<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
LEGG MASON, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
100 Light Street
Baltimore, Maryland 21202
June , 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders which
will be held at The Center Club, 100 Light Street, 16th Floor, Baltimore,
Maryland at 10:00 a.m. on Tuesday, July 25, 2000. On the following pages you
will find the formal Notice of Annual Meeting and Proxy Statement.
Whether or not you plan to attend the meeting, it is important that your
shares be represented and voted at the meeting. Accordingly, please date, sign
and return the enclosed proxy card promptly.
I hope that you will attend the meeting and look forward to seeing you
there.
Sincerely,
RAYMOND A. MASON
Chairman of the Board, Chief
Executive Officer and President
<PAGE>
LEGG MASON, INC.
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Tuesday, July 25, 2000
----------------
To the Stockholders of
LEGG MASON, INC.:
The Annual Meeting of Stockholders of Legg Mason, Inc., a Maryland
corporation, will be held at The Center Club, 100 Light Street, 16th Floor,
Baltimore, Maryland, on Tuesday, July 25, 2000, at 10:00 a.m. to consider and
vote upon:
(1) The election of five directors for the three-year term ending in
2003;
(2) Amendment of the Legg Mason, Inc. Articles of Incorporation to
increase the number of authorized shares of Common Stock from 100,000,000
to 250,000,000;
(3) Reapproval of the Legg Mason, Inc. Executive Incentive Compensation
Plan; and
(4) Any other matter that may properly come before the meeting or any
adjournment thereof.
The Board of Directors has fixed the close of business on May 16, 2000 as
the date for determining stockholders of record entitled to notice of and to
vote at the Annual Meeting.
Your attention is directed to the accompanying Proxy Statement and 2000
Annual Report to Stockholders.
By order of the Board of Directors
CHARLES A. BACIGALUPO
Secretary
June , 2000
<PAGE>
LEGG MASON, INC.
100 Light Street
Baltimore, Maryland 21202
----------------
PROXY STATEMENT
----------------
ANNUAL MEETING OF STOCKHOLDERS
Tuesday, July 25, 2000
----------------
The enclosed proxy is solicited by the Board of Directors of Legg Mason,
Inc. (the "Company") and is revocable at any time prior to its exercise. The
cost of soliciting proxies will be borne by the Company. In addition to
solicitation by mail, proxies may be solicited by the Company's officers,
directors and employees personally or by telephone or any other means of
communication, and the Company may reimburse brokers, banks, custodians,
nominees and other fiduciaries for their reasonable out-of-pocket expenses in
forwarding proxy materials to their principals. This proxy material is being
sent to stockholders on or about June 15, 2000.
Stockholders of record at the close of business on May 16, 2000 are entitled
to notice of and to vote at the meeting. As of the close of business on that
date, there were outstanding and entitled to vote 58,847,530 shares of Common
Stock, $.10 par value ("Common Stock"), each of which is entitled to one vote.
See "Security Ownership of Management and Principal Stockholders" for
information regarding ownership of Common Stock.
Directors are elected by a plurality of the votes cast by the holders of
shares of Common Stock present in person or represented by proxy at the
meeting, with a quorum present. For purposes of the election of directors,
abstentions and broker non-votes do not affect the plurality vote. The
affirmative vote of a majority of the votes entitled to be cast on the matter
is required for approval of the amendment of the Legg Mason, Inc. Articles of
Incorporation, and the affirmative vote of a majority of the votes cast on the
matter is required for reapproval of the Legg Mason, Inc. Executive Incentive
Compensation Plan. Abstentions and broker non-votes will have the effect of a
vote against the proposal with respect to the proposed amendment of the Legg
Mason, Inc. Articles of Incorporation and will have no effect with respect to
the proposed reapproval of the Executive Incentive Compensation Plan.
ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes. Each year
one class is elected to serve for a term of three years. The stockholders will
vote at this Annual Meeting for the election of five directors for the three-
year term expiring at the Annual Meeting of Stockholders in 2003. All nominees
presently serve as directors.
The persons named in the enclosed proxy will vote for the election of the
nominees named below unless authority to vote is withheld. In the event any
nominee is unable to serve, the persons named in the proxy will vote for such
substitute nominee as they, in their discretion, shall determine. The Board of
Directors has no reason to believe that any nominee named herein will be
unable to serve.
<PAGE>
Nominees for Director for the Term Expiring in 2003
Harry M. Ford, Jr., age 67, has been a director of the Company since its
formation in 1981 and has served as a Senior Vice President of the Company
since May 1982. Mr. Ford's principal occupation is as a Financial Advisor with
Legg Mason Wood Walker, Incorporated ("LMWW"), the Company's principal
subsidiary.
Margaret DeB. Tutwiler, age 49, has been a director of the Company since
July 1995. Since May 1997, she has served as Senior Vice President for
Communications and Public Affairs for the Cellular Telecommunications Industry
Association. From May 1993 until May 1997, she was engaged in the public
relations and strategic communications business through firms of which she was
the sole or a principal owner.
James E. Ukrop, age 62, has been a director of the Company since January
1985. Since 1975, he has been the principal executive officer of Ukrop Super
Markets, Inc., which operates a chain of supermarkets in Virginia. Mr. Ukrop
is a director of Owens & Minor, Inc. and Chairman of First Market Bank.
John E. Koerner, III, age 57, has been a director of the Company since
October 1990. He has been the President of Koerner Capital Corporation, a
private investment corporation, since August 1995. From 1976 until August 1995
he was President of Barq's, Inc., a soft drink producer and distributor.
Peter F. O'Malley, age 61, has been a director of the Company since April
1992. He has been Of Counsel to the law firm of O'Malley, Miles, Nylen &
Gilmore, P.A. and its predecessor, O'Malley & Miles, since 1989. Mr. O'Malley
currently serves as the President of Aberdeen Creek Corp., a privately-held
company engaged in investment, business consulting and development activities,
and is a director of Potomac Electric Power Company and Forensic Technologies
International Corp.
