FL MORRIS / FMORRIS@STARBULLETIN.COM
Bank of Hawaii Chairman Michael O'Neill spoke during a panel discussion at the University of Hawaii's Corporate Governance Conference yesterday. Other panelists, from left, were Jeri Calle, Kent Graham and John Rocchio.
Investing
with confidenceUH presents a panel discussion
on corporate governance
In the bull market days, many investors never looked back as money poured in faster than they could count.
Forget about the warning signs -- unsustainable price-earnings ratios, overcapacity and profitless companies were someone else's problem.
But Enron, WorldCom and Global Crossing, among others, changed all that. Although many people may not be familiar with the Sarbanes-Oxley Act of 2002, chances are they're aware that there has been a renewed focus on corporate governance.
Today, it boils down to one thing: investor confidence, said John Rocchio, managing director of Trust Company of the West.
Rocchio was one of four panelists, which included Bank of Hawaii Corp. Chairman and Chief Executive Michael O'Neill, who appeared yesterday at a University of Hawaii-sponsored forum on corporate governance at the Hawaii Prince Hotel.
"Everything we're talking about relates to one thing -- investor confidence," said Rocchio, who was on the panel with Jeri Calle, partner with KPMG LLP, and Kent Graham, partner of O'Melveny & Myers LLP. "If you don't have investor confidence, then you don't have the capital markets. And if you don't have the capital markets, you don't have the formation of businesses and the proliferation of capital you have in the United States."
FL MORRIS / FMORRIS@STARBULLETIN.COM
Members of the audience included, from left, Bill Richardson, Jennifer Waihee and James Miyashiro Jr.
O'Neill, whose 20-page quarterly earnings releases are testament to his commitment to transparency, said there probably wouldn't have been a call for Sarbanes-Oxley if the bull market were still in force. Most people, he said, probably don't even know much about the law. But CEOs certainly do. They're now required to certify their earnings results each quarter. Sarbanes-Oxley, among other things, improves financial disclosure and provides safeguards against conflicts of interest.
"If the market was at 16,000, I don't think any of this would have come out," O'Neill said. "There's an element of people who lost a lot of money and are therefore looking for reasons why. A lot of it was because of terrible behavior (by corporate executives)."
Rocchio, who describes himself as a cynic, doesn't think the legislation will be a panacea. But he said one thing it has done is raise awareness.
"There are more lawyers at meetings now spending more hours doing this," Rocchio said. "What we really want to do is raise awareness in the public. Investors have a decision. They have a dollar in their pocket, and they can decide where to put it.
"They can ignore all this stuff. They can ignore the fact that WorldCom was made up by a bunch of acquisitions with highly inflated stock prices off of assumptions that were never going to hold true. The same thing with Global Crossing.
"You could not even calculate the multiples of earnings that those stocks were trading at. Of course, they went out and bought everything in the world. It was paper. If you invest in that, then buyer beware."
At Bank of Hawaii, O'Neill requires each of the bank's senior managers to buy into the company.
"Options, in and of themselves, are one-way traffic if you don't own any stock," he said. "There's no downside."
But Bank of Hawaii senior managers are required to buy stock, he said.
"Then effectively what options become is added incentive because they have put their own skin in the game -- as much as four and five times their annual salary. Not given to them, purchased by them."
Replied Rocchio:
"That's music to institutional investors' ears."
