Stanford Business

MAY 2007


Taking the Reins at T. Rowe Price

Kennedy looks for “wicked smart” people and say he’s biased towards those who have overcome adversity.

By Laura Smitherman

James A.C. Kennedy, MBA ’78, planned to pursue a career as a railroad executive when he first arrived at Stanford University. Trains rattling through the West held fascination for him during his boyhood in Omaha, Neb., and he had worked summer jobs overhauling diesel locomotives and repairing tracks.

But his plans would change after studying under the Business School’s John G. McDonald, the finance professor who brings executives to the classroom to be quizzed by his students. That’s where Kennedy first met Warren E. Buffett, the legendary investor nicknamed the Oracle of Omaha, the headquarters for his Berkshire Hathaway Inc.

“It was a tremendous, eye-opening experience,” Kennedy says. And a new career path took shape.

In January, Kennedy became CEO of T. Rowe Price Group Inc., a global investment company that manages more than $300 billion on behalf of clients. After Stanford and a stint in General Electric Co.’s renowned financial management training program, Kennedy landed at Baltimore-based Price and has been there ever since.

Two hundred miles from Wall Street, Price has an almost goody-goody corporate reputation. The company avoided the mutual fund scandals that tainted the industry a few years ago, and it won accolades for steering clear of dot-com fads of the late 1990s after the Internet bubble burst.

Kennedy was tapped for the CEO post because, as director Donald B. Hebb Jr. put it, the board believed he would be a faithful “keeper of the culture” who not only plays by the rules but is committed to the company’s team approach.

“As opposed to the star who looks to be thought of as smarter and quicker than the rest,” Hebb said, “you have someone who says, ‘I’m the guy who calls the meeting to order.’”

Kennedy started as an analyst, looking at companies for possible investment. One of his first recommendations: Buy railroads. An old map of Nebraska railroads still hangs behind his desk.

Soon his bosses approached him to be director of research in charge of the analysts. He said no six times before grudgingly taking a job he feared would be like “herding cats.”

The year was 1987, and the job would be even more difficult than he imagined when the market crashed a few months later. Kennedy set out to shake up the department, and a number of people were fired or transferred. He developed a system to weed out analysts who produced inferior research and couldn’t sell recommendations to money managers.

A decade later, Kennedy rose to head of the equities department, managing the money managers. He was a stickler for policies that keep managers in check. For instance, funds must be diversified to reduce the risk of a hotshot making oversized bets on a stock or bond that goes sour.

Kennedy became known for his sharp eye for talent. He can give people the distinct impression he is analyzing their personality during conversations, and he frequently begins sentences with the phrase, “If you think about it.”

Price’s eclectic investment team includes a college football Hall of Famer, a surgeon, an urban planner and, actually, a rocket scientist. Kennedy looks for “wicked smart” people and says he’s biased toward those who have overcome adversity.

Colleagues say Kennedy is accessible, with a knack for remembering names and a penchant for lunching with different employees. “He’s not like a lot of people moving into a corner office and disappearing into the corporate boardroom,” said Mary J. Miller, head of the fixed-income division.

A number of company traditions already bear Kennedy’s imprimatur. He wrote the memo that turned the holiday party into a gridiron show, even though he is often lampooned. And he started the company softball league by challenging the fixed-income folks to a game with equities; the annual playoffs now field more than two dozen teams.

Kennedy also spends a lot of time with new hires, and has escorted spouses around Baltimore to give them a feel for the place. He once invited the interns to his house and cooked after a rained-out Baltimore Symphony Orchestra event.

“These guys get to drink beers and eat dinner with the CEO,” said Anna M. Dopkin, a money manager at Price. “I used to work at Goldman Sachs, and while that’s an amazing firm, I don’t think I can remember who was CEO at the time.”

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