Directors Continuing in Office
Directors whose terms will expire in 2001
Edmund J. Cashman, Jr., age 63, has been a director of the Company since its
formation in 1981 and has served as a Senior Executive Vice President of the
Company and LMWW since December 1983. He is responsible for supervising LMWW's
syndicate, fixed-income securities, public finance and institutional sales
activities. Mr. Cashman is also a director or trustee of six funds within the
Legg Mason mutual funds complex and a director of EA Engineering, Science, and
Technology, Inc.
William Wirth, age 69, has been a director of the Company since July 1995.
From 1977 to 1994, Dr. Wirth served as a member of the Credit Suisse Executive
Board with responsibility for various areas of asset management, institutional
investment counseling, mutual funds, economic research and financial analysis.
He continues to occupy positions in several entities within the CS Holding
Group, an international financial organization, including Chairman of the
Board of Bank Hofmann AG, Zurich.
Harold L. Adams, age 61, has been a director of the Company since January
1988. He has been the Chairman of RTKL Associates, Inc., an international
architecture, engineering and planning firm, since 1987 and the President of
the firm since 1969. Mr. Adams is a director of the American Institute of
Architects.
2
<PAGE>
W. Curtis Livingston, age 56, has been a director of the Company since 1989
and has served as Chairman of Western Asset Management Company since October
1995. He served as the President and Chief Executive Officer of Western Asset
Management Company from October 1983 until March 1999. Western Asset
Management Company is a wholly owned investment advisory subsidiary of the
Company.
Directors whose terms will expire in 2002
Raymond A. Mason, age 63, has served as Chairman of the Board, Chief
Executive Officer and President of the Company since its formation in 1981. He
has served as Chairman and Chief Executive Officer of LMWW since 1975, and was
its President from 1970 to November 1985. Mr. Mason is Chairman of the Board
of the Legg Mason Value Trust, Inc., the Legg Mason Total Return Trust, Inc.
and the Legg Mason Special Investment Trust, Inc.
James W. Brinkley, age 63, has been a director of the Company since its
formation in 1981 and has served as a Senior Executive Vice President of the
Company since December 1983. In November 1985, he became President of LMWW and
in February 1998, he also became the Chief Operating Officer of LMWW. He is
Chairman of the Securities Industry Association.
Nicholas J. St. George, age 61, has been a director of the Company since
July 1983. He is engaged in private investment activities. He was the Chief
Executive Officer of Oakwood Homes Corporation, a manufacturer and retailer of
manufactured homes, from 1979 to 1999. Mr. St. George is a director of Carey
International, Inc.
Richard J. Himelfarb, age 58, has served as a director of the Company since
November 1983. He has been a Senior Executive Vice President of the Company
and LMWW since July 1995 and was an Executive Vice President of those
companies from November 1983 to July 1995. He is responsible for supervising
corporate and real estate finance activities of LMWW and other subsidiaries of
the Company.
Roger W. Schipke, age 63, has been a director of the Company since January
1991. He is engaged in private investment activities. From August 1993 through
May 1996, he was Chairman of the Board and Chief Executive Officer of Sunbeam
Corporation, a manufacturer of consumer products. Mr. Schipke is a director of
Brunswick Corporation, Oakwood Homes Corporation and the Rouse Company.
Edward I. O'Brien, age 71, has been a director of the Company since February
1993. He is engaged in private investment activities. He serves in an advisory
capacity to certain entities in the securities business, having served as a
consultant to the Securities Industry Association from December 1992 to
November 1993, and as its President from 1974 to December 1992. Mr. O'Brien is
a director of a number of mutual funds in the Neuberger & Berman mutual fund
complex.
Director Not Standing for Re-election Whose Term Expires in 2000
Charles A. Bacigalupo, age 66, has been a director and the Secretary of the
Company since its formation in 1981 and has served as a Senior Vice President
of the Company since May 1982.
3
<PAGE>
Committees of the Board -- Board Meetings
The Board of Directors has an Audit Committee and a Compensation Committee.
It does not have a nominating committee.
The Audit Committee, which consists of Messrs. St. George (Chairman),
O'Brien and Schipke, is primarily concerned with the effectiveness of the
audits of the Company by the Company's independent auditors. Its duties
include: recommending the selection of independent auditors; reviewing the
scope and results of the audits conducted by them; meeting with the Company's
internal auditors; and reviewing the organization and scope of the Company's
internal system of accounting and financial controls.
The Compensation Committee, which consists of Messrs. Koerner (Chairman) and
Ukrop and Ms. Tutwiler, is responsible for recommending and approving the
compensation of the senior executive officers of the Company. The Compensation
Committee also serves as the administrative committee of certain of the
Company's employee benefit plans.
During the fiscal year ended March 31, 2000, the Board of Directors met
seven times, the Audit Committee met four times and the Compensation Committee
met four times. Each director attended 75% or more of the aggregate number of
meetings of the Board and all committees of the Board on which the director
served except Dr. Wirth, who attended 71% of the meetings of the Board of
Directors.
Compensation of Directors
Directors who are not employees of the Company receive an annual retainer of
$20,000, a fee of $4,000 for each Board meeting attended, and reimbursement of
expenses for attendance at meetings. Committee members also receive a fee of
$2,500 for each committee meeting attended, and the chairperson of each
committee receives an annual retainer of $5,000. Prior to June 2000, non-
employee directors received an annual retainer of $15,000 and a fee of $2,000
for each Board meeting attended, and committee members received an annual
retainer of $1,000 ($2,000 for the committee chair).
