Legg Mason calls it: The worst financial crisis

June 23, 2009

Unlike the SEC, which seems to be spending a lot of time reading the CD&A sections of various proxies, we don’t tend to spend a lot of time with that section, because, quite frankly, it’s all too often boring boiler-plate. But as with every other filing, every now and then, you can find something pretty interesting like we did in the proxy that Legg Mason (LM) filed yesterday. There, in the justification for Chairman and CEO Mark Fetting’s bonus, was this little pearl:

Mr. Fetting’s leadership of the company during one of the worst financial crises of the last 100 years, which particularly affected financial services companies

Just to make sure, we did a quick check for the word crisis (or crises) at other financial services companies and didn’t come up with anything that even came close. While the word was used in several other proxies, it wasn’t used in a way to justify a bonus and there were no pronouncements about this being the “worst financial crises”.

Equally interesting is that while the board set Fetting’s bonus at 21% of the bonus pool in June 2008, Legg Mason’s loss of $1.9 billion last year meant that there was no bonus pool. But that didn’t stop the bonus because as the comp committee writes in the proxy the net loss was due to just two items and without those two items, the company “would have had net income, and the plan would have produced a total bonus pool large enough to accommodate the annual incentive awards made. Although the terms of the plan do not explicitly provide for the exclusion of those items, the Committee considered the items to be extraordinary expense.”

Just remember: where there’s a will, there’s a way.

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Image source: Associated Press/Chris Gardner

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