By appointing William Donaldson to succeed Harvey Pitt as chairman of the Securities and Exchange Commission, President Bush has opted for a time-tested hand with some of the tightest Bush family links that Wall Street has to offer. And Wall Street is applauding the move.
Indeed, many executives say, Donaldson, 71, is well placed to take on Wall Street's effort to separate research from banking activities. They point out that the firm Donaldson co-founded, Donaldson, Lufkin and Jenrette, was originally a dedicated research house, without any investment banking function.
But some experts ask if such a Wall Street insider would be ready to sign off on a large fine as part of a global settlement with Wall Street firms. Donaldson and the Citigroup chairman, Sanford I. Weill, for example, were peers at their respective brokerage firms in the 1960s though they are not described as close friends. His supporters state that Donaldson's time away from Wall Street will only strengthen his regulatory hand.
"Bill is not beholden to anyone," said Richard Jenrette, a founding partner of Donaldson, Lufkin and Jenrette. "He knows the cast of characters. We all love Wall Street and it's painful to see these things such as the decline of research and executive compensation."
As a chief executive, Donaldson has also received some criticism for being awarded a US$7 million compensation package and diluting corporate governance measures at Aetna Inc. Donaldson served as chief executive for Aetna for 11 months before returning to the board and retiring this April.
Nevertheless, his establishment credentials are impeccable: He served in the State Department of the Ford administration under Henry Kissinger and Nelson Rockefeller, was chairman of the New York Stock Exchange in the early 1990s and went on to serve as a chairman and chief executive of the health care giant Aetna Inc. His directorships have included Honeywell and Philip Morris, and he is the founding dean of the Yale School of Management.
With gravitas and moral probity to burn, he would seem, in the eyes of the Bush administration, an antidote to Pitt, who was accused of being too closely tied to the accounting industry.
"All of Bill's history has been pulling together wildly different constituencies," said Dan W. Lufkin, another founding partner of Donaldson, Lufkin and Jenrette. "Yes it's a hot seat, but this is a man of talent and abilities and he has the trust of everyone who he has run across."
Born in Buffalo in 1931, William Henry Donaldson graduated from Yale in 1953 where he made his first Bush connection with Jonathan Bush, the president's uncle. A fellow member of the Skull and Bones secret society, he was also a decorated Marine during the Korean War and went on to earn a degree from Harvard Business School.
In 1959, he, Lufkin and Jenrette founded, with US$100,000 between them, the firm known to many today as DLJ.
The company quickly made a name for itself in providing research on small growing companies. Donaldson, in fact, started out as a research analyst, and penned several research reports, including one on American Greetings, the greeting card company.
In 1969, Donaldson, Lufkin and Jenrette became the first Wall Street investment firm to go public. It was a revolutionary move at the time -- the first time that a Wall Street partnership had opened itself to outside investors. Donaldson's supporters cite this event as crucial to inculcating within him a keen understanding of the concerns of the main street investor.
In 1973, Donaldson was appointed undersecretary of state under Henry Kissinger. It was the time of shuttle diplomacy and Kissinger was not often found in Washington. Donaldson, his friends say, was something of an aimless figure in Washington then, without a defined role. He spent some time helping with Nelson Rockefeller's transition to vice president.
In the 1980s he did some leveraged buyout investing through his own company called Donaldson Enterprises. He also did significant work for his alma mater, becoming the founding dean of the Yale School of Management. Donaldson was a hockey player at Yale and friends say that he plays a brisk set of tennis. He lives in Manhattan with his wife, Jane, and three children.
In 1991, he was appointed chairman of the New York Stock Exchange. At the Big Board, Donaldson became embroiled in one effort to get the SEC to lower the standards for allowing foreign companies to list their securities in the US. Under the rules he wanted to relax, foreign companies have to restate their financial statements so they conform to US generally accepted accounting principles.
While foreign listings flowered as a result, competing exchanges like the NASDAQ flourished as well, attracting a new breed of fast growing, technology-oriented company that in another time might have chosen to list on the Big Board.
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