Weak Morale at Strong Pales Putnam Resolve
January 12, 2004
It's a tale of two cities. While its certainly not the best of times at Beantown's Putnam Investments, it seems to be the worst of times for the employees at Strong Financial in Menomonee Falls, Wi. Both firms are heavily involved in the scandal plaguing the fund industry and have some striking similarities in circumstances. But their fates, and those of their workers, seem decidedly different.
At Strong, the outlook is bleak. Industry watchers and sources say that morale is plummeting at the firm and that employees there are both shocked at the revelations about founder Richard Strong, and awed at the predicament they now find themselves mired in.
After Strong, chairman, CEO and CIO of the firm resigned in December because of improper trading in his own account as well as a host of misdeeds by his firm, Strong Financial was put on auction block. Richard Strong announced a sale of the firm was being contemplated and Goldman Sachs was hired to scout out potential buyers.
At press time, it was reported that a number of bidders were interested in purchasing the assets of the firm, a move that could set the sale in motion. Strong had reportedly mandated a deadline last week, for potential buyers to submit a price range in which they are willing to pay for the firm's assets.
Bank One, Wachovia Bank, KeyCorp, and Wells Fargo, are among the reported suitors, as well as Lehman Brothers and New York Life Insurance. The assets are to be sold off, leaving the remaining portion of the hollowed-out firm to assume any liabilities imposed by regulators and handle the bevy of lawsuits.
Strong's public relations department had previously said that a sale is just one option, but sources have said the move is a foregone conclusion. An imminent sale could lead to the majority of the 1,300 employees at its headquarters losing their jobs.
Attracting quality workers to the firm may be nearly impossible at this stage with the cloud of uncertainty surrounding its future, say industry insiders. Current workers should start updating their resumes and considering alternative options, some have suggested. Burton Greenwald, president of the Philadelphia fund-consulting firm B.J. Greenwald Associates, said employees there have to be considering whether or not their jobs at Strong in the suburbs of Milwaukee are a long-term viable option. Strong Financial did not return several calls seeking comment.
"Our phones ring continuously from Strong associates wondering whether they should actively be looking for new jobs. The kinds of calls I am getting are calls asking for advice. People have a strong loyalty to the firm, but feel they need to be hedging their bets," said Rochelle Lamm, Chairman and CEO of Precision Marketing Partners and The Academy of Financial Services Studies in Milwaukee. Lamm is the former president of Strong Intermediary Services and Strong Retirement Plan Services. The two firms fall under Lamm Wallach Companies, which provides distribution, sales, marketing and training services exclusively to the financial services industry. "While people first and foremost are concerned about their families and jobs, as we talk with our former colleagues at Strong, they have many more questions than answers about what's in store for them personally and for the firm," Lamm added.
Lamm said that between her two firms, a total of 15 people are ex-Strong veterans, including Leslie Lynch, president of The Academy of Financial Services Studies and Strong's former head of human resources. "Our firm is filled with ex-Strong employees, its like family over there to us."
A Lump of Coal
Adding insult to injury, Strong announced recently that it is cutting back on the retirement benefits it provides to employees. "That is a sorry commentary on the leadership in the sense that the abuses occurred at the very top, but the rank and file are suffering because of it," Greenwald added.
Specifically, the firm told its employees that it is eliminating its 2004 pensions plan contribution and ditching its matching contribution to employees' 401(k) plans, amid a push to lessen costs. Additionally, the firm said that it is considering other cost cutting measures as it fights to stop assets from hemorrhaging. The 2004 pension contribution that is being eliminated by Strong's board of directors was to be paid in 2005. The firm said it will make its 2003 contribution at the end of this month.
"It's an unfortunate piece of news for the employees and is basically driven by the firm being in some difficulty because of what the top executive did," said Don Cassidy, senior analyst with Lipper of New York. "I think the firm is in a position of trying to survive, whether that be independently or being acquired, but it is unfortunate for the innocent people."