Bank CEO gives
up $1 million salary

The head of Pacific Century hopes his
action will improve the firm's share price

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By Russ Lynch
rlynch@starbulletin.com

One of Hawaii's highest-paid executives is giving up his 2002 salary -- more than $1 million in pay and bonuses -- saying he wants to lead the way in cutting costs so that other employees will not lose their jobs.

But Michael O'Neill, chairman and chief executive officer of Bank of Hawaii's parent company, Pacific Century Financial Corp., said he has a broader motive: to improve the company's share price in the market, from which he will benefit as a significant stockholder.

"I'm not being altogether altruistic," O'Neill said.

O'Neill said he will not take his expected 2002 salary of $900,000 and bonus of $600,000. His top team of about 10 executives will also take pay cuts.

"The management committee has taken a 10 percent cut in pay, and we've basically told the board we won't take cash bonuses," O'Neill said.

But the executives are all willing to consider taking stock options instead. "We want more and more of our compensation to be stock-related," O'Neill said.

He owns 732,000 shares of Pacific Century stock, which he purchased with his own money after he took the top bank job in November 2000. His purchase cost was a little over $11 million. At yesterday's closing price of $26.13, those shares were worth nearly $19 million.

O'Neill also has options to buy more than 2 million additional shares at $13.65 a share, about half what they are selling for now, so it is very much in his personal interest to see the stock do well in the market, he said.

When the word gets out that executives are cutting their pay, his theory goes, investors should be even happier than they are now with the company's performance, and the stock price should improve.

The shares have done well under the leadership of O'Neill, a former vice chairman of Bank of America who came to Pacific Century on a deal that specifically excluded "golden parachute" bonuses if he bails out, and he relies entirely on his salary and stock options, which are at the whim of the board of directors. Pacific Century stock has risen to about $26 from about $15 a share when O'Neill took over, although there have been dips in between.

He and the rest of top management have been looking at ways to keep the company's profits to the point where there will be "no enforced layoffs," which would be good for employee morale, he said.

Management's morale would get its boost from a climb in the stock price.

Pacific Century reported yesterday that its earnings for the fourth quarter of 2001, $26.3 million, were 19.3 percent below the $32.6 million profit of the final quarter of 2000.

Last year, the company shed its money-losing or questionable businesses and some real profit-makers in the interests of staying closer to its Hawaii home and concentrating on core businesses in Hawaii, American Samoa and the Western Pacific.

As a result, it ended the year a much smaller company, with assets of $10.6 billion, down 24.3 percent from $14 billion at the end of 2000.

O'Neill said in the earnings report that he was glad all the divestitures he had planned, such as selling some mainland and South Pacific banks and getting rid of unsatisfactory loans, were completed in 2001.