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Administration January 3, 2006
SEC: Disgraced Putnam Managers Got 'Lavish' Comp
March 25, 2004 (PLANSPONSOR.com) - The U.S.
Securities and Exchange Commission (SEC) has disclosed that
two former star Putnam Investments portfolio managers were
paid "lavish compensation" in 2000, at the height of the bull
market.
Reported by Fred Schneyer
The federal securities regulators said Justin Scott received $14.3 million while Omid Kamshad walked off with $8.7 million, according to a Wall Street Journal report. Both were richer than the 2000 compensation of the chief executive of Putnam parent Marsh & McLennan Cos., Jeffrey Greenberg. Greenberg received $6.8 million in salary, bonus, and restricted stock awards. However, the two money managers payouts lagged behind Putnam’s then-CEO, Lawrence Lasser, who was received $35 million.
At Putnam, Scott and Kamshad both face charges from the SEC and Massachusetts regulators that they market timed the funds they were overseeing. Their big payday came the same year Putnam says it discovered the improper trading, but didn’t disclose it to regulators or fund trustees. The company has since dismissed both managers. In all, the SEC has said six managers made profits of $1 million through improper trading, while company lawyers place the figure at $500,000, once trading losses are deducted.
Putnam has been a key target in the ongoing federal/state probe of market timing and late trading practices as well as certain fund sales practices.
Disclosure of the Putnam managers’ compensation may well become more the norm than the exception. The SEC is now considering rules that would require more information, such as how pay is tied to fund performance, but not dollar amounts (See SEC Proposes Fund Manager Disclosures ). The agency argues that overall management fees paid to a mutual fund represents enough dollar disclosure.
John Hill, chairman of the Putnam funds board of trustees said Scott and Kamshad had extraordinary performance records and supervised huge sums. According to the SEC, Scott oversaw $18 billion in 2000, and Kamshad $17 billion.
According to a survey by executive recruiter Russell Reynolds and the Association for Investment Management and Research cited by the Journal, the median stock-fund manager would make an estimated $325,000 in 2003, down from $436,500 in 2001 and roughly the same as 1999, the first year the survey was conducted. Among veteran fund managers, with at least five years experience, the top 10% could expect to be paid $1.1 million on average, down from $1.8 million in 2001.