John Bogle: Character Is King

The founder of Vanguard Group's new book makes you wish everyone in business would read it -- and heed it

By Robert Barker

When Eleanor Roosevelt died in 1962, I was still at that age when adults expected me to be seen and not heard. But I was listening. And the tone of their comments about Mrs. Roosevelt -- the most grudging form of admiration, mixed even at her death with discomfort at her insistence on Americans doing right -- is something I'll never forget.

As time passed, I came to appreciate the scarcity of souls such as hers. And I felt ashamed for the adults' failure to listen beyond the shrillness in her voice to its clarion message of generous service to causes greater than one's self.

A strange way to begin an investment column, I know. But it's the ghost of Eleanor Roosevelt who haunts many of the pages of the latest book by John C. Bogle, founder and retired eminence of the $530 billion Vanguard Group. It's called Character Counts: The Creation and Building of The Vanguard Group (McGraw-Hill, 333 pages, $24.95). It's worth your time. (Full disclosure: The publisher, like BusinessWeek Online, is a unit of The McGraw-Hill Companies.)


  The book traces in an unusual way Vanguard's astonishing growth since its founding in 1974 to its current place as the nation's second-largest and most trusted mutual-fund operator. Bogle covers most of the 28-year period via reproductions of 42 speeches he gave through the years to the company's ever-expanding crew. To add the necessary context and perspective, he mixes in several quick reviews of the major events, covering them in five- or six-year periods.

If this sounds like a recipe for tedium, you're right, at least in part. For all the economy and verve with which Bogle sketches out each period's milestones, no one without a deep personal stake in the internal workings of Vanguard could be interested in examining each and every speech. After 42 of them, there's only the smallest chance that you would find yourself curious about No. 43.

That said, the book has plenty to offer not just for Vanguard partisans, but anyone in business -- especially anyone who manages other people and hopes to spur them to their best. Bogle naturally exhorts his employees to be productive, imaginative, and competitive. But he also and repeatedly strikes some rarer themes on the nature, meaning, and cultivation of character. Among them: Honest stewardship. Persistence toward goals. The critical role of teamwork, along with the crucial difference individuals can make.


  All of this would eventually grow pretty tiresome were it not for Bogle's easy conversational style and well-furnished mind, which is able to cite authorities ranging from rocker Bob Seger to poet T.S. Eliot. In this, he makes each rendition of his favorite themes slightly different, and Bogle leaves readers not just with a well-rounded history of Vanguard but also with more than a few secrets to its success.

Above them all, Bogle says, is its solid character, which he reaches to the Oxford English Dictionary to define as "the sum of the moral and mental qualities of an individual or a nation" -- or, he would add, a business enterprise.

Character was the core asset Bogle counted on for Vanguard to distinguish itself in the marketplace. "We have stuck to our high principles, striving to be, as one shareholder described it a few years ago, 'in the Vanguard of integrity,'" Bogle writes. "And our purpose has remained singular -- to put the interests of our clients first and paramount, no matter what the issue."

When in 1995 it came time for Bogle to name a successor, John Brennan, he lauded Brennan for personifying many sterling qualities, but chief among them was his "integrity of character." This isn't something Bogle made up last month to burnish his own reputation. This is what he chose to say to his colleagues about Brennan at that crucial juncture.


  A cynic would say these sorts of injunctions, from boss to employee, are just so much HR-department rhetoric: "I hope we can continue to be guided by Bogle's Rule: 'Do what's right. If you're not sure, ask your boss.'" But you don't need to be a dreamer to imagine how the world might now be a better place had that also been Kenneth Lay's Rule. The trouble at Enron would have stopped long before it destroyed the company. Could Lay have told Enron's employees that he had chosen Jeffrey Skilling to succeed him as chief executive above all for his "integrity of character"?

Bogle, who spent his entire career in the mutual-fund industry, has wound up no pauper. Nor is he a Pollyanna. He concedes he was no easy guy to work for. His speeches allude to shrewd moves in his founding of the company and to very public fights with mutual-fund industry rivals, most especially No. 1 Fidelity Investments. He glories in victories over once-larger T. Rowe Price (TROW ) and Dreyfus. But in too many business histories, those sorts of smaller issues are where the executives' thinking ends.

After crediting his colleagues for racking up market-share triumph after triumph, he goes on to observe: "We must constantly question why we do our work; but if we do it to serve others, and do it with the joy that comes with creativity, getting things done, and exercising our ingenuity, this organization has no limits. I well know that this philosophy is idealistic to a fault."


  See why I kept thinking about Eleanor Roosevelt? Her critics hated her for her nonstop challenge to America's post-war sense of self-satisfaction. Something similar is why, when mutual-fund executives gather to toast their own great good fortune, Jack Bogle is the unwelcome guest. He makes them feel uncomfortable for having so often served investors poorly. This is why they call him, with unconcealed sarcasm, "Saint Jack."

They would do their own souls a world of good by heeding the admonition Bogle leveled at Vanguard employees on Dec. 12, 1986: "There are today perhaps 1.5 million investors -- down-to-earth, honest-to-God human beings with real needs and aspirations -- who believe that we offer them sound investment programs, with clearly delineated risks, at fair prices. We must never let them down."

Barker covers personal finance in his Barker Portfolio column for BusinessWeek. His column appears every Friday, only on BusinessWeek Online

Edited by Patricia O'Connell

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