James Riepe, W’65, WG’67 – 2017 Joseph Wharton Award for Lifetime Achievement
28 February, 2018
category: Finance, Joseph Wharton Dinner
James S. Riepe, W’65, WG’67, HON’10
Advisor and Retired Vice Chairman,
T. Rowe Price Group, Former Chairman of University of Pennsylvania’s Board of Trustee
Throughout his life, Jim Riepe, W’65, WG’67, HON’10, chose opportunities where he could learn more. This led him to:
-Penn where he became the captain of the University of Pennsylvania Quakers football team
-Wellington Management to work with Jack Bogle and help found The Vanguard Group in 1975
–T. Rowe Price where he helped the firm succeed, while creating a culture of collaboration and accountability
-Penn where he was invited to chair the University’s Board of Trustees
All the while, Jim thought about how he could contribute, and continue to learn.
You have accomplished much. Were you driven from an early age, with a keen sense of what you wanted to accomplish?
No, I really was not. I never had a grand scheme. My only thought was that, if I continued to learn, then I felt good about what I was doing. As a kid, I always worked hard. I had a paper route, and then throughout high school, worked at a small factory in my hometown. I think a lot of us who were raised in the 1950s ended up with a sense of innocence, because it was a wonderful period in which to grow up. I picked up a good work ethic, and sense of integrity and humility from my parents. One other learning from watching my father was how to get along with people, to treat others nicely. But there was no push from my parents to have a grand vision for my life.
What was your experience at Wharton?
It was different in many ways from today. I did not research or apply to many colleges. My mother was from Philadelphia and said that the University of Pennsylvania had a good business school. Coincidentally, an assistant coach from Penn came to my high school in 1960, to try to recruit a few of us who played decent football and had good grades. So, one could say it was good luck that brought me to Wharton. Since we were a middle-income family, I attended Penn with a scholastic scholarship, a student loan and a loan my dad took out. This is one reason I’ve been focused on providing scholarships to students today.
At Penn, I played football for four years, and learned a great deal about team building from that experience. At the same time, Wharton had a very heavy class schedule — as many as six courses per semester — it was a pretty demanding time.
I was convinced that I needed to develop some specific skills. So, during my first four years, I focused on industrial management and finance, and then in graduate school majored in accounting. I still recommend accounting and finance to students today as a good foundation for any business they eventually enter.
What was your first job out of Wharton?
Public accounting at Coopers and Lybrand. I learned quite a bit about accounting and corporate finance those first two years, but also recognized that I didn’t aspire to be a public accounting partner.
One thing I learned from that experience is to pay as much attention to what you don’t want to do, as to searching for what you are passionate about. It’s important to understand what things you do well or don’t do well, and what things you enjoy or don’t enjoy. In sports, for example, I loved baseball, but I couldn’t hit a curveball.
While a public accountant, I got an opportunity to become the assistant to the president of an investment firm in Philadelphia, Wellington Management, which specialized in mutual funds. I liked Philadelphia and thought that, if I kept my eyes and ears open and my mouth shut, I might learn something in that role.
This was the late 1960s, and I was able to work closely and absorb a lot from the company president, Jack Bogle. Then in 1975, another Wharton alum and I worked with Jack to found Vanguard, where I stayed until 1982.
You helped Jack Bogle found Vanguard! Why did you leave?
In 1982, I received an offer from T. Rowe Price to help expand its mutual fund business. It made sense for my career at that time. I often ran into people who worked at T. Rowe Price whom I liked. I felt good about the quality of the people there and the firm’s reputation.
It also gave me a chance to keep learning and do something on my own. I knew that would be more difficult at Vanguard, because Jack Bogle wasn’t going anywhere. I stayed at T. Rowe Price for about 25 years until retirement in 2006. Jack and I remain good friends to this day.
What were the principles at T. Rowe Price?
Well, Mr. Price, who started the firm in the 1930s, often said, “If my clients do well, then I will do well.” That philosophy concurred with mine and was one that we embraced at Vanguard. We also sought to create a culture based on merit, collaboration and accountability. We couldn’t just have a group of “nice” people who didn’t accomplish much. Because our industry is fiercely competitive, we needed to have people who were competitive, but who understood they needed to collaborate with their colleagues — competing with the markets and other professional investors, not with each other.
In the mutual fund business, one’s performance is measured every day. We tried to hire people who were competitive, but enjoyed working with others, and wanted to learn from others. The challenge is to have that collaborative, mutual-respect characteristic, but at the same time, ensure accountability.
We found that it can be a virtuous circle. A culture like that is not attractive to some people but is attractive to others. It worked well for T. Rowe Price, and over time, we ended up with a lot of very able, long-tenured people.
