Advertiser Staff Writer
After two years of
layoffs, troubled loans and growing unrest among investors, Bank of
Hawaiëi and its parent company
are facing a crucial test: Analysts say itís now time for
Hawaiëiís second biggest
banking company to deliver on its promise of higher profits.
billion Pacific Century Financial Corp. stumbled badly in its loan
business earlier this year ó so badly that the companyís stock price
hit a five-year low and CEO Lawrence Johnson announced his
retirement amid rising investor pressure.
the companyís board of directors is itself under intense pressure
from Wall Street to get the bank back on track in one of the most
critical periods in its 102-year history as they search for a new
Primary markets: Pacific Century, a regional financial
services holding company, has operations in four primary
markets: Hawaiëi, the west and
South Pacific, Asia, the U.S. Mainland.
Principal subsidiary: Bank of Hawaiëi
Assets: $14.3 billion
Second-quarter net income: $6.71 million, according to a
company report last month ó a drop of nearly 83 percent from
the same quarter a year ago ó as the company set aside $83.4
million for loan losses.
Ticker symbol: BOH, New York Stock Exchange
Web site: http://www.boh.com/
were reluctant to talk specifically about the board and its
performance over the past couple of years, citing their sensitive
relationship with the company. But some talked about general
"There are some
things that clearly frustrate us: Why is it that all the economic
indicators are showing that the Hawaiian economy is improving, yet
the bank is still reporting difficulties?" said Andrew
ington, a New
York-based analyst with Pzena Investment Management, one of Pacific
Centuryís biggest institutional investors.
That is one of
the many questions Pacific Centuryís board will have to address in
the months to come in order to restore confidence among
Board members ó
typically 10 to 12 at any one time ó oversee Pacific Centuryís
operations, monitor finances, guide acquisitions, plot strategic
moves and most visibly serve as boss to the chief
"I think we
have been a very responsive board," said Mary Bitterman, 55, a
director since 1994 and one of Pacific Centuryís 11 current board
Centuryís board also consists of:
Heenan, the 60-year-old trustee for the Estate of James
Campbell, a real estate development company, and former
chairman of Theo H. Davies & Co. Ltd.;
Stuart Ho, 64, chairman and president of Capital
Inc., a real estate development and management
Trotter, 69, president of F.E. Trotter Inc.;
Baldwin, 62, president of Baldwin Pacific Corp., a livestock
sales and maintenance company with orchard farming operations
on the Mainland;
Donald Takaki, the 58-year-old chairman and CEO of
Island Movers, a local transportation service
Stanley Takahashi, 67, executive vice president of
Kyo-Ya Ltd., a Japanese investment firm;
Martin Stein, 59, president of Sonoma Mountain Venture,
a consulting and venture capital firm; and
Robert Huret is the boardís most recent addition and a
managing member of Financial Technologies Ventures, a venture
capital investment firm.
Bitterman is president/CEO of KQED Inc. (San
Richard J. Dahl, is president/COO of Pacific
Century Financial Corp.
Johnson is chairmain/CEO of Pacific Century Financial
Also sitting on
the board are Johnson and Pacific Centuryís president and chief
operating officer Richard Dahl, a leading candidate for the chief
boards, Pacific Century has among its members the brightest and most
experienced corporate talent in Hawaiëi. It pays its directors
a retainer of $8,000 a year plus $750 and expenses for each of the
quarterly meetings they attend. Members get another $3,500 annually
if they chair one of Pacific Centuryís three standing
directors also sit on the board of the companyís Bank of
Hawaiëi subsidiary, which pays
them another $8,000 in retainers and $600 for each meeting they
attend. That board meets monthly.
to say exactly how much money directors end up collecting, because
company reports to the Securities and Exchange Commission do not
include attendance records. But for that kind of money, investors
are expecting big things from Pacific Centuryís board.
"We are looking
for them to find a capable leader who will be able to exploit the
full value of what we still think is a really great franchise,"
geographic isolation has insulated the company from some of the
competitive pressures on Mainland banks. "The management has been
slow to adapt some of the management practices of the Mainland, so
may be a bit behind the times," Wellington said.
banks had already completed their restructuring when Pacific Century
launched its own initiatives in 1998.
to the occasion'
and the other directors hope to put to rest any qualms investors may
have with the bank and their ability to oversee the companyís
will rise to the occasion," Bitterman said.
She pointed to
the recent addition of two outside directors from the Mainland with
extensive backgrounds in banking, technology and acquisitions as
examples of the board adding necessary expertise.
Two other board
members contacted by The Advertiser declined to comment, saying the
board was referring all questions to Bitterman, the lead
The board has
hired Korn-Ferry, the worldís biggest executive recruiting firm, to
help it find and screen CEO candidates over the next several months.
It also is hoping to leverage its own expertise in the final
Heenan, who has
an MBA from Columbia University and a doctorate from Wharton School
and the University of Pennsylvania, once ran one of
Hawaiëiís Big Five companies
and knows what it takes to succeed in Hawaiëi, analysts said. Stein,
a former vice chairman at BankAmerica Corp., was responsible for
technology, operations and payments at the banking giant and brings
much-needed banking expertise to the board.
collective standpoint, I think the board is patient and likes to
digest information," said Jim Bradshaw, a Portland, Ore.-based
banking analyst with D.A. Davidson & Co.
But the board
also must decide whether to continue the companyís long tradition of
promoting from within, or go outside and choose an agent of change
who might face resistance.
chairman and chief executive will have to focus on the companyís
flagging share price and long-term strategy. Pacific Century has
been burned in Asia, its South Pacific holdings are not performing
as expected, and it has missed much of the U.S. economic boom on the
Pacific Century ó formerly Bancorp Hawaiëi ó produced some of the
stateís best-trained banking talent. But experts said it also
produced a protective and insular management culture, one that
resisted big change and big risk, and was slow to carry out major
before the board is very important to the institution and the
communities it serves," Bitterman said. "But it is a decision that
has to be deliberated in a prudent way."
While a short
list of candidates is still months away, insiders said the name
dropping already has begun. While Dahl is the only one to
acknowledge being a candidate, speculation abounds on other local
quick to point out that with the consolidation of the banking
industry over the last five years, there is no shortage of
top-flight talent on the Mainland.
"I donít think
anyone is going to make a really big bet on the company until they
see who (the board) is going to bring in as CEO," said Randy Havre,
chief executive officer for Hawaiëi Venture Group and a
director for Neugenesis, a California biotechnology
has served as banking regulator in Gov. George Aryoshiís
administration, knows this board will be judged on its selection of
the next CEO, but she and the board refuse to rush into any
"Itís not a
popularity contest," she said. "Hawaiëi does not have a
monopoly on sensitivity. We will look for someone with a good head
and a good heart. One without the other would not be