Lawyer Diaries: SEC Chairman Interview

The following Lawyer Diary comes in the form of an interview with David S. Ruder. He's a former Chairman of the Securities and Exchange Commission. This interview is excerpted from Learning From Precedent.

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Bloch: In terms of your future career, what was the biggest value of going to law school?

Ruder: After practicing law, I came to Northwestern Law School as a professor, then dean. Eventually I became Chairman of the Securities and Exchange Commission. I would say that the biggest value of law school for all of those positions was the ability to see both sides of issues.

In law school you’re taught that the law is not one-sided. The better lawyers not only understand the points on their side of the argument, but the points that the other side makes as well. Understanding opposing views allows you to be prepared to meet and rebut arguments.

I think that the ability to see both sides of a problem is also very beneficial to the businessperson. I’ve always thought that law is great training for business. If you can see both sides, you can anticipate problems that will arise when you follow your own inclinations.

That’s not to say that there aren’t downsides from training to be a lawyer. For example, some lawyers tend to become risk-averse because they see problems everywhere. To me, the ideal businessperson is someone who is willing to take risks, but can also recognize obstacles that are bound to arise.


Bloch: I’ve heard from many lawyers who say it’s important to learn business, and from many businesspeople who say it’s important to learn law. It seems as though the skill sets of the two professions are complementary.

Ruder: At a major law school like Northwestern, many of our graduates tend to go into the world of business, corporations, and commercial transactions. There are other areas of law such as estate planning, torts, criminal law, and property law that may not seem to involve business. I often find students who say, “I’m not interested in business law so I’m not taking any business courses.” And I say to them, “Do you think your clients are never going to have any business interests? Shouldn’t you be able to understand the business interests of that client? Shouldn’t you be able to understand what obstacles those clients may have in becoming financially successful?” Sometimes I hear students say, “I don’t want to be in business law. I want to go to trial.” And I say, “What kind of cases will you be trying? Do you never plan on having a business case that you’ll try?”

I think that avoiding business matters is wrong. The need to learn something about business is crucial for almost all types of law practice.


Bloch: Are there other sets of knowledge law school provides?

Ruder: I think that many people who have not gone to law school not only don’t understand the nature of the legal process, but also don’t know how historically the law became an alternative to war. In its simplest form, legal practice involves conflict resolution. In conflicts, each side has a different view. In the pre-law days, armies were sent out to decide conflicts. Eventually, lawyers became the combatants. In our legal system, the brightest legal minds, the best arguers, and the best thinkers come together to try to resolve conflicts.


Bloch: How did all of these understandings contribute to your career as a law school dean and as Chairman of the SEC?

Ruder: In some ways, I was fortunate to have been the dean of a law school before I became SEC Chairman. A dean has to deal with various constituencies—students, staff, professors, alumni, university administration, other departments, and other schools. I had a fair amount of experience dealing with these constituencies, and I was sensitive to the fact that each of them required attention.

As Chairman, similar responsibilities existed. I had to deal with investors, staff, other commissioners, Wall Street, Congress, the administration, and the press. In Washington, I quickly learned that no matter how much I thought I knew about something, I always had more to learn. I had some understanding of how Wall Street worked, but not a deep understanding of how individual large firms operated. I had a very steep learning curve, particularly when the stock market crashed only a few months after I arrived.



Bloch: Can you tell me about your time as Chairman? What motivated your move from academia?

Ruder: On the motivation side, as a professor I was interested in corporate and securities law. After 25 years or so as a law professor, I had become intensely involved in learning about securities regulation and securities markets. I had an abiding interest in the regulation of the purchase and sale of securities, in fraudulent conduct in the securities world, and in the operation of the securities markets. From my point of view—from a securities professor’s point of view—when I was offered the opportunity to lead the organization I had been studying all my life, the answer was, “Yes!”

In terms of how I got there, the track was quite different than most people who become Chairman of the Securities and Exchange Commission. Most chairmen have some political connections and are active in a political party. I had no political background. I had begun by writing articles in the securities field. As a result of those articles, I was asked to speak. I spoke at a great number of securities meetings with lawyers. As a result of those speeches, I became active in the American Bar Association, and I served in its Business Law section. As a result of my various activities, I was asked to participate in a securities law project for the American Law Institute, the most learned of the legal organizations in the United States.

The then-Chairman of the SEC decided to retire after six years in the position. President Reagan looked for a suitable replacement from Wall Street and from regulators, but finally, decided to look at lawyers. Reagan’s people began to ask around the White House, where many of the top people were lawyers. They asked for suggestions for Chairman of the SEC. It turned out that my name came up on almost all of the lists!

I think I was selected because of a combination of my reputation in the securities field from writing, speaking, and participating in activities of the American Bar Association, and my work in the academic world as a dean. I don’t advertise this, but I knew that I wasn’t a political candidate, so I called myself the “competency candidate” instead!