After running one of Baltimore's leading companies for 38 years, Legg Mason Inc. patriarch Raymond A. "Chip" Mason is handing over control to one of his top lieutenants, Mark R. Fetting, the company announced late yesterday.
Fetting's appointment as chief executive capped a long search for a successor to Mason, 71, who will remain nonexecutive chairman. Mason built a stock brokerage he started in Newport News, Va., nearly 46 years ago into a global, Baltimore-based business that manages $1 trillion in assets for its clients.
Fetting, 53, who heads the division that includes mutual funds, was one of several senior insiders passed over for the job when the initial successor to Mason, James W. Hirschmann, was selected in 2006. Hirschmann bowed out in April, saying he wanted to stay in California with his family and remain head of Western Asset Management, Legg Mason's largest subsidiary.
Legg Mason then hired an executive search firm to help a four-member board committee find a new CEO. The list of candidates was whittled down to Fetting and two unidentified outside candidates.
Mason, 71, said Fetting's appointment culminates a succession plan that began more than two years ago. The board voted on the decision yesterday, and Fetting begins his new role immediately.
"In terms of how I feel about it, it's the right thing to do," Mason said in an interview. "Fortunately, my health has been good. Therefore, it's not because of sickness. At my age, it is time. Particularly with a company of this size, it should be a younger person. I don't think many people would argue with that."
Fetting said he was humbled to succeed Mason. The two first met 20 years ago and worked closely after Fetting joined Legg Mason in 2000.
"I'm deeply honored to take the baton from Chip," Fetting said. "Chip is truly revered within our company and throughout the industry."
Fetting and his wife, Georgie Smith, have deep Baltimore roots, which analysts speculated was highly important to the board after what happened with Hirschmann. They were high school sweethearts while she attended Bryn Mawr and he was at Gilman School.
Fetting's father, John Howard Fetting Jr., ran a jewelry business in Towson and served on the board of the Federal Reserve Bank of Richmond's Baltimore branch.
Before joining Legg Mason, Fetting ran Prudential Financial Group's retirement services business and worked at Legg Mason's hometown rival, T. Rowe Price.
Harold L. Adams, former CEO of the Baltimore architecture firm RTKL Associates Inc. and the independent director who was chairman of the board's search committee, laughed last night when it was suggested that people might wonder why Fetting wasn't selected to succeed Mason the first time.
"They may ask, but we asked that ourselves sometimes," he said.
The search committee remained impressed with Fetting's industry experience and leadership skills, Adams said.
"It was an even horse race, but what it came to in the end with Mark was he had experience from the outside. He was an insider that had knowledge of an outsider," Adams said.
Fetting takes over a company that is coming off a challenging year and is preparing to relocate next year from its signature skyscraper at 100 Light St., the city's tallest building, to the new Harbor East development.
Star money manager Bill Miller has been in a slump after previously besting the Standard & Poor's 500 index for 15 straight years, and several other top fund managers also had poor years in 2007. Clients have pulled billions of dollars from its mutual funds. Most recently, Legg Mason had to prop up its money market funds, which are never supposed to lose money, because of soured investments in mortgage-related securities known as structured investment vehicles.
Those struggles occurred after Legg Mason had largely completed the integration of Citigroup's money management unit into its own institutional investment and mutual fund businesses.
In a surprise decision, Mason decided in 2005 to swap his brokerage operations with Citigroup to make Legg Mason purely a money manager.
In that deal, Legg Mason also gave up its capital markets division, which was later acquired by the St. Louis brokerage Stifel Financial.
Legg Mason has about 1,000 employees in Baltimore.
In its fiscal second quarter, which ended Sept. 30, Legg Mason had net income of $178 million, or $1.23 a share. Its quarterly earnings fell short of analysts' expectations, but the quarter was the second-strongest in the company's 108-year history.
The company will report its fiscal third-quarter earnings tomorrow.
Andrew Richards, an equity analyst at Morningstar Inc., viewed the appointment positively.
"It removes a significant distraction from the firm," said Richards, who does not own stock in Legg Mason. "They've been asked about this on earnings calls going back several quarters."
Richards said Fetting's appointment will lift Legg Mason's stock, which he said is significantly undervalued. Resolving the succession question will allow managers to get back to the business at hand, he said.
Hirschmann and Fetting were the finalists during the first search, but Hirschmann had the advantage because he ran Legg Mason's largest subsidiary and had global experience, Mason said. Another senior executive passed over at the time, Timothy C. Scheve, left Legg in August to become CEO of the Philadelphia brokerage Janney Montgomery Scott.
Mason, who typically works up to 12 hours a day, said he will have to get used to his nonexecutive role.
"I won't be the last car out of the parking lot," he said. "I've been working 45 to 46 years, and my days are normally 10 to 12 hours at minimum, assuming I'm in town. I'll probably go through an adjustment. It's time."
Sun reporter Allison Connolly contributed to this article.
Raymond A. "Chip" Mason's tenure
Mason starts Mason & Co. in Newport News, Va.
Mason & Co. merges with Legg & Co. of Baltimore to become Legg Mason & Co. Mason becomes president.
Legg Mason goes public, raising $14 million in its stock offering.
Legg Mason swaps its brokerage business for Citigroup's asset management unit in a $3.7 billion deal.
James W. Hirschmann becomes president, making him Mason's heir apparent. Hirschmann is CEO of Western Asset Management, Legg Mason's largest subsidiary.
Hirschmann steps down for family reasons. Mason reassumes the role of president and the search for a successor is reopened.
Mark Fetting is named CEO; Mason is named nonexecutive chairman.
[Source: Sun archives]