Legg Mason Inc.’s LM chief executive officer (CEO) Joseph A. Sullivan’s total compensation, including a cash bonus, had been increased to $9.95 million in fiscal 2019. This represents a jump of 2.9% from the prior fiscal year on higher incentives, according to the Securities and Exchange Commission (SEC) filing.
In fiscal 2019, Sullivan’s pay package included a salary of $500,000, unchanged from fiscal 2018, a cash bonus of $3.4 million (down from $4 million in 2018) and stock awards of $5.73 million (up from $3.32 in 2018). He also received stock options worth $1.66 million, in line with fiscal 2018. Notably, 60% of incentive awards were paid in equity to Sullivan, while 40% was paid in cash.
However, Sullivan’s pay was down 14% in real terms due to the SEC's rules. Per the rules, fiscal 2019 salary package includes value of equity awards recorded in May 2018, rather than equity awards granted in May 2019 as compiled by the company's board. Therefore, actual compensation came in at $9 million, including incentive awards worth $8.5 million.
Per Legg Mason’s board, Sullivan’s pay package is commensurate with the company's financial performance and compensation of its competitor firms’ CEOs. However, several top executives of Legg Mason witnessed pay declines.
For fiscal 2019, the Baltimore-based investment manager recorded total revenues of $2.9 billion, down 8% year over year, mainly due to lower performance fees. Further, assets under management (AUM) edged down 1% year over year to $758 billion. Notably, investors were inclined toward passive indexes during the fiscal year.
Although there were industry-wide challenges, as per the board, Legg Mason's executive management team had "strong individual performance" and "consistent execution" of the company's corporate strategy for providing more investment options to clients.
Furthermore, Sullivan was compensated highly for tackling the company’s growth and efficiency initiatives in response to industry challenges and "driving sound capital allocation decisions."
Notably, during fiscal 2019, a restructuring plan was implemented by Legg Mason which included costs of $130-$150 million. Nonetheless, the plan is anticipated to record savings of $100 million annually over the long-term.
We believe Legg Mason has the potential to outperform its peers over the long haul, given its diversified product mix and leverage to the changing demographics in the market.
Legg Mason currently flaunts a Zacks Rank #1 (Strong Buy). The company’s shares have appreciated around 46% year to date compared with growth of 17.4% registered by the industry.
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