A week before the March 2000 crash began, The Wall Street Journal chided T. Rowe Price for being cautious about tech stocks (“T. Rowe Pays High Price for Avoiding Tech Craze“). The last line in the article quotes you as saying, “We’ve got to stick to our principles, even though these principles might hurt us in the short term.” What was going on in- side T. Rowe Price that helped you dodge that precipitous fall?
Two colleagues and I had been in senior management for some time. We experienced bad markets in the 1970s and the 1987 crash, so we were very sensitive to the risk side of the equation — just like our parents had been sensitized to risk by having lived through the Great Depression. We ran the company with that in mind, and even our growth investment teams always looked to the relative risk they were assuming. But by March of 2000, when prices were so high, even some of our directors challenged us on why we were not being more aggressive. It was a time when analysts and investors were talking about the number of “eyeballs” a tech company had, rather than revenues and profits. I remember a management meeting that month, when we began to question ourselves, “What if we are wrong, and this is a new world?”
Then just two weeks after that painful Wall Street Journal article about “old-fashioned” T. Rowe Price, the market peaked, and tech stocks collapsed, beginning a major bear market for equiti Let’s just say that kind of experience is character building, and we felt vindicated. Our firm’s subsequent growth reflected, in part, that our clients and future clients respected that approach to managing their money.
What attributes allowed you to rise in the company?
We were not a big corporation with a clear route to senior roles. Basically, I was able to work with others to accomplish some important advances in our business. Because I learned the business from the ground up, I understood what needed to be done and could evaluate which of my colleagues was doing well.
Obviously, if you understand the fundamentals of a business, it gives you a big leg up in getting things done. It’s an advantage of starting in a relatively small company versus a large corporation.
You were elected to chair the Board of Trustees of the University of Pennsylvania in 1999. During your tenure, Penn conducted a historic capital campaign of $4.3 billion. Why and how did you become so involved in the University, while you were still working?
After Wharton, I lived in Philadelphia and was put on an alumni task force, to wrestle with what turned out to be a thorny problem. I was successful, and as always, you then get asked to do more. I joined the Board of the Alumni Society and helped start the Alumni Council on Admissions — an important initiative to help children and grandchildren of alumni in the admissions process.
In 1990, when I was in Baltimore, I was invited to become a Trustee. It was a way for me to give back to the university that had done so much for me. After nine years, they asked me to chair the Board. I inquired about my schedule and worked out what I could and could not do while working full- time. My colleagues at T. Rowe Price were gracious in allowing me to take on this role. But I also owe a lot to my wife because this role demanded a lot of nights and weekends on campus. During my tenure, I headed the search committee for a new University President, and Amy Gutmann was chosen.
Can you share how the Board of Trustees works at the University of Pennsylvania?
We have a large, very engaged Board that works primarily through committees. All boards of trustees are active in development, to provide the financial resources that the institution needs. The primary responsibility of Trustees is stewardship of the institution. That means overseeing both the raising and expenditure of resources. Like a corporate board, key Trustee roles are to select the University President, assist in developing a strategic plan, and provide the administration with advice and counsel.
The University of Pennsylvania is one of a few large universities that have the healthcare system under the university umbrella, which adds to the Trustees’ responsibilities. The health system was having severe financial difficulties when I became Chairman. So, I spent a great deal of time working with the administration and fellow Trustees to put new leadership in place and draw up a plan that could get the system moving in the right direction. Today, Penn Medicine has over $6 billion of revenue and 35,000 employees, and is nationally ranked in the top five medical schools and top 10 hospitals.
With the right leadership in key positions, a Trustee Board can act as a vigilant overseer, seeking the right balance between engagement and standing back. Given the tremendous growth and positive recognition that the University has experienced during the past 20 years, I believe our Trustees can be very proud of what they have accomplished in their stewardship role.
You and your wife began endowing scholarships many years ago. Then the University named a dormitory the Riepe College House in Penn’s historic Quadrangle. How did that come about?
Colleges, including the University of Pennsylvania, have become unaffordable for an increasing number of families. Thirty years ago, few scholarships were available, and my predecessor as Chair, Dr. Roy Vagelos, initiated an effort to raise our scholarship endowment. I was a scholarship student, and we feel strongly about the importance of providing scholarship funds to needy students.
Penn made a decision to renovate the dormitories in the historic Quad. We wanted to support that effort, and the University was kind enough to name one of the college houses after us. It’s been very exciting for my wife and me to meet the students who live there. When we last visited Riepe College House, one student — with the perspective of an 18-year-old — said to us, “We assumed you were dead!”
What advice would you give to young alumni considering a career in investing?
When I was in school, students thought finance would be a good field for them to work in, not because it was the most lucrative, but because it was an interesting profession.
