Vol. 19, No. 9Oct. 28, 1999

Financial pioneer receives University's highest honor

Trustees William T. Allen and Howard Cosgrove confer an honorary degree on John T. Bogle.

John C. Bogle, senior chairman of the board of the Vanguard Group, one of the two largest mutual fund organizations in the world, received an honorary doctor of laws degree from the UD on Friday.

The honorary degree-the highest honor the University bestows-is presented to individuals whose contributions to the quality of life in the nation warrant such recognition. Former awardees include Supreme Court Justice Sandra Day O'Connor, artist Andrew Wyeth and former President George Bush, among others.

Trustee William T. Allen, former member of the Delaware Court of Chancery and now professor and director of the New York University Center of Law and Business, called Bogle "a wise counselor and great businessman and a man who has contributed importantly to the finance welfare and security of hundreds of thousands of Americans."

He said, "I can start with no word other than virtuous to describe the man whom we honor, even if that world seems quaint to our ear. For John Bogle's life reflects such a deep commitment to the concepts of duty, honor, candor and diligence and service to others that the most complete summarization of the man is to say that he is a man of high virtue.

"[Bogle's] life reminds us that the value of a life is measured by how one affects the lives of others, not by either celebrity or by balance sheet," Allen continued. "This is the aspect of business that gives it nobility.

John T. Bogle speaks to business students during his visit.

"Jack Bogle is a great businessman because he has changed the world in a way that confers huge benefits upon countless citizens," Allen said.

"Our defining quality, I think, is our recognition, a quarter of a century ago, of the majesty of simplicity," Bogle said in accepting the award. "If Vanguard has dared to strive for greatness, it is because we have tried to live by Tolstoy's standard: 'There is no greatness where there is not simplicity, goodness and truth,'" Bogle said.

"Since our inception, Vanguard's stock in trade has been the notion that in minimal operating costs lies the key to approaching 100 percent of the market's return. The unifying theme in everything we do is rock-bottom expenses. It begins with our mutual mutual fund structure, which broke new ground when we began in 1974 by having the mutual fund shareholders own the funds' management company, which in turn operates on an 'at cost' basis," Bogle said.

"Just a few months later, we broke new ground again, bringing the idea of low-cost investing into crystal-clear focus. We formed the first index mutual fund, which in its ideal form owns a pro-rata share of every security in a given market and virtually guarantees almost-but not quite-100 percent of the market return. As a result, the index fund provides its participants with certainty that their returns will outpace the returns of all other investors as a group," Bogle explained.

"In essence, investing in highly diversified portfolios, focused on high-quality stocks and bonds, holding trading to a minimum and operating at bare-bones cost proves to be the key to investment success.

"However obvious, the notion that there is inevitably a gap between the returns the markets provide and the returns the investors receive is gradually reshaping the way Americans invest," Bogle said.

Reminding the audience that Tolstoy's second element for greatness was goodness, Bogle said, "External fund managers had a powerful vested interest in maintaining their own extraordinarily high profitability. We alone had an internally managed structure, a structure that would provide a measurable goodness, if you will, to investors. It is putting the investor first that has given us the highest motivation....

"Tolstoy's third element of the search for greatness-truth-also played a vital role. In a business where marketing has become the highest priority and hyperbole the order of the day, our investment strategies are clear and uncluttered. We can not only honestly report what our past returns were, but explain why they happened. The superiority of the index approach has been endlessly tested in academia and has not been found wanting...."

Bogle also spoke of "Vanguard's focus on service to human beings as the core of our business philosophy-honest-to-God, down-to-Earth human beings, with their own hopes, fears and objectives... Even with 12 million shareholders, we strive to treat each one as an individual...only as treating human beings with respect, fairness and compassion, permeates our enterprise, can we truly emerge as the honest stewards of our investors assets, hard-earned and vital to their future security."

At Friday's ceremony University President David P. Roselle thanked Bogle for meeting with students and delivering a lecture for an advanced finance class earlier in the day.

"Thank you, John Bogle, for your active participation in the day-in-the-life our students. We deeply appreciate your presence here today," Roselle said.

Howard E. Cosgrove, board chairman, said Bogle's "contributions to the body of business philosophy and practice are legend." The honoree "thinks like a man of action and acts like a man of thought," Cosgrove said.

-Beth Thomas
Photos by Robert Cohen