Walter!

Hawaii’s most powerful and influential businessman retires. Well, not exactly.

December, 2004

The sucking sounds that you hear emanating from the corner of Bishop and King streets in downtown Honolulu are the beginnings of the power vacuum that will be engulfing the city and the rest of the state in the coming year. At the end of the month, Walter Dods steps down from his position as chief executive officer of First Hawaiian Bank and its holding company, BancWest Corp. He will be succeeded, at First Hawaiian Bank, by Don Horner, 54, who has been the bank’s president and chief operating officer since 2003. Horner has been with the bank since 1978.

Dods’ retirement will be the end of a 15-year tenure as head of the bank, a time in which First Hawaiian was transformed from a modest, second-place, Island institution earning $57 million on $5 billion in assets into Hawaii’s largest and most profitable company. Last year, BancWest earned $361 million on $35 billion in assets. It is the seventh-largest bank holding company in the western United States, with 530 branches in 17 Western and Midwestern states, as well as Guam and Saipan. By the end of the year, BancWest will have assets of $49 billion.

However, Dods won’t be riding off into the Hawaiian sunset. He won’t even be leaving the building. The charismatic and ever-present executive will retain his position as chairman of BancWest and First Hawaiian Bank, as well as sit on several boards of some the most powerful and influential corporations and organizations in the state. Maybe more significantly, Dods is head of a local hui investing in the Washington-based Carlyle Group’s purchase of Verizon Hawaii. While he won’t be participating in the day-to-day operations of the company, the shape of the new telecom will have Dods’ fingerprints all over it.

The End of an Era
No matter how much or how little Dods participates in Hawaii’s business and political worlds after his retirement, his departure from First Hawaiian will mark the end of an era. Arguably, no chief executive before or since has been as influential and as energetic as Dods has been during his 36-year career at the bank. Combining local-boy street smarts with good-ol’-boy, backroom skills, Dods was able to rapidly ascend the bank’s corporate ladder and, once on top, deftly move within Hawaii’s concentric business, political and social circles.

“Walter is extraordinary. He’s been able to succeed in so many different areas while always being involved in the community,” says Jeffrey Watanabe, attorney and managing partner of Watanabe Ing Kawashima & Komeiji. “He has tremendous vision, but, more importantly, he has the capability and the guts to act on that vision.”

Besides growing First Hawaiian’s market share in the Islands from 30 percent to 40 percent, extending BancWest’s reach throughout the West, and more recently, the Midwest, Dods also found time to serve as campaign manager and political confidante to both Sen. Dan Inouye and former Gov. George Ariyoshi, two of the state’s political gods. Moreover, he has raised untold millions of dollars for charities, work that has won him loyalties for life. The mythical chief executives from Hawaii’s Big Five corporations from decades past may have had more absolute power than Dods, but none of them had as extensive a reach into or a deeper understanding of the Islands’ many constituencies.

“As governor, I got an awful lot of information that came pre-packaged, designed for me to make a certain decision,” says Ariyoshi. “I needed to have people who could tell it to me straight, and Walter was one of those people. He’s smart and not only very perceptive about what’s happening in the business community, but also the rest of the community at large.”

Those who have worked closely with Dods claim that his combination of charisma, intelligence and drive won’t be seen in another Hawaii business leader for a long time, or ever. Others, who have observed him from afar, say that larger economic forces are defining the limitations of post-Dods leaders.

“Walter is one of a kind,” says Howard Karr, retired vice chairman of First Hawaiian Bank and executive vice president and CFO for BancWest. “I haven’t seen anyone who measures up to him; there is no one today that has his combination of intelligence, leadership skills and personal magnetism.”

According to Neal Milner, professor of political science at the University of Hawaii at Manoa, the changing nature of business in the Islands and the rest of the world will all but ensure that Hawaii will not see another leader like Dods, who often acted independently and decisively, looking beyond the bank’s bottom line.

“I don’t know if he’s the last leader of his kind,” says Milner. “However, I do know that more and more of the larger institutions are owned and run by people outside of the community. There still will be this concern for Hawaii, but it will be shown in altogether different ways.”

Great Expectations meets Pidgin to Da Max
Hawaii may some day see another leader like Walter Dods, but it is safe to say that his Great Expectations meets Pidgin to da Max life’s story will never be duplicated. Dods, the oldest in a family of seven children, grew up in East Honolulu’s Aina Haina and Kuliouou Valley and called a Quonset hut home. The tin-roofed house had no walls, just room dividers that didn’t reach the ceiling. The Dods kids shared two bedrooms: the four boys in one and the girls in the other. His parents slept in a third room.

“My father, who was an orphan from the Big Island, would tell us that we were upper middle class and that there were a lot of people who weren’t doing as well as we were,” says Dods. “I guess, compared to his upbringing, we were middle class, but we were still pretty poor.”

