Exclusive: Legg Mason hires Korn/Ferry to run CEO search - sources
BOSTON (Reuters) - Asset manager Legg Mason Inc (LM.N) has selected recruiting firm Korn/Ferry International (KFY.N) to run its search for a new chief executive, according to two people briefed on the matter, a personnel decision that will also set the company's future strategic direction.
Baltimore-based Legg Mason announced on September 11 that current CEO Mark Fetting would step down October 1. Legg Mason's board has come under increasing pressure this year to improve results and boost its lagging stock price.
Since he was named CEO in 2008, Fetting had steered the company through the aftermath of the financial crisis. But Legg Mason shares remain mired at about one-quarter of the $100 level they hit before the crisis, while shares of major competitors have fully recovered. The firm remains dogged by customer outflows and questions about whether to continue as a collection of semi-autonomous investment units like its big Western Asset Management bond division.
The firm's board includes activist investor Nelson Peltz, who owns 10 percent of Legg Mason shares. Peltz is known for pursuing breakups at other companies.
Board members, also including lead independent director W. Allen Reed, have declined interview requests. Legg Mason spokeswoman Mary Athridge declined to comment.
One option for a new CEO would be to sell Western or other operating units, analysts said. But a breakup might not pay off in the asset management business, where bigger is usually better, they said.
Or, a new CEO could keep the company's various money managers but renegotiate their revenue sharing agreements and push for changes to improve investment performance.
Fetting will remain a consultant to the company until year-end, a sign that directors are still groping for a strategy, said Morningstar senior stock analyst Greggory Warren.
"The fact that he is sticking around to me suggests there is some sort of argument about the direction of the firm," Warren said.
One big-name outsider who has been mentioned as a possible successor is Ronald O'Hanley, now head of Fidelity Investments' asset-management division.
O'Hanley reported to Fidelity chairman and CEO Edward "Ned" Johnson III when he was hired in 2010. But under a change announced last month, he now reports to Ned Johnson's daughter, Abigail Johnson, the president of Fidelity Financial Services.
Other candidates to run Legg Mason might be Sallie Krawcheck, the onetime head of Bank of America's Global Wealth and Investment Management unit, or Peter Cieszko, an executive at Kansas City asset manager American Century Investments who previously worked at Legg Mason, said Neil Bathon, managing partner of FUSE Research Network, a Boston-area fund consulting company.
Representatives for O'Hanley, Krawcheck and Cieszko declined to comment.
Given Peltz's influence as a major Legg Mason shareholder and board member, his support will be essential in recruiting a top candidate, Bathon said.
"Anyone who really wants this to be their legacy, they would have a hard time working out an arrangement unless they could get some assurances from Peltz," Bathon said.
(Reporting By Ross Kerber; Editing by Aaron Pressman, Andre Grenon and Bernard Orr)
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