Banker & Tradesman photo / file
After an investor last week publicly questioned Berkshire Bank’s decision to hire a new CEO, the bank issued a statement today explaining the reasons for the hiring and confirming it has contacted the investor.
New York-based HoldCo Asset Management last week sent an open letter to J. Williar Dunlaevy, the independent chairman of Berkshire Bank’s parent company, raising concerns about the bank’s decision to hire a new CEO instead of pursuing other alternatives, including a sale.
HoldCo said in a statement announcing the letter that it wanted full transparency regarding the process “that resulted in the hiring of yet another CEO – the fourth in less than three years – instead of pursuing other strategic alternatives including a sale or merger.”
In a statement today responding to HoldCo’s press release and letter, Berkshire Bank said it had contacted representatives from HoldCo to understand their views and would “continue this dialogue.”
“Berkshire is a purpose-driven organization focused on enhancing shareholder value and delivering for all of our stakeholders, including customers, employees and the communities we serve,” Berkshire Bank said. “Consistent with that mission, we take the views of our shareholders seriously and regularly listen to their perspectives on the Company’s strategy and progress.”
Last week’s letter, which was signed by HoldCo’s co-founders, Vik Ghei and Michael Zaitzeff, asked why the board decided to hire a new CEO “to attempt a herculean turnaround of the bank,” and why it was reluctant to return excess capital to shareholders. HoldCo and its managed funds own approximately 3.3 percent of the outstanding shares of the bank’s parent company, Berkshire Hills Bancorp Inc., according to HoldCo’s statement.
“The Board’s failure to evaluate all strategic alternatives, including a sale, merger, and/or capital return program appears to us to be a breach of its fiduciary duties that should outrage all shareholders,” Ghei and Zaitzeff said last week. “In short, it is time for the Board to open the kimono.”
HoldCo’s letter was sent two weeks after Berkshire Bank had announced that Nitin Mhatre, a former Webster Bank executive, would become the new CEO effective Jan. 29. Berkshire’s previous CEO, Richard Marotta, had resigned on Aug. 10. The move came after Berkshire Bank took a $554 million goodwill impairment charge that created a $549 million loss for the bank in the second quarter. Marotta had replaced longtime CEO Michael Daly in 2018, and Sean Gray, the bank’s president and chief operating officer, had been acting CEO in August.
Berkshire in its letter explained why it hired Mhatre.
“The appointment of Mr. Mhatre was the culmination of a comprehensive, national search process conducted by the Board with the guidance of a leading executive search firm to find the right candidate to lead Berkshire into its next chapter,” Berkshire said Tuesday. “Berkshire’s Board chose Mr. Mhatre to lead the Company for, among other reasons, his decades of experience driving growth and profitability in community and global banks; his proven leadership qualities in a range of roles building customer-centric cultures; his commitment to technology-driven innovation and digital transformation; and his vision, passion and integrity.”
Berkshire Bank said that it would “continue constructive engagement with all shareholders to achieve our mission.” The bank added: “Under the leadership of our new CEO, we look forward to sharing a more comprehensive plan and providing updates on our progress as we move forward.”
