Everyone knows Hawaii is a unique place.
But not everyone adapts, particularly
when it comes to profits in paradise.
Ronald Migita was in an unusual position. Standing behind a podium, his spokesman at his side, the president and chief executive officer of CB Bancshares Inc. was getting grilled by reporters.
He looked clearly out of his comfort zone, giving one- and two-sentence answers to questions. His stoic expression suggested he'd rather be anywhere but in the conference room.
But pressure was growing for Migita to respond to a takeover proposal from the bank's downtown rival.
With the news conference down to its final question, the 61-year-old banker was asked about Central Pacific Financial Corp.'s takeover tactics. Migita actually thanked the reporter for the question. Then he answered:
"I can certainly assure you and the community that this is not how we do business in Hawaii."
While it probably wasn't Migita's intention, his comment started a discussion across the Bishop Street corridor: Is doing business in Hawaii different than it is on the mainland?
Business transactions in Hawaii are gentler, nonconfrontational and make a point of trying to save face for all invloved, said Richard Brislin, a professor of management at the University of Hawaii's College of Business Administration.
"My understanding is that (former Hawaii financier and developer) Chinn Ho, when he was a successful businessman, would say 'I've been successful because I love my potential partners to death,' " Brislin said.
There's little love between takeover player Central Pacific Bank and target City Bank. Both sides have dug in their heels while shareholders, employees, customers, the communities and the state wait for a resolution.
Central Pacific has been on the offense with a major publicity blitz to shareholders, analysts and the media while CB Bancshares has retired to its corner to study the proposal, saying very little.
BancWest Corp. Chairman and CEO Walter Dods, who has been on both ends of mergers, said there are similarities and differences between doing business in Hawaii and on the mainland.
"Business is pretty much the same everywhere in that you need to respect and treat people properly," said Dods, who merged First Hawaiian Bank into San Francisco-based Bank of the West four years ago. "But you also need extra sensitivity to ethnic and cultural diversity. People on the mainland tend to be more verbal. The Hawaii people are just as capable, but because of their culture they tend not to be as verbal. We recognized the differences and worked them out."
Dods said "the proof in the pudding" is that four years later the combined bank is breaking all its earnings records.
"We knew the First Hawaiian brand wouldn't work on the mainland and the Bank of the West brand wouldn't work in Hawaii, so we were very careful to keep the distinction of the two banks," Dods said. "A lot of banks would cut and create one bank, but we found that one plus one equaled three instead of two by not trying to homogenize the operations."
Dods said there hasn't been any change since French giant BNP Paribas in December 2001 bought the remaining 55 percent of the bank that it didn't already own.
"They let the American management run the company and have not interfered in a single management decision," Dods said.
Dave Banks, a corporate attorney with Honolulu law firm Cades Schutte, said the pace of bigger deals involving mainland lawyers and clients generally are more frenetic than in Hawaii.
"Timelines are often shorter, and the expectation is that everyone will work around the clock on the deal until it is completed," he said. "A few years ago, I was in the L.A. office of Skadden Arps (the firm now representing CB Bancshares) at 10 p.m. on a Sunday and every one of their dozen conference rooms was occupied and in use."
Banks said mainland attorneys and their clients have a tendency to be less trusting and less cordial of opposing counsel and their clients. He said it's different in Hawaii because corporate attorneys and businesspeople here know each other. However, he said he has seen this diminish over the years as the state bar has gotten bigger and technology has advanced in the legal practice.
"Impersonal e-mail messages are replacing phone calls and face-to-face meetings," Banks said.
Robert Clarke, chairman, president and chief executive officer of Hawaiian Electric Industries Inc., said the relatively small size of the state plays a factor.
"This is a small town and we all know each other," he said. "And while we all compete fiercely as competitors, personally we're friends and we're very careful about not criticizing our competitors personally. I think that's different than you might find in places like San Francisco, Los Angeles and New York."
Competitive criticism won Clint Arnoldus, Central Pacific's chairman, president and CEO, a public lambasting last month after he talked about Central Pacific Bank being more local than Bank of Hawaii and First Hawaiian Bank.
"When I say a local bank, I'm talking about a bank that is focused on the state of Hawaii," Arnoldus said in defense of his statements. "This bank was founded in 1954. It has never gone outside the state. It has always been focused on businesses right here."
Arnoldus said when he had the opportunity on two occasions to hire management positions, he hired from within the state instead of bringing in people from the mainland.
"In the first place, it's better for the state," he said. "Also, local people are very qualified. They've got a great work ethic and they've very well educated. They know their jobs. So when I'm saying a local bank, that's what I'm talking about."
The chief executives of Bankoh and First Hawaiian, though, responded forcefully and publicly to Arnoldus' criticism. Bankoh Chairman and CEO Michael O'Neill brought the subject up at a shareholders meeting, and Dods derided Arnoldus as a malihini and offered to debate him on the meaning of local, in pidgin.
O'Neill said the state's limited universe is a major reason why people here have to tread more softly.
"It's a relatively small place where everyone knows everyone," said O'Neill, a former Bank of America executive who during his career has been involved in three mergers or acquisitions. "A lot of people are related. So what goes around, comes around. I think you need to be conscious of that."
Ultimately, he said, businesses are in charge of taking care of their customers.
"You need to understand how customers think, behave, what their value systems are," he said. "I think if you run afoul of those, the chances of it affecting your business are significant."
Dods said that in Hawaii, especially, it's not wise to pull the wool over someone's eyes.
"Like any place, you don't take the local community cheap or talk down to the locals," Dods said. "I will say this about the people in Hawaii, because of their multicultural experiences, they have great B.S. detectors, and they can spot a fast-talking person pretty quickly."
In Arnoldus' case, he began courting CB Bancshares in private by sending the bank a letter on March 17. But, growing frustrated with the lack of a response, he took the issue public April 16 and has been pounding away ever since. Still, he's expressed his willingness to sit down at the table and talk with Migita.
Jim Schuler was the head of Honolulu-based Schuler Homes when larger mainland home builder D.R. Horton Inc. came calling two years ago. Schuler had grown his business into a $1.6 billion company by acquiring several private mainland companies. This time, though, his company was the one being pursued. He elected to merge with Horton because it had the same business and management philosophies as Schuler Homes.
After more than 30 years doing business in Hawaii, Schuler said the state seems friendly to him. But, he said, some mainland businessmen he deals with find Hawaii a difficult place to do business.
"They understand how to play the game in their locales as we do in Hawaii," said Schuler, who is president of Horton's western region, which includes Hawaii.
Paul Loo, senior vice president of financial services firm Morgan Stanley in Honolulu, said the informal climate in Hawaii results in many business executives answering their own phones.
"I can reach CEOs easier here than on the mainland," he said. "We tend to be more face-to-face people."
Loo questioned whether Migita was following Hawaii "style" by failing to respond to Arnoldus.
"Management works for the shareholder," Loo said. "Hawaii style is, 'If you call me, I call you back.' The Hawaiian style is to respond and to answer phone calls. And if you don't answer, the person may have the right to go to another level, which in corporate America is the shareholders. That is what Clint did."
Migita, born and raised in Hawaii, said the culture here is that parties involved in a business deal need to work with each other harmoniously.
"If we have a disagreement, we're able to talk about it," Migita said.
Banks, the corporate attorney, said at the end of the day it's the stakes involved, more so than the players, that usually determine how negotiations proceed.
"The gloves may come off, and the Queensbury rules will not apply, if there is a lot to win or lose in a particular transaction," he said. "It won't matter whether the parties are in New York, London, Paris or Waimanalo."
