Cabot's First Two Edicts

Harvard's new financial wizards showed again this week their distrust for a long tradition of chummy money management which led George F. Bennett '33 to serve simultaneously as Harvard's treasurer, president of the company that handles the University's $1.4 billion endowment, and a director of several corporations which form multi-million segments of that portfolio.

Walter M. Cabot '55, president of the new Harvard Management Co., which will take over $1 billion of Harvard's portfolio on July 1, emphatically stated this week that no employees of his company will sit on "any corporation in which there is any possibility that Harvard might invest."

"I don't care how many safeguards you set up, I see a basic conflict in holding a directorship of a corporation and maintaining the freedom to act and use information to make investment decisions about that company," Cabot said.

Bennett has always insisted to critics that his position on the boards of directors of Ford Motor Co., Middle South Utilities and Hanna Mining Co. have not interfered with his management of the portfolio as president of State Street Research and Management or with his job as Harvard treasurer.

Bennett retired as treasurer last July and was replaced by George Putnam '42. State Street will end 26 years of handling Harvard's endowment at a nominal fee on July 1.

The move to disperse the enormous sphere of power and influence built up by Bennett and his predecessor Paul C. Cabot '32, also of State Street, began last spring when Putnam was chosen to succeed Bennett and State Street and Harvard concluded it was about time to change portfolio managers.

Putnam and President Bok decided last fall to keep the portfolio management separate from the Treasurer's Office, and felt that an independent management company set up by the Corporation was the cheapest way to handle the endowment.

No one can accuse Putnam or Cabot of contemplating a complete break from traditional norms of financial management, but they are developing a keen awareness to problems of conflict-of-interest and corporate responsibility, which Bennett always chose to ignore.

Cabot and Putnam also said this week they will carefully try to avoid investing in companies they don't believe are "socially responsible," because in the long run these companies cost the University money.

Harvard finances apparently have entered a new era of management, one which looks toward eliminating at least some of the problems students and faculty have long decried.