Legg Mason said Wednesday that it has agreed to a severance package for outgoing CEO Mark R. Fetting that will cost the Baltimore money manager about $4 million, including $2 million in direct payments.
Fetting is stepping down as CEO and chairman Oct. 1.
The newly disclosed separation agreement entitles him to $2 million in payments made over 15 months and allows him to keep 111,548 unvested restricted shares of company stock, which will vest under the same timetable as if he weren’t leaving.
He also will get 18 months of COBRA healthcare coverage paid for by Legg Mason and outplacement services worth up to $25,000.
Victoria Nguyen, compensation research analyst at Glass, Lewis & Co., said cash payments are sometimes calculated by tripling an executive’s annual salary and bonus. Fetting’s lump sum is “well under” that amount, she said.
“Compared to most severance packages found at companies of Legg Mason’s size, I don't find this arrangement particularly problematic,” she said in an email.
Legg Mason, which disclosed the agreement in a Securities and Exchange Commission filing, said Fetting agreed to provide consulting services to the company through the end of the year. His severance deal includes a non-compete clause to keep him from joining a competitor or “raiding” employees or customers for at least 15 months.
Legg Mason declined to comment beyond its filing.
Fetting’s departure, announced earlier this month, will come less than five years after he stepped up to the top jobs. Analysts speculated the abrupt move was a result of Legg Mason’s difficulties since the financial crisis.
The company’s stock, which closed at $25.92 a share on Wednesday, is up from its 2009 low of less than $11. But shares are more than 60 percent below what they were worth when Fetting took over in January 2008 — just before the American and global financial markets fell apart.