A pointless, but necessary protest

First off, I want to apologize for two highly snarky posts in a row. Anyone who knows me offline knows that sarcasm is a hobby, not a lifestyle for me. But hoo boy, does Putnam Investments ever deserve it--I could clone myself ninety-nine times, and still not give them all the sarcasm they deserve.

Backstory: A previous employer went to the trouble of setting us (meaning the employees who opted in) with Simple IRAs, and given the employer matching, I would have been a fool to turn it down. The financial advisor from Putnam somehow couldn't be bothered to take my calls after our meeting, in which I asked for info. about socially responsible funds. But we were locked into a single vendor, so to minimize the blood on my hands, I took the option of small cap funds on the rationale that smaller companies would probably do lesser harm than large corporations who have been known to bribe (or outright buy) public officials and whose Third World union-busting and/or land acquisition techniques are indistinguishable from terrorism (which is not a word I use lightly, btw).

(Now, before I completely come off all goody-two-shoes and all, please humor me long enough to let me state that I strongly believe, in principle, that it is better than to be good than to be pure (because purity = dogma = evil). And, with equal strength, I also believe that there is no way to do business and keep 100% of the evil cooties off you. In the end, it boils down to a mentality not unlike Integrated Pest Management.)

But.

Then this year's shareholder proxy statement arrived in the mail and I came eyeball to eyeball with the mentality that should have had me dumping my shares a few years ago. Bad Doreen! Bad, BAD Doreen! (Although there's more than a pinch of penance baked in the fact that I'll have to drop them in this market.)

Let's take take the voting proposals point-by-point. But beforehand, just make a note that, at the head of the proposals was the following advisory (in all caps emphasized with boldfacing and underlining the word "FOR"):

THE TRUSTEES RECOMMEND A VOTE FOR ALL APPLICABLE PROPOSALS OTHER THAN PROPOSAL 5

Proposal 1 is merely a matter of voting for the 14 eligible trustees. My reaction after skimming the profiles: You're all white and the youngest of you is 58 years old. Yeah, that's going to promote a lot of diversification in thought in a global economy.

Proposals 2 and 2A - 2C are intended to approve a new management contract for funds, including breakpoints and performance fees. My reaction: Granted, the same-old-same-old is what drove the economic bus off the road. But the management fees for a fund are tied to the net value of the fund's assets, and in some cases, fees will be tied to a benchmark. Both of which I think could be bad because I view them as an abdication of judgement. We've already seen what "too big to fail" has done; the saving grace of the net aggregate asset-based fee is that the "performance period" is a Methuselah-esque three years. But benchmarks? Bad. As I read it, these are calculated monthly, which completely negates the long(er)-term thinking of the thirty-six month performance cycle. Now the idea of the breakpoint, which is based on the performance of a fund family as a whole, I like because it spreads the incentive.

Proposals 3 and 3A through 3E essentially remove self-imposed restrictions and enable things like investment in commodities, reducing diversifications in some funds, owning a higher percentage of securities, borrow a higher percentage of a fund's total asset value, and lend a higher percentage of a fund's total asset value. My reaction (in Sam Kinneson-esque decibels, minus the profanity): WERE YOU PEOPLE NOT PAYING ATTENTION LAST YEAR?!!?!! Because we all know how well de-regulation combined with (cough) innovation in "packaging" worked out. (Saving, of course, the die-hard Kool-Aid drinkers who still believe that spritzing the lawyer-ese equivalent of Lysol on bad debt and paying brokers/managers/"regulators" obscene amounts of money to pretend that it was good debt is part of a giant plot by ACORN.)

Proposals 4 and 4A through 4B remove the cap on the lifetime of a trust. Currently, a trust's value must be paid out to the surviving descendents of the person who set up the trust twenty-one years following the death of the last of his/her named children. The proposals allow the trust to continue indefinitely. I don't have an opinion on the basic principle; my reaction is to the proviso that gives Putnam the right to buy out the trustees' interest whenever they feel like it, based upon "thresholds" set--surprise!--by Putnam itself. The redefinition of both "trust" and "indefinitely" is breathtakingly Orwellian, no?

Proposal 5 is a shareholder-initiated resolution that would require Putnam's Board of Directors to implement policies designed to prevent investing in companies that "contribute to genocide or crimes against humanity." Should be a no-brainer, you'd think. Yet, recall that this proposal is the one that the Trustees "unanimously" recommend all shareholders vote against.

In fairness and balancedness, here is the collective Trustees' response in full, with my reactions spliced between paragraphs:

The Trustees condemn genocide, crimes against humanity and similar egregious violations of basic human rights. However, for the reason set forth below, the Trustees, recommend a vote against the shareholder proposals.

