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December 8, 2003
Washington, DC -- Four of the nation’s most powerful
public pension funds, in a heightened response to the Putnam
mutual fund scandal, announced they are using an anticipated
Securities and Exchange Commission (SEC) rule to more easily
nominate and elect better leadership on Putnam’s parent
company board.
The response comes in the form of a shareholder proposal
that seeks access to the proxy to nominate and elect directors
not hand-picked by the company. Marsh & McLennan Companies
Inc. (NYSE: MMC), which is the parent company of Putnam Mutual
Funds, is the target of the resolution for its failure to
properly control its money management business and for its
severe lack of independent board leadership.
Filing the action are AFSCME Employees Pension Plan, New
York State Common Fund, California Public Employees’
Retirement System and the California State Teachers’
Retirement System. Together they hold 6.85 million shares,
worth $306,000,000 or about 1.3 percent of the company.
“Marsh & McLennan deserves to be the first company
in U.S. history to face a binding proxy access proposal because
of its gross failure to have proper controls that could have
prevented the Putnam disaster,” said Gerald W. McEntee,
AFSCME Employees Pension Plan Chairman. “It is tragic
that the board at Marsh & McLennan lacked the independence
needed, and today continues to be influenced more by its insiders
than the needs of its shareholders. There is no question that
shareholders will support the idea of electing a truly independent
director to the board if given the opportunity through our
shareholder resolution.”
“Investors have pulled more than $32 billion dollars
in assets out of Marsh's Putnam subsidiary due to its involvement
in this terrible mutual fund scandal, and Marsh's stock price
is down about 10 percent,” added Alan G. Hevesi, New
York State Comptroller and sole trustee of the New York State
Common Retirement Fund. “I can't think of a stronger
case worthy of shareholder involvement, and I have no doubt,
that given the chance, shareholders will respond favorably
to our initiative.”
The problems of Putnam and Marsh & McLennan have been
continuously mounting since the trade scandal broke several
months ago, said Sean Harrigan, President of CalPERS. “Shareholders
do not have any interest in using the proxy statement process
to nominate a director unless the problems are so severe they
are Enron-esque. Putnam and Marsh & McLennan’s problems
are in that category,” he said.
Lack of independence and excessive compensation are also
reasons for filing the proposal, he said. “The excessive
compensation received by and promised to Lawrence Lasser is
outrageous,” he added. Lasser was fired as Putnam’s
CEO and pushed off the Marsh & McLennan board, but may
collect an estimated $89 million in severance, in addition
to having received salary, bonuses, stock options, restricted
shares and retirement pay packages worth $163 million over
the last five years. “This tells all of us that this
board is more concerned about its friends than its owners,”
he said.
Jack Ehnes, Chief Executive Officer of CalSTRS said the sponsors
are also concerned about the lack of independent board membership.
“This board isn’t meeting the needs of shareholders.
Now it is time for shareholders to do more than send a message
of our dissatisfaction. We must be allowed to use the same
process that the company does to elect truly independent directors,
who will listen to the shareholders--the real owners of the
corporation.”
The resolution will appear on the proxy if the SEC approves
the final regulations regarding shareholder access to the
proxy next month. The SEC allows early filing of shareholder
resolutions regarding proxy access in anticipation of the
regulations’ issuance.
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