Under the terms of the Legg Mason, Inc. Stock Option Plan for Non-Employee
Directors, which covers an aggregate of up to 1,100,000 shares of Common
Stock, each non-employee director is granted, on the date he or she is first
elected as a director, an option to purchase 6,000 shares of Common Stock,
and, on the date of each subsequent Annual Meeting of Stockholders, an option
to purchase an additional 6,000 shares. All options have an exercise price
equal to the fair market value of the Common Stock on the date of grant. The
options are exercisable immediately upon the date of grant and have a ten-year
term, subject to earlier termination in the event the optionee ceases to be a
director of the Company. During the fiscal year ended March 31, 2000, each of
the non-employee directors received an option to purchase 6,000 shares of
Common Stock.
4
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the ownership of Common
Stock of the Company as of May 16, 2000 by each director, each executive
officer named in the Summary Compensation Table, all executive officers and
directors as a group, and each person who, to the best of the Company's
knowledge, beneficially owned more than five percent of the Company's
outstanding Common Stock.
<TABLE>
<CAPTION>
PERCENT OF
COMMON STOCK OUTSTANDING
BENEFICIALLY COMMON
NAME OF OWNER OWNED(1)(2) STOCK(2)
------------- ------------ -----------
<S> <C> <C>
AXA Financial Inc................................. 9,877,870(3) 16.79
Raymond A. Mason.................................. 1,699,438(4) 2.88
James W. Brinkley................................. 742,278(5) 1.26
Edmund J. Cashman, Jr............................. 408,193 *
Richard J. Himelfarb.............................. 293,211 *
Charles A. Bacigalupo............................. 214,909(6) *
Harry M. Ford, Jr................................. 156,107 *
James E. Ukrop.................................... 119,584 *
Edward A. Taber, III.............................. 111,625 *
Timothy C. Scheve................................. 74,257 *
John E. Koerner, III.............................. 69,390(7) *
Peter F. O'Malley................................. 63,324 *
Harold L. Adams................................... 63,048 *
W. Curtis Livingston.............................. 62,844(8) *
Roger W. Schipke.................................. 58,460(9) *
Edward I. O'Brien................................. 48,260 *
Margaret DeB. Tutwiler............................ 27,996 *
William Wirth..................................... 25,186 *
Nicholas J. St. George............................ 17,332(10) *
All executive officers and directors as a group
(24 persons)..................................... 4,492,310 7.63
</TABLE>
-------
* Less than 1%.
(1) Except as otherwise indicated and except for shares held by members of an
individual's family or in trust, all shares are held with sole
dispositive and voting power.
(2) Includes the following number of shares subject to options exercisable
within 60 days from May 16, 2000: Mr. Mason--234,773; Mr. Brinkley--
71,136; Mr. Cashman--42,261; Mr. Himelfarb--53,386; Mr. Bacigalupo--
40,261; Mr. Ford--45,069; Mr. Ukrop--49,990; Mr. Taber--51,884; Mr.
Scheve--50,929; Mr. Koerner--43,326; Mr. O'Malley--49,992; Mr. Adams--
49,990; Mr. Livingston--9,600; Mr. Schipke--34,662; Mr. O'Brien--46,660;
Ms. Tutwiler--27,996; Mr. Wirth--22,664; Mr. St. George--17,332; and all
executive officers and directors as a group--1,071,090. For purposes of
determining the percentage of outstanding stock, such options are assumed
to have been exercised. Does not include shares represented by vested
beneficial interests in the Legg Mason Profit Sharing and 401(k) Plan and
Trust.
(3) Represents shares held by the following four subsidiaries of AXA
Financial Inc. ("AXA"), 1290 Avenue of the Americas, New York, New York
10104: Alliance Capital Management L.P. holds 6,850,528 shares for
investment purposes on behalf of client discretionary investment advisory
accounts; The Equitable Life Assurance Society of the United States holds
2,995,200 shares for investment purposes; Wood, Struthers & Winthrop
Management Corporation holds 29,242 shares
5
<PAGE>
for investment purposes on behalf of client discretionary investment
advisory accounts; and AXA Rosenberg holds 2,900 shares for investment
purposes. 9,874,970 of these shares are held with sole dispositive power,
2,900 shares are held with shared dispositive power, 5,366,242 shares are
held with sole voting power and 4,367,500 shares are held with shared
voting power. The number of shares in the preceding information is based
upon a Schedule 13G report filed by AXA reporting ownership as of December
31, 1999. The percentages are based upon the Company's outstanding shares
as of May 16, 2000.
(4) Does not include 12,600 shares owned by Mr. Mason's wife, as to which Mr.
Mason disclaims beneficial ownership. Includes 60,000 shares of restricted
stock as to which Mr. Mason has voting power, but which are subject to
transfer restrictions.
(5) Excludes 8,332 shares owned by a charitable foundation of which Mr.
Brinkley is co-trustee.
(6) Does not include 53,332 shares owned by Mr. Bacigalupo's wife, as to which
Mr. Bacigalupo disclaims beneficial ownership.
(7) Includes 2,400 shares owned by Mr. Koerner's children.
(8) Includes 2,400 shares held by Mr. Livingston as a trustee of a trust for
the benefit of his children and 10,192 shares held as trustee of a trust
for the benefit of his family.
(9) Includes 1,800 shares held in trust of which Mr. Schipke is trustee.
(10) Does not include 29,332 shares owned by Mr. St. George's wife, as to which
Mr. St. George disclaims beneficial ownership.
