William H. Donaldson, who made an early fortune as a co-founder of the innovative securities firm Donaldson, Lufkin & Jenrette and later pushed for tighter financial regulation as chairman of the Securities and Exchange Commission in the wake of the Enron and WorldCom accounting scandals, died on Wednesday at his home in Westchester County, N.Y. He was 93.
The cause was leukemia, his son Adam said.
Mr. Donaldson also served briefly as an under secretary of state under Henry A. Kissinger, headed the New York Stock Exchange and was chief executive of the insurer Aetna Inc.
In 1975, he was named the founding dean of Yale University’s School of Organization and Management, now known as the School of Management, whose mission of training leaders for both business and government was exemplified by his own zigzagging career.
Mr. Donaldson was only 28 and a year out of Harvard Business School in 1959 when he joined two friends, Dan Lufkin and Richard Jenrette, to found a securities firm bearing their names and known as D.L.J.
The three young men noticed that mutual funds and other institutional investors were accounting for a larger share of stock market trading. They believed that these professional investors would welcome more sophisticated research than was typically produced on Wall Street. D.L.J. focused on the stocks of smaller, up-and-coming firms rather than slower-growing blue chips.
Mr. Donaldson served as chief executive as the firm expanded rapidly and diversified into fund management during the “go-go” stock market boom of the 1960s. In 1970, D.L.J. upended a Wall Street tradition by offering its own shares to the public. Other securities firms soon followed, opening up a badly needed new source of capital for the private partnerships that had long dominated Wall Street.
In 1973, The New York Times called Mr. Donaldson “one of Wall Street’s best-known whiz kids.”
That same year, feeling restless, he whizzed off to Washington to work for Mr. Kissinger in the State Department. He resigned from that post about eight months later after finding himself bogged down in bureaucratic minutiae, lacking influence on policy and rarely in direct contact with the globe-trotting secretary of state.
But his public service wasn’t over. He was briefly an adviser to Vice President Nelson A. Rockefeller in the mid-1970s. President George W. Bush appointed him chairman of the S.E.C. in 2003.
The commission was under fire at the time for appearing too lax in its watchdog role. After the stock market boom of the late 1990s, Americans were stunned and angered to learn that the energy firm Enron and telecommunication-services provider WorldCom had used accounting trickery to inflate their reported profits. Congress was determined to crack down and authorized a bigger budget for the S.E.C.
Mr. Donaldson, a moderate Republican, often sided with Democratic commissioners rather than those of his own party when voting on new regulations. Republicans and business groups said some of his ideas, such as imposing tighter regulation on hedge funds, would raise costs needlessly. Faced with this backlash among the commissioners, he announced his resignation in June 2005, a little over two years after his arrival.
William Henry Donaldson was born on June 2, 1931, in Buffalo. His father, Eames Donaldson, a Yale-educated engineer, co-founded a machine-tool business that collapsed during the Depression, then took “a series of not-very-lucrative jobs,” his son wrote in 2018 memoir, “Entrepreneurial Leader: A Lifetime of Adventures in Business, Education, and Government.” His mother, Guida (Marx) Donaldson, managed the household. Mr. Donaldson described her as gregarious but plagued by periods of depression.
William Donaldson was a scholarship student at the private Nichols School in Buffalo, where he played varsity hockey. He started a short-lived humor magazine, Read ’Em and Grin, mainly using jokes cribbed from other sources and selling ads to local merchants.
He had also shown entrepreneurial instincts as a teenager, creating the grandly named United Enterprises to supply student labor for such tasks as house painting and lawn care.
As an undergraduate at Yale, Mr. Donaldson majored in American studies and befriended members of the Bush political clan. He was business manager of The Yale Daily News and a member of the exclusive Skull and Bones secret society. After graduating, he enlisted in the Marine Corps, earned a commission as a second lieutenant and served in various locations in the United States and Japan.
“When I got out of the service I was convinced that helicopters were the wave of the future and that everybody was going to have one in their garage,” he said in a 2002 oral history for Harvard Business School. After failing to find a management-track job in the helicopter industry, he joined the Wall Street firm G.H. Walker & Company, run by members of the Bush family.
Around a year later, he enrolled in Harvard Business School, where he found that case studies of business problems sharpened his ability to ask probing questions. He returned to G.H. Walker after completing his M.B.A. degree in 1958. Soon he was talking with two other Harvard Business School graduates, Mr. Lufkin and Mr. Jenrette, about starting their own firm.
Once D.L.J. was up and running, Mr. Donaldson wrote, the founders taught themselves to do stock market research with an “investigative mind-set.” Rather than just talking to executives, they sought input from customers, suppliers and others.
The Equitable Life Assurance Society acquired D.L.J. in 1985 for about $430 million, and it was later absorbed into Credit Suisse.
In the mid-1970s, Mr. Donaldson tried to buy The New York Post, only to see it sold to Rupert Murdoch. Kingman Brewster Jr., then president of Yale, provided an alternative by recruiting Mr. Donaldson to create a management school. He served as its dean until 1980, promoting the idea of combining public service with business careers.
“I think the lines between the private and public sectors are blurring more and more,” he told The Times in 1975. “Business has to interface with government increasingly, and government is more and more involved with business. It’s just a fact of life, and not necessarily bad.”
In the early 1980s, he created an investment company, Donaldson Enterprises, and briefly campaigned to become the Republican nominee for governor of New York in 1982. “It was a time when the Republican Party was increasingly at the far right, and I wasn’t there, especially on social issues,” he told The Journal News of White Plains, N.Y., in 2005.
The New York Stock Exchange, facing tougher competition and declining revenue, recruited him to be its chairman, starting in January 1991. During his term of about four and a half years there, the exchange reduced transaction costs and lured some trading back from rivals.
Mr. Donaldson was a director of Aetna in the late 1990s when that company ran into trouble after splurging on acquisitions. In a February 2000 management shake-up, Aetna’s board appointed him chairman and chief executive. He pleased shareholders with the sale of Aetna’s international and financial-services businesses. He was paid about $19 million in salary, bonuses and stock options (about $35 million in today’s currency) for spending about 13 months working on Aetna’s overhaul.
“My compensation was strongly aligned with shareholder interests,” Mr. Donaldson said when asked about those payments during his S.E.C. confirmation hearing before the Senate Banking Committee.
His first wife, Evan (Burger) Donaldson, who led a nonprofit adoption service, died in 1994. The next year he married Jane Phillips, a former admissions and placement director at the Yale management school. She survives him. In addition to his son Adam, he is survived by two other children, Matthew and Kimberly Donaldson; and three grandchildren. He lived in the hamlet of Waccabuc, part of Lewisboro, in Westchester.
In the Harvard Business School oral history, Mr. Donaldson offered a tip for all kinds of leaders: “Why are we doing it this way?,” he said, is a question that can be asked about everything.
