NU Online News Service, Dec. 9, 2003, 8:33 p.m. EST – Four large public pension systems say they will seek to elect their own directors to the board of Marsh & McLennan Companies Inc., New York, as a result of revelations about trading activities at a Marsh subsidiary, Putnam Investments.[@@]

Marsh called the pension systems’ announcement, which compared the Putnam situation with another corporate scandal, “outrageous.”

The four pension systems are the pension plan at the American Federation of State, County and Municipal Employees, Washington; the California Public Employees’ Retirement System and the California State Teachers’ Retirement System, both based in Sacramento, Calif.; and the New York State Common Retirement Fund, Albany, N.Y.

The systems say they will present a shareholder proposal to allow the groups to nominate and elect directors to the Marsh board.

The systems say they hold 6.85 million shares of Marsh stock, or about 1.3%, of the company’s stock. The shares are worth $306 million.

The systems are responding to allegations that Putnam let some investors trade mutual funds after hours, giving them an advantage over most other investors. After the allegations surfaced, Marsh replaced Lawrence Lasser as Putnam’s president.

“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,” Gerald McEntee, chairman of the AFSCME pension plan, says in a statement included in the pension systems’ announcement.

McEntee says 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.”

The four also criticize Marsh for paying Lasser too much.

Sean Harrigan, president of CALPERS, called the actions at Putnam “Enronesque.”

The analogy drew strong criticism from Marsh. In a statement, the company says it was “surprised and disappointed” that the investors decided to communicate their stance in a press release instead of sitting down with the company first.

Marsh adds that “any sense of objectivity is undermined by your outrageous reference to Enron in your characterization of what has occurred at our Putnam Investments subsidiary.” The company says it does not believe the facts support the position taken by the four pension systems.

Marsh says that 9 of its 15 directors are independent and that other forms of committee oversight use independent directors. Marsh also says a new management team is in place to oversee operations at Putnam and “establish the most rigorous governance, oversight, trading and compliance standards in the mutual fund industry.”

The company says it has taken other measures, including firing other employees and committing to reimburse pension funds that suffered losses because of the actions involved in the allegations.