6
<PAGE>
EXECUTIVE COMPENSATION
The following table provides certain information concerning compensation for
the past three fiscal years of the Company's Chief Executive Officer and each
of the four other most highly compensated executive officers.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------------------------- ---------------------
Restricted
Name and Principal Other Annual Stock Options All Other
Position Year Salary Bonus(1) Compensation Awards(2) Granted(#) Compensation(3)
------------------ ---- -------- ---------- ------------ ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Raymond A. Mason....... 2000 $300,000 $6,800,000 $1,899 -- -- $ 40,211
Chairman of the Board, 1999 295,833 4,759,000 1,651 $2,220,000 60,000 45,087
President and Chief 1998 249,163 3,670,000 1,679 -- 266,666 48,172
Executive Officer
James W. Brinkley...... 2000 $249,996 $3,100,000 $1,968 -- -- $127,459
Senior Executive Vice 1999 247,913 2,300,000 1,684 -- 25,000 98,492
President 1998 223,750 1,650,000 1,709 -- 18,000 59,607
Richard J. Himelfarb... 2000 $230,004 $1,700,000 $2,002 -- 12,000 $ 22,797
Senior Executive Vice 1999 229,170 1,400,000 1,704 -- 20,000 15,704
President 1998 219,163 1,450,000 1,733 -- 20,000 14,425
Timothy C. Scheve...... 2000 $223,750 $1,625,000 -- -- 20,000 $ 11,600
Executive Vice 1999 205,833 850,000 -- -- 18,000 8,800
President 1998 159,167 425,000 -- -- 20,000 7,250
Edward A. Taber, III... 2000 $230,004 $1,600,000 -- -- 12,000 $ 11,600
Senior Executive Vice 1999 229,170 1,350,000 -- -- 18,000 8,800
President 1998 219,163 1,300,000 -- -- 4,000 7,250
</TABLE>
--------
(1) Each fiscal year the Company sets aside an executive bonus pool in an
amount up to 10% of the Company's pre-tax income for the fiscal year
(before deducting such bonuses). The selection of the participants in the
pool, the total amount received for bonuses, and the allocation of
incentive bonuses among the executive officers identified in this table,
is determined by the Compensation Committee as described in the
Compensation Committee Report on Executive Compensation.
(2) Awards have been valued for this table using the closing price of Legg
Mason common stock on the New York Stock Exchange on the grant date of the
award. The 80,000 shares of restricted stock granted to Mr. Mason vest in
25% annual increments commencing December 8, 1999. As of March 31, 2000,
the number and value of shares of restricted stock held by Mr. Mason was
60,000 shares and $2,595,000. Mr. Mason receives the dividends paid on
this restricted stock.
(3) Amounts for fiscal 2000 include $11,600 for each individual contributed
under the Legg Mason Profit Sharing and 401(k) Plan and Trust, and include
for Messrs. Mason, Brinkley, and Himelfarb, respectively, $28,611,
$115,859, and $11,197 of commissions earned from securities brokerage
activities.
7
<PAGE>
STOCK OPTIONS
The following table summarizes option grants made during the fiscal year
ended March 31, 2000 to the executive officers named in the Summary
Compensation Table.
Option Grants in Fiscal 2000
<TABLE>
<CAPTION>
Individual Grants(1)
-------------------------------
% of Total
Number of Options
Securities Granted to
Underlying Employees Exercise
Options in Fiscal Price Expiration Grant Date
Name Granted Year ($/Share) Date Present Value(2)
---- ---------- ---------- --------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Raymond A. Mason........ -- -- -- -- --
James W. Brinkley....... -- -- -- -- --
Richard J. Himelfarb.... 12,000 0.74 35.81 7/22/07 173,504
Timothy C. Scheve....... 20,000 1.24 35.81 7/22/07 289,174
Edward A. Taber, III.... 12,000 0.74 35.81 7/22/07 173,504
</TABLE>
--------
(1) Option grants made pursuant to the Legg Mason, Inc. 1996 Equity Incentive
Plan. The exercise price of each option granted under the Plan is not less
than the fair market value of the Common Stock on the grant date. Options
generally are not exercisable during the first year after the date of
grant, and thereafter generally vest in cumulative installments of 20% on
each anniversary of the date of grant, such that the options are fully
exercisable on and after 5 years from the date of grant until the eighth
year following that date, subject in all cases to accelerated vesting in
certain circumstances. Option holders may use previously owned shares to
pay all or part of the exercise price.
(2) The stock options were valued using the Black-Scholes Option Pricing
Model. The following assumptions were made for purposes of calculating the
Grant Date Present Value: an expected option term of 8 years to exercise;
a dividend yield of 1.10%; stock price volatility of .2666, based upon the
daily Common Stock market price for the 8 years prior to the grant date;
and risk-free interest rate of 6.06%. The actual value realized, if any,
on stock option exercises will be dependent on overall market conditions
and the future performance of the Company and its Common Stock. There is
no assurance the actual value realized will approximate the amount
calculated under the valuation model.
The following table summarizes option exercises during the fiscal year ended
March 31, 2000 by the executive officers named in the Summary Compensation
Table and the value of their unexercised options at March 31, 2000.
Aggregate Option Exercises During Fiscal 2000
and Value of Options Held at March 31, 2000
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Number of Underlying Unexercised In-the-Money
Shares Options at March 31, 2000 Options at March 31, 2000(1)
Acquired on Value ------------------------- -------------------------------
Name Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ----------- ------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Raymond A. Mason........ 59,858 $1,591,640 161,231 327,999 $ 5,422,067 $ 8,281,217
James W. Brinkley....... 55,998 2,037,704 71,136 47,192 2,436,804 1,076,593
Richard J. Himelfarb.... 8,334 245,061 82,718 51,944 2,815,722 1,003,868
Timothy C. Scheve....... 11,112 321,055 50,929 50,067 1,629,204 772,675
Edward A. Taber, III.... 85,664 2,154,847 51,884 50,780 1,753,171 1,152,845
</TABLE>
--------
(1) Value realized and value of unexercised options are calculated by
determining the difference between the fair market value of the shares
underlying the options and the exercise price of the options at exercise
or March 31, 2000, respectively.
8
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Legg Mason's executive compensation program is designed to attract, motivate
and retain the management talent needed to strengthen the Company's position
in the financial services industry and to achieve its business objectives.
