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Baker Fentress changing compensation to attract top staff

Baker Fentress & Co. wants to add a stock option plan and other incentives as part of an effort to recruit and keep top employees like Jessica Bibliowicz at the firm's money management subsidiary.

Baker Fentress, the closed-end fund based in Chicago, is asking shareholders to approve an upgraded compensation plan which includes stock options, loans and bonus stock awards based on employee performance. If shareholders approve the proposal, it could mean additional compensation for top employees including Bibliowicz, former chief executive officer of Smith Barney Mutual Funds Management. Bibliowicz, the daughter of Citigroup chief executive officer Sanford Weill, was a high-profile hire for John A. Levin & Co. when she joined the firm in July, 1997. Levin is a Baker Fentress subsidiary.

Baker Fentress described the new compensation plan in a preliminary proxy statement filed with the Securities and Exchange Commission Nov. 25. Shareholders are expected to vote on the proposal Dec. 30.

Levin, with about 65 employees, had $7.5 billion in assets under management as of Sept. 30, says James P. Koeneman, Baker Fentress's chief financial officer. Levin manages money for institutions, high-net-worth individuals and mutual funds. A compensation plan which provides equity in addition to cash is needed to hire and retain top personnel in the financial services industry, says Koeneman.

"This is the norm in the industry," Koeneman said. The compensation plan "is in the long term very beneficial to the company and the shareholders" because it will aid in recruiting and retaining top employees, he said.

That is consistent with what compensation specialists and executive recruiters in the mutual fund industry have been saying since last year. In a report in October, for example, the executive recruiting firm Russell Reynolds Associates said the bull market had fostered increased compensation for top management through the use of stock options.

The move by Bibliowicz last year to Levin, whose business primarily is institutional money management rather than retail mutual funds, was a surprise in the industry, said Gregg Wolper, an editor at Morningstar. Levin currently serves as a sub-adviser for the Vanguard Equity Income Fund, the MainStay Research Value Fund and the Allmerica Select Growth and Income Fund, according to the proxy statement. Bibliowicz could further any plans of Levin's to build its mutual fund business, Wolper said.

"I don't think we've seen the full effects" of Bibliowicz's hiring yet, Wolper said.