John Bogle on Investing: The First 50 Years

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CREATING SHAREHOLDER VALUE: BY MUTUAL FUNDS … OR FOR MUTUAL FUND SHAREHOLDERS?

Keynote AddressAnnual Conference of the InvestorResponsibility Research CenterWashington, D.C.October 26, 1998

IT IS AN EXTRAORDINARY honor to be invited to give this keynote address as the IRRC begins its second quarter-century of service to the shareholders of America's publicly held corporations. In fact, as I understand it, I am the first senior executive of a mutual fund firm to be so honored. Clearly our industry—now representing the largest single pool of institutionally owned equities in the nation—has been conspicuous by its absence from participation in your annual conference.

While there are some valid reasons for why you might not have sought our participation in the past, there are—paradoxically enough—also some disturbing reasons why we might not have been particularly enthusiastic about participating in discussions regarding the creation of shareholder value in Corporate America. For reasons that I look forward to discussing with you today, our self-interested modesty—if that is not an oxymoron—is now at the inflection point of change.

The creation of “shareholder value” as the explicit focus of corporate strategy is largely a phenomenon of the 1990s. It has been driven, in part, by the leadership of large institutional investors, notably the states of Wisconsin and Florida, CALPERS, and the New York City funds, supported by the vigorous advocacy of the Council of Institutional Investors. ...