Salaries of senior executive officers are set at levels which the
Compensation Committee (the "Committee") of the Board of Directors (which
committee consists entirely of non-employee directors) believes are
competitive with salaries of executives in similar positions at comparable
financial services companies. In addition, substantial emphasis is placed on
incentive compensation directly related to short- and long-term corporate
performance through annual cash bonuses and stock option grants.
As is common in the financial services industry, a significant portion of
total compensation of the Company's executive officers is paid in the form of
annual bonuses. For example, in fiscal 2000, approximately 96% of the annual
cash compensation of Raymond A. Mason, the Company's Chief Executive Officer
("CEO"), was paid as an annual bonus. This is intended to maximize the portion
of an individual's compensation that is subject to fluctuation each year based
upon corporate and individual performance.
The compensation program is structured to recognize each executive's level
of responsibility and to reward exceptional individual and corporate
performance. The program takes into account both annual operating results and
the desirability of providing incentives for future improvement. This includes
the ability to implement the Company's business plans as well as to react to
unanticipated external factors which can have a significant impact on
corporate performance. Compensation decisions for all executives, including
the CEO, are based on the same criteria.
In carrying out its responsibilities, the Committee has from time to time
availed itself of independent consulting advice in connection with its
consideration of executive compensation plans.
There are three major components of the Company's executive compensation
program: base salary, short-term awards, and long-term incentive awards.
Base Salary
A competitive base salary is important in fostering a career orientation
among executives consistent with the long-term nature of the Company's
business objectives. The Committee determines the salary of the CEO and the
Company's other senior executive officers based on its consideration of the
CEO's recommendations.
Salaries and salary adjustments are based on the responsibilities,
performance and experience of each executive, regular reviews of competitive
positioning (comparing the Company's salary structure with that of similar
companies) and business performance. While there is no specific weighting of
these factors, the responsibilities, performance and experience of each
executive and reviews of competitive positioning are the most important
considerations.
Raymond A. Mason, the Company's CEO, has more than 35 years of service with
the Company. The Committee established his fiscal 2000 salary based upon
competitive positioning and the Company's overall compensation approach, as
noted above, of limiting base salary levels and emphasizing incentive
compensation.
9
<PAGE>
Short-Term Awards
Short-term cash awards to executives are based on the Company's fiscal year
operating results and recognize contributions to the business during the
fiscal year.
The Company's Executive Incentive Compensation Plan provides for an
executive bonus pool in an amount up to 10% of the Company's pre-tax income
(calculated before deduction of the bonuses) for annual cash awards to the CEO
and other key executive officers selected by the Committee. During the first
quarter of the fiscal year the Committee established maximum percentage
allocations of the total pool for certain key executive officers. Mr. Mason's
maximum percentage allocation was established at 38%. The pre-established
maximum percentage allocation and the specific bonus the CEO and each of the
other selected executives receives within the amount determined pursuant to
the pre-established percentage allocation is dependent on the executive's
level of responsibility and individual performance. Levels of responsibility
are evaluated annually by the Committee without regard to any specific
formula. Assessments of individual performance are made annually by the
Committee after receiving the evaluations and recommendations of the CEO. Such
assessments are based on a number of factors, including individual and
corporate performance, initiative, business judgment and management skills.
Total bonuses to the CEO and the four other named executive officers with
respect to fiscal 2000 aggregated 5.8% of pre-tax income (before deduction of
the cash bonuses), with 45.9% of such total bonuses being awarded to Mr.
Mason. The portion of the total bonus pool awarded to Mr. Mason for fiscal
2000 reflects his significant personal contributions to the business and his
leadership in building the Company's revenues, earnings and capital position.
The award was based on the Committee's general evaluation of Mr. Mason's
overall contribution as CEO to the Company's performance levels. The Committee
believes that Mr. Mason's cash compensation (salary and cash bonus) was
appropriate in relation to compensation of CEOs of comparable companies,
including the companies comprising the peer group reflected in the Stock
Performance Graph, taking into account the size and business results of Legg
Mason and those companies.
Section 162(m) of the Internal Revenue Code, enacted in 1993, limits
deductions for certain annual compensation in excess of $1,000,000 paid to
individuals required to be named in the summary compensation table in proxy
statements of public companies. The Committee believes it is important to
balance the effectiveness of executive compensation plans with the materiality
of potentially reduced tax deductions. Accordingly, the Committee may
authorize payments that may not be fully deductible if the Committee believes
it is in the interest of the Company to do so.
Long-Term Incentive Awards
Long-term incentive awards, made during fiscal 2000 pursuant to the
stockholder-approved Legg Mason, Inc. 1996 Equity Incentive Plan, are designed
to reinforce the importance of building long-term value for the Company's
stockholders.
Stock options were the only long-term incentives granted to executive
officers in fiscal 2000. The Committee believes that stock option grants focus
management's attention on long-term growth in stockholder value and stock
price appreciation. Generally, options have a term of up to 10 years, are
granted at the fair market value of Legg Mason Common Stock on the date of
grant, and an initial portion of the options becomes exercisable one year from
date of grant, with the balance becoming exercisable in increments over the
ensuing four years. Generally, recipients must remain in the Company's employ
to exercise their options.
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The number of options that the Committee grants to executive officers is
based on individual performance (determined as described under "Short-Term
Awards") and level of responsibility, and is determined by the Committee after
considering the recommendations of the CEO. In some years, the Committee may
not grant a long-term incentive award to an executive officer in spite of his
individual performance and level of responsibility if it determines that the
officer has sufficient outstanding long-term incentive awards from prior
fiscal years. Award levels must be sufficient in size so that executives
develop strong incentives to achieve long-term corporate goals.
