Free Essay. Culture, Compensation, and Leadership Contribution to the Ethics Problems at Putnam

Putnam was involved with market timing in international funds, thereby creating ethical issues. Market timing is a quick way to earn profits by trading out of mutual funds between investors, and it lowers the returns of the funds while it increases costs. After receiving approval from SEC, the company was trying to combat this and draw in Peter Scannell, a worker whose responsibility was at the call center responding to requests and questions from shareholders of Putnam funds. Scannell between July and January 2003 observed a total gain of two million United States dollars as a union pension plan in ten members; they were involved with a total number of 657 shares and had made 5,340 trades. He tried to bring the attention to supervisors, but in vain, he was told that the matters would only involve senior management. Then the SEC was aware through Scannell and investigated the situation but took no further action. It is at Galvin's office that there was a notice of the six-portfolio manager's involvement in market-timing trades. They agreed to stop after the confrontation but did not face disciplinary action. At the time, Lasser was notified and failed to report the incident to the leaders and board of trustees.

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Haldeman's changes can influence positive ethical conducts

Yes, Haldeman's changes came at a period that there was a spiraling crisis at Putnam. Through the changes, there is a positive influence whereby the affected are to be in compensation through restitution if not found guilty. The shareholders who were affected by the market timing through an independent expert analysis would ensure the guilty are dealt with and serve as an example of positive ethical conducts. There were civil fines to be imposed upon a later date for the incident employees, and managers at Putnam investment were to hold funds before selling their investments. These are positive influences and practices of good ethics through the imposing of fines and hold on funds because it will ensure that there is adequate time to investigate and punish offenders in Putnam.

Voyager fund attributable to underperforming

The Voyager Fund was a new fund to the team, and they were required to prove themselves if they needed a chance by Haldeman. The fund as a philosophy investment for Putnam comprises of the group being dependable throughout the prudent investment with superior returns on this type of fund for a long-term look on returns for investment management judgment. In contrast to Lasser's era, the fund managers had a directive to work for whatever was necessary for getting up returns through weekly review track or face replacement or dismissal if not. However, problems such as lagging returns had started because of Voyager Fund and Haldeman's efforts to change Putnam culture. A balance strike was the challenge that Haldeman felt for this investment philosophy and changes in culture throughout the company for his restoration of the firm's reputation and attract new funds from institutional and individual clients.

Haldeman regarding the Voyager fund and the 401K transaction

Besides cleaning the house, Haldeman should have a swift, decisive action whereby there is charging the guilty for hold account on their activities. It would create a sense of responsibility for employees to have a fiduciary duty to their clients rather than having market timing for self-benefits. Additionally, there should be a weekly driven compensation for performance bonuses of the employees. To the clients, Haldeman should have reported to all clients on the benefits and advantages of rooting bad employees and new strategies ways of the Voyager Fund and the 401K transaction. Haldeman should regulate personal investments by holding funds for a while to investigate and avoid court battles and expenses to their limited law enforcement funds.

Costs and benefits of recommendations

Holding accountability for incident employees would reduce continual loss costs incurred in market timing and the number of people who want to join. Putnam through the regulators will have a criterion that is cost-effective as they hold client investments that they manage. The weekly driven performance can benefit clients and employees because it will minimize Putnam's exposure and lessen the withdrawal of clients, creating a fund for the long term of the firm.

Reference

Nohria, N., & Nichols, C. (2006). Putnam Investments: Rebuilding the Culture.