'Tradition of Silence' Doesn't Quiet Bogle

“Provocateur and writer” is how John C. Bogle describes what he now does for a day job. The 77-year-old father of index funds and founder of the Vanguard Group is now the author of six books, his most recent being The Little Book of Common Sense Investing [John Wiley & Sons, March 2007]. When Directorship unwittingly borrowed the title of his fifth book, The Battle for the Soul of Capitalism, for the April/ May cover story, Bogle called to discuss the matter and filled us in on his latest findings.

“Most of my life I have devoted to doing things for investors; it’s a habit I can’t seem to break,” he says. Nor does it appear that he has any intention of stopping now. In Bogle fashion, his new book has more than modest aims. Bogle says he was driven to write it by the ideal that he could help fix the long-term financial security of America’s 100 million investors.

One of the questions Bogle says he is most frequently asked is why the mutual fund industry takes a back seat on governance initiatives. Bogle cites the “long tradition of silence that is partially tradition and partially structural.”

“The same people,” he notes, “manage pension assets for the companies they would be criticizing.” Even so, in his view, significant gains were made under former Securities and Exchange Commission Chairman Harvey Pitt, on whose watch the SEC ruled that mutual funds should disclose votes to shareholders. While rarely neutral on any matter, he expresses ambivalence about “vote selling,” describing it as an unintended consequence of that ruling. His solution? Bogle believes voting rights should be owned by investors, not speculators, and that voting should be limited to those shareholders who have held shares for two or more years. “Short-term decisions have to be in the best interest of shareholders. We have to create shareholder value,” Bogle maintains.

As any man on a mission, Bogle has not been without his share of detractors. His first index mutual fund was derided as “Bogle’s folly,” but like Bogle, it outlived its critics and went on to become the second largest mutual fund in the world. His new book details his no-nonsense approach to investing and is peppered with testimonials from gurus such as Warren Buffett, Peter Lynch, Jim Cramer, and even Forrest Gump.

The Little Book of Common Sense Investing is unlikely to be popular reading among money managers, but for the individual investor, it presents a solid game plan for growing funds over the long haul.