COMPENSATION COMMITTEE
John E. Koerner, III, Chairman
Margaret DeB. Tutwiler
James E. Ukrop
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STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on Legg
Mason's Common Stock for the last five fiscal years with the cumulative total
return of the S&P 500 Stock Index and the Regional Sub-Index of the Financial
Service Analytics Brokerage Stock Price Index ("FSA Regional") over the same
period (assuming the investment of $100 in each on March 31, 1995, and the
reinvestment of all dividends). The FSA Regional consists of 10 publicly held
regional securities firms.
[GRAPH]
Fiscal Year Ended March 31,
1995 1996 1997 1998 1999 2000
--------------------------------------------------------------------------------
Legg Mason $100 $125 $186 $349 $400 $517
--------------------------------------------------------------------------------
S&P 500 Stock Index 100 132 168 234 277 327
--------------------------------------------------------------------------------
FSA Regional 100 135 192 381 316 414
--------------------------------------------------------------------------------
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CERTAIN TRANSACTIONS
During fiscal 2000 the Company paid approximately $1,133,000 to the law firm
of Ballard Spahr Andrews & Ingersoll for legal services and related expenses.
The daughter of Charles A. Bacigalupo, a Senior Vice President, the Secretary
and a director of the Company, is a partner of that law firm.
During fiscal 2000, the Company engaged RTKL Associates, Inc. ("RTKL") to
perform architectural and engineering services for the Company. Approximately
$163,000 was paid by the Company for such services during the fiscal year
ended March 31, 2000. Harold L. Adams, a director of the Company, is the
President and Chairman of RTKL.
On December 8, 1998, the Company loaned to Raymond A. Mason, the Company's
Chairman of the Board, President and Chief Executive Officer, $3,378,750 to
finance the purchase of 120,000 shares of the Company's Common Stock from the
Company. The loan is full recourse, is secured by a pledge of the shares, and
accrues interest at a rate of 4.47% per annum, compounded semi-annually. The
principal amount is due in full at maturity on June 8, 2006 and interest
payments are due on June 8 of each year. As of May 31, 2000, the amount of
indebtedness outstanding under this loan was $3,378,750, plus accrued
interest.
In the ordinary course of its business, the Company has extended credit to
certain of its directors and executive officers in connection with their
purchase of securities in margin accounts. Such extension of credit has not
resulted in any losses to the Company and has been made on the same terms as
loans to unaffiliated customers.
PROPOSED INCREASE IN AUTHORIZED
SHARES OF LEGG MASON COMMON STOCK
The Company's Board of Directors has proposed an amendment to the Company's
Articles of Incorporation which would increase the authorized shares of Legg
Mason Common Stock from 100,000,000 to 250,000,000 shares.
As of May 16, 2000, 58,847,530 shares of Common Stock were issued and
outstanding. In addition, 14,980,977 shares were reserved for issuance
pursuant to Company benefit plans, and 5,210,000 shares were reserved for
issuance upon the exchange of exchangeable shares of Legg Mason's wholly owned
subsidiary Legg Mason Canada Holdings Ltd. which were issued in the
acquisition of Perigee Inc. After taking into account the shares reserved, the
Company would have 20,961,493 authorized shares available for issuance as of
May 16, 2000 without adopting the proposed amendment to the Articles of
Incorporation. The Company believes that this number does not provide
sufficient flexibility for possible future acquisitions, stock splits or other
transactions.
If the proposed amendment is approved, the Company would have 170,961,493
shares of common stock available for issuance. These shares would be available
for issuance from time to time to such persons and for such consideration as
the Company's Board of Directors may determine, without further action by the
stockholders, except in the case of certain transactions as may be required by
Maryland law or the rules of the New York Stock Exchange, and free from any
stockholder preemptive rights. Other than in connection with Company benefit
plans, future acquisition opportunities and possible future stock splits, the
Company does not presently have any specific proposed use for the additional
shares to be authorized.
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REAPPROVAL OF EXECUTIVE INCENTIVE COMPENSATION PLAN
In May 1995, the Compensation Committee of the Board of Directors (the
"Compensation Committee") approved the Legg Mason, Inc. Executive Incentive
Compensation Plan (the "Plan"), and in July 1995 the stockholders of the
Company approved the Plan. In order to meet the requirements of Section 162(m)
of the Internal Revenue Code of 1986, as amended, the Plan must be resubmitted
to, and reapproved by, stockholders every five years. Accordingly, in April
2000, the Board of Directors approved submitting the Plan for reapproval by a
vote of stockholders at the 2000 Annual Meeting. The text of the Plan is set
forth in Appendix A to this proxy statement and the following description of
the Plan is qualified in its entirety by reference to the Plan.
The Plan is an annual bonus plan designed to provide certain senior officers
of the Company, including those who are required to be named in the Summary
Compensation Table, with incentive compensation based upon achievement of pre-
established performance goals. The Plan is designed to comply with Section
162(m) of the Internal Revenue Code of 1986, as amended, which denies a tax
deduction to a public company for compensation in excess of $1,000,000 paid in
any tax year to the chief executive officer and each of the four other most
highly compensated executive officers, subject to an exception for
"performance-based compensation" paid pursuant to performance goals determined
by the company's compensation committee and approved by its shareholders.
The Plan is administered by the Compensation Committee. Each year, the
Compensation Committee selects Plan participants from among the Company's
senior management and key employees who will be eligible to receive cash
awards under the Plan (collectively, "Awards").
The Plan provides for a total pool (the "Award Pool") to be based upon a
designated percentage of the Company's consolidated pre-tax income for each
fiscal year, before reduction by the amount of the Award Pool ("Annual
Profits"). The Award Pool for each fiscal year is determined by the
Compensation Committee, but may not exceed 10% of Annual Profits. The
Compensation Committee designates the persons who will participate in the Plan
for each fiscal year and determines the maximum percentage of the Award Pool,
if any, to be paid to each participant for the particular fiscal year. In no
event may more than 40% of the Award Pool for a fiscal year be awarded to any
single participant in the Plan. No payments will be made under the Plan unless
Annual Profits exceed $3,000,000.
