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William Demchak Asks Why

The Tepper School of Business Class of 2014 graduated this past May with the well wishes and advice of an illustrious keynote speaker — William S. Demchak, PNC Financial Services Group Chairman, President and Chief Executive Officer.

Demchak stepped to the podium to congratulate the class and quickly highlighted the “wonderful partnership” between the Tepper School, the university and PNC.

Examples of this collaboration include the PNC Center for Financial Services Innovation, created in January 2013 and housed in the Tepper School, as well as the Tepper School’s PNC faculty chair, held by PNC Professor of Finance Burton Hollifield.

Demchak began his remarks by illustrating his own “lifelong habit of always asking why,” pointing out its significance.

“You’re graduating into a world that is much, much more complex and rapidly changing than the world was when I graduated,” he observed, “and we haven’t left it in terribly great shape for you, either. What is legal, what is ethical, and what is right are not always the same.”

He provided examples of the need to question.

“We strive for consensus, we enter into a stupor of groupthink,” Demchak said in describing the large corporate environment. “We celebrate the success of the team and all the while we quietly forget to form our own opinions. We forget to ask why.”

“There’s been a lot written about the root causes of the financial crisis,” he continued. “What’s not written about are the people who were complicit in the problem because they just went along…who forgot to ask why.”

And what about the ethics classes offered at schools around the country?

“These classes tend to expose you to visible issues where you need to make a choice,” he remarked, “but my experience is that many — if not most — ethical breaches happen without the individual ever realizing that they were, in fact, making a choice.”

Demchak relayed a story from his days leading the derivatives team at J.P. Morgan and was quick to note that the culture fortunately “celebrated doing the right thing.”

“We had incredible informational and analytical advantage over our customers,” he pointed out. “We had weapons of mass destruction or we had the ability to power the world depending on our actions.”

While calling on the treasurer of Orange County, California, Demchak had realized the official didn’t fully understand the tremendous portfolio risk he was incurring through heavy derivative investment. Given this, Demchak recommended against doing business with Orange County, despite the potential short-term profitability.

“Probably the proudest day of my entire career was when our chairman wandered across the trading floor, sought me out, shook my hand and thanked me for doing what was right,” said Demchak.

Less than a year later, Orange County declared bankruptcy and the treasurer went to jail.

“None of the Wall Street firms were charged,” Demchak said. “They didn’t do anything illegal — but they also did absolutely nothing right.”

Demchak used these tales to both caution and inspire the graduates.

“We need to aim higher,” he said. “Do what is right — right by your colleagues, your clients, your communities, your shareholders and society as a whole. To do this, you need to ask why, you need to understand why, you need to take accountability for why. You need to have an informed opinion based on facts and you need to be willing to voice that opinion.”

“My wish for you as you step out into the world,” Demchak said in closing, “is that you will aim for that higher standard, you’ll chase your dreams with intense energy, you’ll drink in information to mold informed opinions, that you’ll stand boldly for what is right, even above what is legal, that you’ll do better than we have. Congratulations.”

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