Raymond A. "Chip" Mason, the 70-year-old chief executive who has led investment company Legg Mason Inc. for more than three decades, had figured to be in the throes of planning his cushy golden years by now.
If only he could find a successor.
Mason's heir apparent, James W. Hirschmann, bowed out as company president in April to return to his old job running Legg Mason's largest subsidiary, which is based in California.
And yesterday, Timothy C. Scheve, the chief administrative officer who was rumored to be in the running for the top post, announced he would be leaving the firm after 23 years to run Philadelphia brokerage Janney Montgomery Scott.
The executive changes mean that Mason, who in 2005 said he would stay about two more years, must take on added management responsibilities. The changes also come as the board - and Mason - continue to look for his successor. The search extends outside the Baltimore company as well as internally.
"There's always stress when there is change at the top," said Kip Trum of WJM Associates Inc., a management development and executive coaching firm in New York. "You don't know who's going to get the job. If someone else gets the job and you don't, you wonder what you're going to do. And it's not just people who are candidates for the job who are affected but the people who are working for them."
Corporate America is famous for the drama it creates by setting up executives to compete for the top spot. Think of General Electric Co.: When longtime CEO Jack Welch handed the coveted reins to Jeffrey R. Immelt, two executives who were passed over moved on to become CEOs at other Fortune 500 companies. Or think of the jockeying to replace Citigroup Inc.'s Sanford I. Weill, whose own protege resigned.
Legg Mason spokeswoman Mary Athridge downplayed the possibility of further defections and said the remaining senior executives have been given "robust roles" at the company.
Athridge said the board might name a successor within the next year. Mason said in April, after Hirschmann resigned as president, that he would remain for at least two more years.
With Scheve's departure, the departments under his purview, including legal and accounting, will report to Mason. Scheve will move to Janney Montgomery Scott in early August. He takes over from CEO James W. Wolitarsky, who is retiring.
It's unclear who the Legg Mason board of directors has considered for the CEO job, as the matter is considered confidential. According to a corporate statement yesterday, Scheve agreed to stay with Legg Mason at the time of the company's deal with Citigroup in 2005 to help with the transition.
"Having successfully fulfilled that mission, Tim is now pursuing his long-standing interest to lead a securities brokerage firm," Chip Mason said in the statement.
The $3.7 billion deal transformed Legg Mason into one of the world's largest money managers; it now has about $970 billion in client assets under management. As part of the transaction, Legg Mason exited the brokerage business and swapped those operations, which Scheve led, for Citigroup's asset management unit.
Scheve said in the statement that his decision to leave Legg Mason was "the most difficult professional decision I have ever made."
Jeffrey Ptak, an analyst at Morningstar Inc., which tracks mutual funds, said he could understand why Scheve would consider this "an inflection point in his career."
"Here you are toiling away, working on some of the most important projects at the company, and yet the process to find a successor is thrown wide open to any and all candidates," Ptak said. "It suggests they don't have someone right in house that is the logical heir apparent. I could see circumstantially why he would look at his other options."
Hirschmann, who became president three months after the Citigroup deal closed, was being groomed for the CEO job. When he resigned, saying he didn't want to disrupt his family life by moving to Baltimore, Chip Mason took back the title of president, which he had long held in addition to chairman and chief executive. Hirschmann has resumed his position as head of Western Asset Management, Legg Mason's bond shop in Pasadena, Calif.
Mason has been CEO of Legg Mason since 1974. He holds nearly 3 million shares and receives a multimillion dollar annual compensation package. The stock was worth $99.95 apiece after losing $1.08, or 1 percent, yesterday on the New York Stock Exchange.
2 other executives
Two other executives whose names were floated as CEO candidates before Hirschmann was tapped, Peter L. Bain and Mark R. Fetting, remain at Legg Mason. They took over divisions, along with Scheve, that were formed after the Citigroup transaction.
Fetting heads the division that includes mutual funds, and Bain runs the institutional and wealth management operations. Neither could be reached for comment yesterday.
Mo Cayer, who works at the American Management Association and as a professor of management psychology at the University of New Haven in Connecticut, said corporate succession planning should not only encompass who gets the CEO job but also how to appease those who don't. That can include financial perks as well as pats on the back.
"Naturally, there are a lot of broken hearts, so you need to prepare in advance for what to do with the people you're going to want to keep," Cayer said. But, he added, "it's often typical for some of them to leave."