Dods’ father was a well-respected sergeant in the Honolulu Police Department and his mother was a night cashier at a Waikiki restaurant. The “no-scared-‘em, go-get-‘em” Walter first learned the value of hustle at the dinner table or, more specifically, on the way to the dinner table, since the last person there would just get the leftovers, if there were any.

To help pay for his tuition at St. Louis High School, Dods worked 40 hours a week from the age of 15, bagging groceries at Foodland, pumping gas at the corner service station and washing dishes at Aina Haina Chop Suey. After graduation in 1959, the future Bishop Street boy wonder got a tentative start in Honolulu’s business world. Dods, who had decided to forego college after graduation, because he “thought [he] was too smart for school,” got a job as an office boy at First Insurance. It would be the last tentative thing he did in his life. After six months of delivering mail, Dods realized that he wasn’t so smart after all, and enrolled in night classes at the University of Hawaii at Manoa.

The Making of a Community-based CEO
Dods worked his way up to the position of account executive at First Insurance before moving to Dillingham Corp., where he rose to manager of advertising and promotion. While at Dillingham, Dods started to get involved in community affairs and public service efforts, activities he would participate in for the rest of his career. Besides acquainting him with Honolulu’s interconnected communities, public service became a management training ground for the young executive, who would eventually become a legendary fund-raiser and team builder.

“Motivating volunteers is probably the single greatest training an executive can get,” says Dods. “You’re not paying them. They don’t get vacation or overtime, and you can’t fire them. You’ve got to appeal to their team spirit and their devotion to the cause.”

In 1968, the year he received his degree in business administration from UH, Dods joined First National Bank of Hawaii as its director of advertising and public relations. After only seven days on the job, he was put in charge of overseeing the company’s name change to First Hawaiian Bank. Shortly thereafter, he was entrusted with the considerable job of introducing a little thing called MasterCard to the Islands.

“Almost every job I had in my career was over my head. I was really young,” says Dods. “But I took those jobs as a challenge and a compliment and decided I’d learn from them.”

With those two early successes under his belt, Dods rose up First Hawaiian’s corporate ladder, quickly collecting vice president titles like so many deposit slips. Only a year after joining the company, Dods was promoted to assistant vice president. Less than a year after that, he became a full vice president. In 1973, he made senior vice president and, in 1978, he was named an executive vice president. Three years later, he was elected to the bank’s board of directors.

“From early on you could see that he had leadership skills,” says Karr, who joined the bank in 1973. “Walter has a keen sense of reading people, and he has an uncanny ability to empower and motivate them.”

“Walter was asked to perform certain things, and he always came through, always,” adds Wesley Park, former president and CEO of Hawaii Dental Service and a close friend of Dods. “After a while, he was expected to do the impossible, and then the impossible became routine.”

In 1984, Dods was handpicked by chairman John Bellinger to be the bank’s new president and his eventual successor. The choice seemed unlikely. Dods, an outgoing consensus builder, was the good cop to the autocratic and intimidating Bellinger’s bad cop. But the financial world was changing and Bellinger, also known for an uncanny insight, must have seen the writing on the wall.

“Mr. Bellinger and I had very different leadership styles and his style was right for his time,” says Dods. “He was very strong and effective. He was much more of a personality. He was like George Patton and I was more like Karl Malden’s character [the self-effacing and reserved Gen. Omar Bradley] in the movie [Patton], more collaborative.”

In November 1984, then bank examiner Donna Tanoue and the director of the state’s Department of Commerce and Consumer Affairs, Russell Nagata, approached the newly minted president with a plea for help. A year earlier, the bankruptcy of Manoa Finance, an industrial loan company, had cast a cloud over Hawaii’s financial world. Seven thousand depositors were clamoring for more than $45 million in frozen funds. Many of the depositors, who were under the mistaken impression that their life savings were federally insured, were elderly Japanese Americans who lived in and around the Manoa area. Some were near death. As a result, emotions were running high. A legion of lawyers was sifting through the debris and, because some public monies would be involved, a host of politicians was standing on the sidelines, ready to point and wag fingers.

Tanoue and Nagata approached a number of financial executives both locally and on the Mainland for help, but none of them wanted to venture into the financial and political minefield. They needed someone who had the confidence of Hawaii’s financial world, but who also had the nimbleness of a well-seasoned politician.

“Walter understood the significance of the issue to our community, which was in stark contrast to other conversations that we had,” says Tanoue, who is now vice chairman at Bank of Hawaii. “There were so many constituencies involved, but Walter took the bull by the horns. He was a real rock.”

According to Tanoue, Dods marshaled the support of other executives of large financial institutions and industrial loan companies and formulated a complex bail-out strategy that was a mix of liquidated Manoa Finance assets and private and public monies. The repayment became known simply as the “Dods Plan.” Dods met with community groups and lawyers many, many times. He then hammered the plan through a reluctant Legislature, a job that was more difficult than he had first thought.