The Compensation Committee is authorized at any time during or after a
fiscal year, in its sole and absolute discretion, to reduce or eliminate the
Award Pool or the portion of the Award Pool allocated to any participant, for
any reason. The Compensation Committee may, at any time, terminate or, from
time to time, amend, modify or suspend the Plan or any Award which has not yet
been paid. Any such amendment may be made without stockholder approval. No
Award may be granted during any suspension of the Plan or after its
termination.
The proposed reapproval of the Plan will first apply for the fiscal year
which began April 1, 2000. Because amounts payable under the Plan will be
based on fiscal 2001 performance and will be contingent upon the right of the
Compensation Committee to exercise discretion to reduce the amount of the
final payments, such amounts are not determinable at the present time. The
Committee anticipates that if Annual Profits for fiscal 2001 were the same as
earned in fiscal 2000 the aggregate Awards that would be paid under the Plan
to the executives named in the Summary Compensation Table and any other
executives specified by the Committee would not be materially different than
the
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aggregate incentive bonuses paid for fiscal 2000. Amounts received under the
Plan for fiscal 2000 are reflected in the Summary Compensation Table under the
heading "Executive Compensation."
The Company believes that, upon reapproval of the Plan by the stockholders
and certification by the Compensation Committee that performance goals and any
other material terms have been satisfied, compensation paid pursuant to the
Plan will be tax deductible. The reapproval of the Plan by the stockholders
and certification by the Compensation Committee will be conditions to the
receipt by participants of any payments under the Plan for the fiscal year
ending in 2001 and beyond. Failure of the stockholders to approve the Plan
will not prohibit the Company from paying bonus compensation to senior
management who would have been covered by the Plan, including in situations
where such compensation may be subject to the deductibility limitation under
Section 162(m).
INDEPENDENT AUDITORS
The Board of Directors has selected PricewaterhouseCoopers LLP to be the
independent auditors of the Company for the fiscal year ending March 31, 2001.
Representatives of PricewaterhouseCoopers LLP will be present at the Annual
Meeting. They will have the opportunity to make a statement if they desire to
do so and will be available to respond to appropriate questions.
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Any stockholder proposal intended for inclusion in the proxy material for
the 2001 Annual Meeting must be received in writing by the Company on or
before February 14, 2001. The inclusion of any proposal will be subject to
applicable rules of the Securities and Exchange Commission. The persons named
as proxies for the 2001 Annual Meeting will generally have discretionary
authority to vote on any matter presented by a stockholder for action at the
meeting. In the event the Company receives notice of any stockholder proposal
by May 1, 2001, then, so long as the Company includes in its proxy statement
advice on the nature of the matter and how the named proxies intend to vote
the shares for which they have received discretionary authority, such proxies
may exercise discretionary authority with respect to such matter, except to
the extent limited by the Securities and Exchange Commission's rules governing
stockholder proposals.
COMPLIANCE WITH SECTION 16(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Pursuant to Section 16(a) of the Securities Exchange Act of 1934 and the
rules thereunder, the Company's executive officers and directors are required
to file with the Securities and Exchange Commission and the New York Stock
Exchange reports of their ownership of Common Stock. Based solely on a review
of copies of such reports furnished to the Company, or written representations
that no reports were required, the Company believes that during the fiscal
year ended March 31, 2000 its executive officers and directors complied with
the Section 16(a) except that a report covering a sale of 15,000 shares by
Andrew M. Silton was filed late.
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OTHER MATTERS
The Board of Directors of the Company is not aware of any other matters to
come before the meeting. If any other matters should come before the meeting,
the persons named in the enclosed proxy will act thereon according to their
best judgment.
By order of the Board of Directors
CHARLES A. BACIGALUPO
Secretary
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APPENDIX A
LEGG MASON, INC.
EXECUTIVE INCENTIVE COMPENSATION PLAN
1. Purpose. The purpose of the Legg Mason, Inc. Executive Incentive
Compensation Plan (the "Plan") is to provide incentives to executive officers
and other key employees of Legg Mason, Inc. (Legg Mason, Inc. and all direct
and indirect subsidiaries being referred to herein as the "Company") to incent
the performance of such employees and to encourage them to remain in the
employ of the Company. Amounts paid pursuant to the Plan are intended to
qualify as performance-based compensation within the meaning of Section 162(m)
of the Internal Revenue Code of 1986, as amended (the "Code").
2. Definitions. The terms defined in this section are used (and capitalized)
elsewhere in the Plan.
a. "Annual Profits" means the consolidated income before income taxes of
the Company for the Performance Period, before the provision for incentive
compensation earned pursuant to this Plan, and subject to accounting
adjustments and adjustment for extraordinary items.
b. "Award" means a portion of the Award Pool payable to a Participant as
determined pursuant to Section 4 hereof.
c. "Award Pool" means a pool specified by the Committee, in accordance
with Section 4 hereof, out of which Awards may be made to Participants.
d. "Committee" means the Compensation Committee of the Board of Directors
of Legg Mason, Inc., or such other Board committee as may be designated by
the Board of Directors to administer the Plan.
e. "Participant" means an employee designated by the Committee to
participate in the Plan for a designated Performance Period.
f. "Performance Period" means the Company's fiscal year.
3. Administration.
3.1 The Committee shall administer the Plan. The Committee's interpretation
of the Plan and of any Awards made under the Plan shall be final and binding
on all persons with an interest therein. The Committee shall have the power to
establish regulations to administer the Plan and to change such regulations.