Success in business depends not just on ability but also on timing, chance and luck. So just picking the right business to enter is not the panacea. Finance is certainly not the only field in which folks can make a good living. I understand that many students graduate with substantial student loans. Because of that, I’m concerned that they would get lured into a business that does not fit them.
Thus, my advice is to work with people you like, in a job you like and that hopefully you are good at. If you are good at your job, the money will take care of itself.
What did you learn from your father and mother?
They gave me a lot of responsibility. I wish they knew how much they contributed to my success. My father was a good businessman, but he was never driven by money. My goals as a student were to work hard, find a good job and be able to buy a house — I didn’t learn until I got to college that my parents did not own their house. I think, when you’re a child, your world is small. When I was getting my M.B.A. in accounting, my father asked me to do his tax return. I couldn’t believe how little he made!
Can you share your reflection on achievement over a lifetime?
Hopefully, there are more chapters to my life! I would say that I tended to live in the moment. The most important choice I made was to leave accounting and enter the investment business. But as I said earlier, I was focused more on eliminating what I didn’t want to spend my career doing. I didn’t fully understand the asset management business, but I was lucky enough to have picked a good employer, to do work I enjoyed and to have a great mentor from whom I could learn.
I later moved on to another firm that had great potential and offered me an attractive opportunity to do more on my own. So, I lived in the moment, making the best decisions I could, with no grand scheme in mind. I have learned over the years that able, effective people seem to attract additional responsibilities. So, receiving an award like this allows one to look back and say, “Well, maybe I was able to accomplish a few good things during my career.”
Today, I remain on a few corporate boards. I’ve stayed involved at Penn as an Emeritus Trustee. Because of its importance to our society, I continue to be interested in the healthcare area and remain on the Board of Penn Medicine. I’m on a Boys & Girls Club board, and I’m increasing my philanthropic activity, a few of the things I didn’t have time to do when I was working.
You just mentioned having the opportunity to work with Jack Bogle, even though you were new to the investment field. How did that come about?
This gets into the “chance” factor. People may forget this, but 1967 and 1968 were the go-go years of the stock market. It was so busy that they shortened the market hours to 10:30 a.m. to 3:00 p.m. and closed on Wednesdays, because broker- age firms could not handle the record keeping.
When these firms hired public accounting firms to help them, I was assigned to one of those jobs and given much more responsibility than a junior guy should have had. A friend of mine who worked at Wellington Management reached out to me and said, “You ought to look at this position.”
I’ll give you a funny story. Jack Bogle’s secretary called me for an interview for what I thought was a controller position. I didn’t know what to say, as I didn’t want the job. I thought, “If I wanted to be a controller, I would have stayed in public accounting.” I told her, “I’m not sure I have time to do the interview. How long will it be?” She answered in a stone-cold voice, “Mr. Bogle is a very busy man. I’m sure he won’t keep you long, Mr. Riepe.” She very quietly put me in my place — and taught me a lesson.
The interview went well — Jack and I connected. And it turned out to be for the assistant to the president position, not controller. Someone had told me that, if you get the chance to sit at the “foot of the throne,” then take that chance. Jack was not as well-known as he is now. He was a 38-year-old president in an attractive business.
This is a good example of “chance” and “background” matching up — being in the right place at the right time, with the right set of skills. It began a great career for me. And, in 1975, we started Vanguard!
JAMES S. RIEPE is a Senior Advisor and Retired Vice Chairman of the Board of Directors of T. Rowe Price Group, Inc. Mr. Riepe retired from active management at T. Rowe Price in 2006 after nearly 25 years of service. He served on the firm’s management committee, was responsible for overseeing the firm’s global mutual fund and institutional investment activities and was Chairman of the T. Rowe Price Mutual Funds.
Mr. Riepe worked in the investment management business for more than 35 years and played a leadership role in mutual fund industry affairs. He was twice elected Chairman of the Board of Governors of the Investment Company Institute, the industry’s national trade association, and was a member of its Executive Committee for over 20 years. He also was a member of the Board of Governors of the [National Association of Securities Dealers] NASD (now FINRA) and chaired its Investment Companies Committee.
Mr. Riepe currently serves as the non-executive Chairman of the board of Genworth Financial, and as a director of LPL Financial Holdings, UTI Asset Management Company Ltd (India), and Baltimore Equitable Society. He previously served on the board of The NASDAQ OMX Group.
Mr. Riepe received a B.S., M.B.A., and Honorary Doc- tor of Laws degree from the University of Pennsylvania where he served as Chairman of the University and Penn Medicine Boards of Trustees. He is a board member of the T. Rowe Price Program for Charitable Giving (chairman), Baltimore Museum of Art (president), Boys and Girls Clubs of Martin County, Florida and U.S. Ski and Snowboard Foundation.
– by Kent Trabing