Marcato Capital Management Founder Explains: Seeking Removal Of Bank Of New York Mellon's CEO

Activist investor Marcato Capital Management LP, which has a 1.6 percent stake in Bank of New York Mellon Corp BK according to its latest SEC filing, sent a letter on Monday to the lead independent director of the bank calling for the ouster of its CEO.

Mick McGuire, founder of Marcato Capital Management, was on CNBC Tuesday to explain why the hedge funds want Gerald Hassell, the CEO of Bank of New York Mellon, to go.

Not Achieving Potential

"Bank of New York is our largest position; its been our largest position for several months," McGuire said. "And we've had a pretty extensive dialogue with the company, with the board and with several shareholders as well. And I think shareholders are really frustrated and we are also."

He continued, "The company is really not achieving its potential. We think that meaningful change is needed there and it's unlikely to be experienced without a meaningful change in leadership. So, we actually have sent a letter to the company today asking for them to seek the replacement of the CEO."

Related Link: Marcato Capital Sends Letter To Bank Of NY Mellon

Performance Metrics Not In Right Direction

McGuire was asked why he is specifically asking for Hassell to be removed as the CEO, even though the stock price of Bank of New York Mellon has doubled since he joined in September 2011, and some analysts on Street have praised him for trimming expenses.

He replied, "Despite what has been a rise in the share price itself, a lot of the key performance metrics of the company have not been in the right direction.

"The company is losing share in its core custody and administration asset business. Revenue is growing slower than competitors. Expense levels in particular are growing at rates that are truly unsustainable. And what that leads to is declines in margins declines in return on equity and earnings per share that have gone nowhere over all of the current CEO's tenure," McGuire concluded.