“After working with the Legislature for a while, I realized that a lot of those lawmakers were involved through the back door with Manoa Finance,” says Dods. “Many of them were willing to let this whole thing die and let all those people lose their life’s savings.”

Two years later, Manoa Finance’s depositors received 100 cents on the dollar. “That’s how business should be done in Hawaii,” says Dods. “There is more to it than just dollars and cents. We have to take losses sometimes for the greater good of the community and that is hard for some people to grasp. But I really believe that if you take that kind of approach, the community will benefit and the bank will prosper.”

Way Out West
In the fall of 1989, after Bellinger’s sudden death, First Hawaiian’s directors named Dods chairman and chief executive officer, at 49, the youngest in the bank’s history. Although he had been pegged as Bellinger’s heir apparent five years before, all involved had expected Dods to have at least a couple more years of mentorship. The office boy from Aina Haina was in over his head again.

However, according to Karr, it wasn’t too long before the new chairman had proved his worth. During a talk story session in December 1989, with former U.S. Treasury Secretary William Simon, Dods offhandedly remarked that if Simon ever wanted to sell First Interstate of Hawaii, he would be interested. Early that year, an investment group led by Simon had purchased the Island bank. That informal conversation set the wheels in motion for First Hawaiian’s $140-million purchase of First Interstate in 1991.

Besides negotiations with Simon and company, the acquisition would eventually entail a three-week stock issue on the Mainland in which Dods raised $100 million. It was the largest stock issue to come out of Hawaii at the time. In addition, Dods and Karr would later have to fight a Federal Reserve Board decision to disallow the merger. When the dust had settled, First Interstate’s $790.5 million total deposits and 19 branches were brought into the First Hawaiian fold, increasing the bank’s share of total deposits from 33 percent to 38 percent, all without greatly increasing operating expenses.

The critics were silenced.

First Hawaiian acquired two more local financial institutions, Pioneer Federal Savings Bank in 1993 and GECC Financial, before Dods turned his attention to the West Coast and what he calls a “common sense” expansion.

“I remember all the analysts attacking our bank, because we weren’t international enough. I read volumes and volumes of studies that basically said that if you sold one pencil to everyone in China you would be a trillionaire,” says Dods. “Expansion into the Pacific just didn’t make sense to me. What can a Hawaii bank offer to the Philippines, Taiwan, Japan or Hong Kong that the local banks in those markets couldn’t do better, faster and more efficiently? Not to mention, you have different laws, customs and currencies. Instead, I believed that our model had worked well in Honolulu so why not in Salt Lake City and Portland?”

In 1995, in a rare public relations and political misstep, Dods was prominently featured in an ad campaign designed to boost consumer confidence and spending called “Thumbs Up, Hawaii!” The affirmative message to locals to spend more money fell on deaf ears and empty pocketbooks. Even the telegenic Dods couldn’t reverse Island economic trends.

But Dods’ biggest coups were yet to come.

In 1996, the same year he was named as president of the American Bankers Association, he unveiled the First Hawaiian Center, a sleek, futuristic, shiplike structure, that soared 438 feet above downtown Honolulu. The center, the largest building in Honolulu, was constructed during some the state’s toughest economic times. It would do more for consumer confidence than any ad campaign.

A year later, First Hawaiian merged with Bank of the West, based in San Francisco, with 104 branches and $6.1 billion in assets. The name of the holding company was changed from First Hawaiian Inc. to BancWest Corp. In 2001, Dods negotiated the acquisition by BNP Paribas of France, that country’s No. 1 listed bank.

Aloha Means Goodbye … and Hello
Dods is counting down the days to his retirement. But it doesn’t seem as though his life is going to change much. He’s going to be plenty busy with his work with Hawaiian Telecom, along with his duties as a trustee for the Samuel M. Damon Estate. In addition, Dods still has many public-service commitments and he is weighing offers from UH, Hawaii Pacific University and Chami-nade University to teach. A run for political office is off the table, for now.

“While I was trying to conquer the business world, I regret that I didn’t spend more time with my kids,” says Dods. “Because my wife did such a great job, I have a good relationship with my children. But I don’t regret my business career. I’ve loved every day of it. I’m down to 77 days, and it’s starting to hit hard. I still want to do it. It’s the right thing to do, but that doesn’t mean it will be easy.”

Dods believes that all this talk of him being the last of his kind is all that, just talk. People said the same things when he succeeded Bellinger. And, according to Dods, they will be saying the same things when it’s Don Horner’s turn to step down. It sounds simple and probable, but at this moment it’s hard to imagine Hawaii’s business world without Walter Dods.

“Nature abhors a vacuum, so someone will step up,” says Steven Dawson, professor of finance at UH Manoa. “This leadership stuff is hard to figure, but there will be another Walter Dods. There has to be. If not, we’re all in big trouble.”

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