a combination of factors, which include low interest rates and the change in the way that mortgages were created in America, the fashion of packaging and securitization in vehicles that few could understand.
“If you float the paper immediately after you create it, you don’t pay much attention to the risk you created,” Donaldson said.
Today, Donaldson heads a private investment firm based in New York and he serves on the board of numerous companies and organizations. Donaldson's optimism and excitement for the future burns brightly. “Opportunity springs from the kinds of things you have before you now. Institutions have to change and change creates new opportunities.” Donaldson cited a trend to boutique investment banks that focus on areas that bigger banks have missed.
Jet Hollander, president of Pre-Eminence Strategy Group of Clemmons, NC, and HBS Century Club alumni president, introduced Donaldson. Hollander said of Donaldson, “Bill Donaldson has had a career that is unmatched for its breath of success. Again and again, he has reached and succeeded the very highest levels of business, public service and academia. The hallmark of everything he does is exquisite quality married with breakthrough innovation.”
Aditya Julka, HBS Century Club (2009) presents William H. Donaldson a certificate recognizing him as an HBS Century Club Distinguished Alumnus. Donaldson visited the Club on October 6, 2008.
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