Winds of Change Making Industry Over
December 8, 2003
Survivor: Mutual Fund Island. Which CEO will be the next to go? Many have taken the plunge already, but those who can outwit, outplay and outlast will be off the hot seat.
No, it's not television. But it sure is reality.
Putnam Investments underwent a facelift when it ditched Larry Lasser, its CEO of 18-years, and replaced him with a three-pronged solution: Charles "Ed" Haldeman, A.J.C. "Ian" Smith and Steven Spiegel.
Haldeman, 55, a senior managing director and co-head of investments at the firm, was thrust into the president and CEO role upon Lasser's exit. Meanwhile, Putnam appears to be breaking up the monopoly of power that Lasser held by naming Smith, former chairman and CEO of parent Marsh & McLennan Cos. (MMC), to the newly created post of chairman of Putnam. Spiegel, a senior managing director and chief of global distribution at the firm, was also given the newly made role of vice chairman.
"Ed has a track record of outstanding performance running investment management businesses, and he brings new energy and a fresh perspective to Putnam's leadership," Jeffrey W. Greenberg, chairman and CEO of MMC, said in a statement. Haldeman came to Putnam in October of last year from Delaware Investments and Lincoln National Investment Cos., where he served as president and CEO. He joined Delaware in 2000 and has nearly 30 years of investment management experience.
"Haldeman is a very ethical guy, and that's what Putnam needs above all else," said Don Phillips, Morningstar's managing director. "They need to limit the damage done under the previous regime. He doesn't have the background in sales that Lasser did or the visibility for non-investment operations, but getting back to the basics and putting ethics front and center is very important for the firm, and Haldeman is certainly capable of doing that."
Smith, 69, was chairman of MMC from 1992 until 2000 and CEO from 1992 until 1999. He has held other high-ranking positions within the company since the 1970s. Spiegel, 58, has more than 30 years of financial services experience and came to Putnam in 1995 from Lehman Brothers.
However, the presence of Smith as chairman suggests one of two things. Either the firm is trying to create more of a checks-and-balances system in its hierarchy. Or management believes, as some in the industry have suggested, that while Haldeman was very proficient in his previous role with Putnam and in past endeavors, he is not the right man to lead Putnam out of this mess. Some have suggested he lacks in some leadership categories.
"Haldeman is well known, and Smith has been there," Phillips noted. "Were they icons the way Lasser was? Probably not, but they are well known. A firm's ability to bring in qualified candidates in a panic scandal situation is not very easy."
Phillips said that Putnam has a deep bench of talented executives and that naming Haldeman to replace Lasser highlights the difference between shops like Putnam and Janus Capital.
The executive carousel continued to turn at Janus. Richard Garland, Janus International's former chief executive, has been under the microscope since New York Attorney General Eliot Spitzer plastered internal e-mails showing Garland contemplating allowing timing in Janus funds during the Sept. 3 press conference that kicked off this whole mess. Garland resigned and was replaced by Erich Gerth, a vice president and national sales director of Janus Global Adviser (JGA). His new role is senior vice president and managing director. Gerth, who joined the firm in July, was previously at Goldman Sachs Asset Management and is not all that well known in the industry.
Men Behaving Badly
Lasser and Richard Strong have been the poster boys for the scandal so far. After initially only stepping down as chairman of the Strong Funds, last Tuesday, Strong also relinquished his titles as chairman, CEO and CIO of Strong Financial Corp.
Last month, Alliance Capital's operating chief and chairman of the board of directors of the company's mutual funds, John D. Carifa, agreed to resign. Michael Laughlin, chairman of the firm's distribution unit, is also out. Alliance said Carifa and Laughlin have been replaced by Marc O. Mayer, now president and director of the AllianceBernstein Mutual Funds, and William H. Foulk, Jr., as chairman of the board. It also announced that Gerald M. Lieberman would step in as a director of Alliance Capital and as the firm's COO.
Lewis Sanders, CEO of Alliance, said recently that yet more changes are on the horizon. During a presentation at the 2003 Merrill Lynch Banking and Financial Services Investor Conference, he said that in accordance with the recommendations of its special committee of independent directors, the firm will be making other key management appointments shortly, "made possible by the considerable bench strength that the firm possesses."