Why only "egregious violations" of human rights? Condemning only genocide and crimes against humanity puts you morally north of, say, the KKK, the CIA, the KGB, and The Mob. Good job, there.

The U.S. Government maintains a comprehensive set of laws and regulations governing business relationships with countries that are believed to be responsible for egregious violations of basic human rights. These laws and regulations reflect consideration by experienced foreign policy experts of the nature of the particular problems in each country and often involve complex judgments whether certain types of business relationships might contribute to the problems in a particular country or, alternatively, might contribute to improving the conduct of the political regimes involved and the living conditions of the local populations. Putnam Management is commited to complying fully with all such laws and regulations currently in effect or that the U.S. Government might enact in the future with respect to investments in companies doing business with or in particular countries.

First off, doesn't that beg the question of what kinds of evil Putnam would bankroll were it not for government regulation? Btw, that would be the same government that apologists for unfettered capitalism insist is unilaterally baaaaad, because the market will eventually correct itself. Oh, and also the same government that has, shall we say, "selective" definitions of genocide, even under allegedly "liberal" watches (see also: Rwanda).

The proposed shareholder resolution calls upon the Board of Trustees to establish procedures and exercise its own judgment on these matters. The Trustees believe that this proposal would involve the Board in making judgments on matters that are beyond the range of its expertise and would inapproriately involve the Board in the process of making investment judgments for your fund's portfolio.

Question: Isn't the Board being handsomely compensated for its "judgment" when fund managers are supposed to be motivated purely by the numbers? Second question: How "beyond the range" of any thinking person's "expertise" is it to determine that people being killed for their ethnicity/religion/whatever is, technically "genocide"? Presumably Trustees are not only watching the same news as the rest of us, but also have the global contacts and the money-trail kind of information that most of us shamble along without. If knowledge is power and with great power comes great responsibility, refusing to exercise it in where and when it can do more immediate good than reams of U.N. resolutions is a direct act of collaboration. Period.

As a general matter, the Trustees also believe that imposing constraints on the range of investment opporutinities legally availble to your fund solely because of political or social considerations would not be in the best interests of shareholders. Under your your fund's management contract with Putnam Management, Putnam Management has a fidiciary duty to examine the entire universe of potential investments to identify attractive securities in its efforts to deliver superior long-term investment results for clients. The available investment universe for each fund is defined by its stated investment objective and policies, as limited by applicable laws as noted above. Putnam Management has advised the Trustees that the process of identifying attractive securities for a fund's portfolio includes an assessment of all relevant factors that could impact a security's future value, including, for example, the risks associated with doing business with or in countries that are accused of egregious human rights violations. The Trustees believe that shareholders have invested in a fund that would pursue the broad range of investment opprotunities described in its prospectus and that it would not be appropriate to begin imposing additional limitationsat this time based solely on political and social considerations. The Trustees believe that such limitations would be contrary to the interests of shareholders who are relying on Putnam Management to exercise its best investment judgment tohelp them meet important personal investment goas such as financing education, retirement and other critical personal needs.

So I take it you all skipped that day in Psychology 101 where they talked about projection? Call me naive, but I think you would be challenged to find one person of a hundred who would openly defend putting their child through college with blood money. Or themselves retiring on it, for that matter.

Moreover, "fidiciary responsibility" is a single ethic, which in turn is based on one or more purely subjective value-judgments. It is most certainly not a law of the universe. Which means that it has to compete with any number of other ethics in a given culture, purely on its own merits, with no special perks or precedence. Enough people will be made hungry, sick, illiterate, homeless, brutalized, and even dead by pure dint of dogma and lust for power. And that without bankrolling by rich white people. Don't we put people in jail and take away their money when they finance terrorism? (Because if genocide isn't terrorism on an industrial scale, what the heck is it?) Or does calling it "duty" absolve a person? Or is it okay as long as terrorism is merely the means and not the end of the financing?

Okay, enough ranting and sarcasm for one post. Suffice it to say that I logged onto Putnam's site and cast the most contrarian series of votes possible. Not that it will matter; I fortunately don't hold any shares of the two stocks affected by Proposal 5 (Putnam Asset Allocation: Growth Portfolio and Putnam Voyager Fund, in case it matters). Also, it's not like I will do any appreciable damage when I find another home for those dollars after November 18th (the date of the shareholder meeting). But I refuse to give my tacit consent to a mentality that considers it "duty" to bloody its hands, and mine in the process.