Legg Mason Inc. chose an insider as its new CEO, quelling speculation that the Baltimore-based money manager might be headed for a breakup that could have been bad news for the city.
After a worldwide search for a new leader, Legg announced Wednesday that it had appointed Joseph A. Sullivan as president, CEO and a member of its board. Sullivan, 55, who previously led Legg's global distribution efforts, had been interim CEO since October, when Mark R. Fetting stepped down under pressure after less than five years.
Sullivan, a Minneapolis native, joined Legg in 1994, left in 2005 and returned three years later. His roots with the company mean Sullivan is unlikely to break it up, said James Hardesty, chairman of Hardesty Capital Management in Baltimore.
"There is no pressure on him to come in and take a chainsaw and recast the culture of the company … and tear the pieces apart," Hardesty said. "That would have been bad for Baltimore. They would have been a diminished enterprise."
Still Sullivan, like his predecessor Fetting, faces stiff challenges, including boosting the company's languishing stock price and stanching the flow of money out of its mutual funds.
"The other side of challenges are opportunities," Sullivan said in an interview Wednesday morning, noting Legg has products in many asset classes and a worldwide distribution. "We have a foundation that is very, very strong, and I would say, enviable. We need to make it all work better than we have."
Legg's stock slipped 63 cents, or about 2 percent, Wednesday to close at $27.28 a share.
Sullivan said he plans to work with the board and Legg's affiliates to "craft a vision of what needs to happen for Legg Mason to win in the future."
The board will grow in April with the addition of Dennis M. Kass, who retired as CEO last year from asset manager Jennison Associates, an affiliate of Prudential Financial Inc., Legg also announced on Wednesday.
Sullivan added that he remains committed to Legg's unusual structure as a parent company with independent affiliates that manage their own investment funds.
One of Sullivan's goals is to fill gaps in Legg's investment lineup. That includes adding international or emerging-market equity management or alternative investments, such as real estate and natural resources, Sullivan said.
The new CEO said Legg may fill those vacancies by establishing a new stand-alone affiliate or buying another asset manager and folding it into an existing Legg subsidiary.
Legg Chairman W. Allen Reed, who led the board's search for a permanent CEO, said Wednesday the company considered a long list of candidates, looking for an industry veteran who had the management skills to collaborate with Legg's various affiliates and help them grow.
But as months went by with no permanent CEO, analysts and industry experts speculated that no outsider wanted the job of leading Legg and its affiliates. According to reports, some affiliates have been unhappy with the marketing and other support received from headquarters.
It's not difficult to manage the affiliates, but "it's different to manage," Reed said. "That does reduce the number of candidates that really have the experience to do the job."
Ultimately the board chose Sullivan, who did an "excellent job as interim CEO," he said.
Terrence Murphy, CEO of Legg's ClearBridge Investments affiliate in New York, said the affiliates participated in interviews with candidates. Murphy said he wanted a CEO who understood the affiliate model and the company's history, which goes back to 1899.
"Joe is going to be a great leader," he said. "In the four months he has been in the interim role, he has done a solid job."
In recent months, Sullivan oversaw the acquisition of European money manager Fauchier Partners, which will be merged into Legg's Permal Group, as well as the move to merge the Baltimore-based Legg Mason Capital Management unit into ClearBridge. He also restructured the revenue-sharing agreement with Permal, and introduced an equity incentive program at Permal that would allow managers to invest and share in the growth of that subsidiary.
As time went on and Sullivan quickly made changes, analysts concluded he was the front-runner.