Mason created global giant in a generation

The Baltimore Sun

Human lifespan being what it is, founders of great corporations rarely see their creations at their height.

Thomas Rowe Price Jr., founder of the eponymous Baltimore financial-management company, is long gone. Black & Decker co-founder S. Duncan Black missed most of his company's overseas growth and its development into a billion-dollar powerhouse. Willoughby McCormick did not live to see McCormick & Co.'s ascendance as a coast-to-coast spice vendor.

Raymond A. "Chip" Mason produced a global giant in one generation. Starting with a small Virginia stock brokerage, Mason built one of the biggest money-management companies in the world and a major anchor of the Baltimore economy.

Two weeks ago, the company quietly announced his resignation as board chairman. Replacing him is Mark R. Fetting, who had already succeeded him as chief executive. Mason is staying on as "a senior adviser," but his exit from the board is tantamount to retirement.

The news wasn't unexpected. Mason, 72, had been planning his departure for several years.

But the announcement was even more sotto voce than expected, a concession to Legg's dire circumstances. A news release late in the day. A couple of canned quotes from Legg insiders. A focus on Fetting's promotion rather than Mason's stepping down.

Mason won't be giving interviews for a while, a spokeswoman said.

A triumphalist note wouldn't have blended with the news three days earlier that Legg is cutting its worldwide work force of 4,200 by 8 percent. Or the announcement four days later that it lost even more money - a half-billion dollars - on mortgage securities and other soured debt.

But Mason's career deserves to be seen in its entirety, not just in light of Legg's recent problems. The guy isn't any more perfect than his firm. You can criticize him (and I probably have) for supersize pay and over-reliance on money-management stars.

But any city would count itself lucky if a young man destined to have his name on a huge building and employ thousands at very high salaries decided to adopt it as his home.

Mason was 25 when he founded Mason & Co., a Newport News, Va., stock brokerage. The firm rode the 1960s bull market and was soon looking beyond Virginia. In 1970, it merged with Baltimore's Legg & Co. and put the consolidated headquarters in Charm City.

The initial business was brokerage - distributing securities and money-management products made by somebody else. But in the 1980s, Legg Mason tried money management itself.

The deregulated broker business was becoming more competitive, and a new bull market was taking off. Legg Mason Value Trust, founded in 1982, eventually became one of the most successful mutual funds, based on manager Bill Miller's record of beating the S&P; 500 index for 15 years in a row, starting in 1991.

But Legg didn't just grow its own asset-management operations. It bought them, assembling a collection from all over the country and establishing a reputation for leaving smart managers alone. The height of the deal making came in 2005, when Legg exited the brokerage business altogether and took on the money-management duties of Citigroup, the New York giant.

The transaction would give Legg $1 trillion in assets under management - in prebailout days when a trillion dollars still meant something.

"I'll put this deal away, and my work will be complete," Mason told London's Financial Times that year.

It would have been a better chord to go out on. But first, Bill Miller started trailing the S&P; 500. Then Mason's chosen successor, James W. Hirschmann, decided not to take the top job, which required the founder to stick around longer than he had planned.

Then the financial crisis and its own mistakes brought Legg's stock from $138 shortly after the Citigroup deal to as low as $13 recently. Yesterday, it closed at $19.36, down $1 on more bad news - Fitch's decision to downgrade Legg's debt.

But even at $19.36 a share, the company is still worth $2.7 billion. Not bad for one lifetime's work. Despite the firm's numerous problems, it's probably underpriced.

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