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Get Four
|  | NOVEMBER 4, 2003
Putnam's New Boss on the Task Ahead CEO Charles Haldeman talks about what the troubled firm needs to do to become "the model for ethical behavior" The new CEO of Putnam Investments, Charles "Ed" Haldeman, has been at the troubled money-management firm for just one year. But in that time, he has won kudos from employees and analysts for making changes designed to turn it around. His job got even harder when federal and state regulators charged Putnam with fraud on Oct. 28 (see BW Online, "How Putnam Landed in This Pickle"). A week later, longtime CEO Larry Lasser was gone, and Haldeman took over. Putnam's new leader spoke with BusinessWeek Boston Correspondent Faith Arner on Oct. 21 and again on Nov. 3, when he was just hours into his new job, on a variety of topics. Here are edited excerpts from those conversations: On major changes made: There are two major things that have been going on: To make sure every person in the investment division, every person at Putnam comes to work every day defining their job to be taking care of other peoples' money...and to make sure in every fund and every institutional mandate we have, we deliver performance that's consistent, dependable, and leads to superior results. The second one has to do with the culture. We changed our incentive-compensation program to be totally aligned with those goals. There's no incentive to try to hit the home run (see BW Online, "The Putnam Shakeup: Why It Took So Long") . On structural and cultural change: When you empower people, when you give them more independence, autonomy, and control, you get huge productivity enhancements. And a great investment professional will only stay long-term at organizations that give them that sense of empowerment, freedom, and control. Our view was that because Putnam became a big organization, it became too centrally controlled, and it was too hierarchical -- too structured, too bureaucratic, too many meetings, too many policies, too many rules. We've done everything we can to try to remove the hierarchy, structure, policies, and rules and to trust people more and give them more independence and autonomy. On hiring the former head of the Security & Exchange Commission's investment-management division to review compliance issues: It's going to make our external constituency feel even more comfortable knowing an objective third party who worked at the SEC comes in and helps us look over everything we do in the compliance area and make sure we become the model for ethical behavior. On enforcing compliance: The current management sent a pretty strong message about how we feel about enforcement. Due to a subpoena and production of trading records, we recently found inappropriate behavior in the past -- three-and-a-half years in the past. We knew that taking action against those people would put some of our business at risk, and yet we said we have no choice but to ask those people to leave. In the past, there may have been some lapses, and we apologize for that. But current management has been clear about enforcement. On underperforming in a bull market: Nobody is going to do well in every market. And we have a valuation approach that goes to the core of why you own stocks -- the future flow of dividends discounted back to the present. We're still able to own companies that are losing money now if we make assumptions they'll turn around in the future. It's just that our system probably has at the margin a little bias toward companies that are real companies. On turning around redemptions: There are only two things you can do. One is deliver performance over the long term. And secondly, while you're in the process of delivering that, get the message out as clearly as possible as to what kind of investment management firm we are, what kind of results are likely to be produced, why they're likely to be produced, and give people [enough] confidence to take the leap of faith that we're going to deliver on them. On the impact of the fraud charges: It certainly hurts the reputation, but it doesn't make it any tougher in terms of the investment process we're following. Again, you've got to remember our No. 1 mission is to take care of our existing clients' money in a prudent manner. We've been real clear about how we define that, and we're doing the best job we can on that. And we believe that if we do that consistently and long enough, people will want to work with us. This may slow it down a little bit, but the No. 1 driver of this is time. On why he joined Putnam: It was the opportunity and the challenge -- to see if I could make a difference here despite all those concerns. It had the reputation for being a tough place to work. The impression of me was I was too nice a person to survive the place, that I'd get chewed up. But I've been here a year, and I've been fine, so I can only conclude I'm not as nice a person as other people thought I was.  Edited by Patricia O'Connell
BW MALL
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