3.2 Exculpation and Indemnification. To the full extent permitted by law,
(i) no member of the Committee shall be liable for any action or determination
taken or made in good faith with respect to the Plan or any Award made under
the Plan, and (ii) the members of the Committee shall be entitled to
indemnification by the Company with regard to such actions.
4. Awards.
4.1 Creation of Award Pools. Not later than 90 days following the
commencement of each Performance Period, the Committee shall establish an
Award Pool from which Awards may be paid in accordance with the Plan. The
amount included in the Award Pool for a particular Performance Period shall be
equal to a percentage of the Annual Profits for the Performance Period to be
determined by the Committee, not to exceed 10% of the Annual Profits.
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4.2 Allocation of Award Pools. Not later than 90 days following the
commencement of each Performance Period, the Committee shall select the
persons who shall be Participants for such Performance Period and allocate,
with respect to each Participant, a maximum percentage of the Award Pool, if
any, to be paid for such Performance Period; provided that in no event shall
the percentage portion of the Award Pool allocated to any Participant exceed
40% of the Award Pool.
4.3 Adjustments. The Committee is authorized at any time during or after a
Performance Period, in its sole and absolute discretion, to reduce or
eliminate the Award Pool or the Award allocated to any Participant for any
reason.
4.4 Payment of Awards. Following the completion of each Performance Period,
the Committee shall certify in writing the amount of the Award Pool and the
Awards payable to Participants. Partial payments may be made to Participants
during the course of a Performance Period in the sole discretion of the
Committee; provided that the aggregate of such partial payments may not exceed
the amount of the Award that a Participant would otherwise be entitled to
under this Section 4. No award shall be paid under the Plan unless the Annual
Profits for the Performance Period exceed $3,000,000.
5. Effective Date of the Plan. The Plan shall be effective as of April 1,
1995, provided that the Plan is approved by the stockholders of the Company at
a meeting held no later than September 1, 1995. The Plan shall remain in
effect until it has been terminated pursuant to Section 8.
6. Right to Terminate Employment. Nothing in the Plan or designation as a
Participant shall confer upon any Participant the right to continue in the
employment of the Company or any subsidiary or affect any right which the
Company or any subsidiary may have to terminate the employment of a
Participant with or without cause.
7. Tax Withholding. The Company shall have the right to withhold from cash
payments under the Plan to a Participant or other person an amount sufficient
to cover any required withholding taxes.
8. Amendment, Modification and Termination of the Plan. The Committee may at
any time terminate, suspend or modify the Plan and or any Award which has not
been paid. No Award may be granted during any suspension of the Plan or after
its termination.
9. Unfunded Plan. The Plan shall be unfunded and the Company shall not be
required to segregate any assets that may at any time be represented by Award
Pool.
10. Other Benefit and Compensation Programs. Neither the adoption of the
Plan by the Committee nor its submission to the stockholders of the Company
shall be construed as creating any limitation on the power of the Committee or
the Board of Directors to adopt such other incentive or other compensation
arrangements as it may deem necessary. Payments received by a Participant
pursuant to the Plan shall not be deemed a part of a Participant's regular,
recurring compensation for purposes of the termination, indemnity or severance
pay law of any state or country and shall not be included in, nor have any
effect on, the determination of benefits under any other employee benefit
plan, contract or similar arrangement provided by the Company or any
subsidiary unless expressly so provided by such other plan, contract or
arrangement, or unless the Committee expressly determines that an Award or
portion of an Award should be included to accurately reflect competitive
compensation practices or to recognize that an Award has been made in lieu of
a portion of competitive cash compensation.
11. Governing Law. To the extent that federal laws do not otherwise control,
the Plan and all determinations made and actions taken pursuant to thereto
shall be governed by the laws of Maryland.
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LEGG MASON, INC.
Proxy for Annual Meeting of Stockholders, July 25, 2000
The undersigned hereby appoints Raymond A. Mason, Charles A. Bacigalupo and
Timothy C. Scheve, and each of them, as proxy, with full power of substitution,
to vote all shares which the undersigned is entitled to vote at the Annual
Meeting of Stockholders of Legg Mason, Inc., on July 25, 2000, at 10:00 a.m.,
and at any adjournment thereof.
The Board of Directors recommends a vote FOR each of the items below.
1. FOR [ ] WITHHOLD [ ] The election of all Nominees for the Board of
Directors listed (except as marked to the contrary):
Nominees for the term expiring at the 2003 annual meeting
Harry M. Ford, Jr. James E. Ukrop Peter F. O'Malley
Margaret DeB. Tutwiler John E. Koerner, III
(To withhold authority to vote for any individual nominee strike
a line through the nominee's name)
2. FOR [ ] AGAINST [ ] ABSTAIN [ ] Amendment of the Legg Mason, Inc.
Articles of Incorporation.
3. FOR [ ] AGAINST [ ] ABSTAIN [ ] Reapproval of the Legg Mason, Inc.
Executive Incentive Compensation Plan.
4. To act upon any other matter which may properly come before the meeting or
any adjournment thereof.
This proxy will be voted on each of the foregoing items as specified by the
person signing it, but if no specification is made the proxy will be voted
FOR the election of Directors and FORthe other proposals.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
IT MAY BE REVOKED PRIOR TO ITS EXERCISE.
<PAGE>
Receipt of notice of the meeting, proxy statement and 2000 annual
report is hereby acknowledged, and the terms of the notice and statement are
hereby incorporated by reference into this proxy. The undersigned hereby
revokes all proxies heretofore given for said meeting or any adjournment or
adjournments thereof.
Dated . . . . . . . . . . . . . . . . . . . . . . 2000
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(SEAL)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(SEAL)
Please date and then sign exactly as name appears to the left. If
signing for a trust, estate, corporation or other legal entity, capaci-
ty or title should be stated. If shares are jointly owned, both owners
should sign.
PLEASE DATE AND SIGN THIS PROXY AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
