Pacific Century’s
performance hit

The California Public Employees Retirement
System has branded the Bankoh parent
as a poor performer

By Russ Lynch
Star-Bulletin

The nation's biggest public pension system today listed Pacific Century Financial Corp. as one of its poorest-performing investments but Lawrence M. Johnson, chairman and CEO of the parent of Bank of Hawaii, said the pension plan is wrong.

The California Public Employees Retirement System, a $150 billion fund, included Pacific Century in a list of nine companies that the fund says are "corporate America's poorest performers." The pension fund, known as CalPERS, holds 1.04 million shares of Pacific Century, worth close to $23 million at today's prices and equal to about 1.3 percent of Pacific Century's outstanding shares.

The fund said it plans to use its voting power as a shareholder in the companies this annual meeting season to push for changes.

Johnson today said CalPERS initially was concerned with Pacific Century's financial performance because of a drop in second-quarter earnings last year to about $3 million from the $30-$35 million second-quarter profit that is more normal.

Johnson said he talked with CalPERS and believed he had satisfied them that the poor quarter was the result of a one-time charge for a restructuring, including closing and consolidating branches, to make the bank-holding company more profitable. The benefits are already showing about a year ahead of schedule, said Richard J. Dahl, president and chief operating officer. "Our first quarter results will be out soon and people will see the movement starting to take hold," Dahl said.

Johnson said that CalPERS complaints about unsatisfactory "corporate governance" were really concerned with items that were already internal policies but had not been formalized. They have since, he said.

"Their main concern appears to be that we did not move from a staggered (terms) board" to one where all the directors come up for election at the same time, Johnson said. Pacific Century does not believe that sort of board is appropriate for a financial services company, he said. Staggered terms are needed so a number of the previous year's directors are still around to provide continuity and stability, Johnson said.