A large Building Materials Holding Corporation (NYSE:BLG) shareholder is stepping up its pressure on the company to rid itself of chief executive Robert Mellor and promote Sanley Wilson, according to a Schedule 13D/A filing with the SEC. Many shareholders are hoping that the activist can take action to clean up corporate governance practices and unlock value in the struggling company.

Chapman Capital, which controls over 9 percent of the company, demanded the resignation of chief executive Robert Mellor and his replacement with Stanley Wilson. The activist hedge fund insists that the executive's total compensation over the last three years is excessive given today's market conditions. Meanwhile, an insignificant stake in the company only indicates a lack of conviction.

"BMHC’s owners obviously should hold Mr. Mellor neither commendable for yesterday’s homebuilding boom that enriched him, nor accountable for today’s bust that perversely continues to enrich him," said Chapman Capital in a statement. "BMHC’s holding company structure, with Mr. Mellor serving as the Company’s '$6 Million Man' in personal total compensation over the past three fiscal years, is out-of-date and untenable in today’s challenging homebuilding environment."

Problems compounded recently after Standard & Poor's placed BHCM's ratings on "Credit Watch with negative implications" as a result of the board's "corporate governance lapse". Interestingly, the S&P cited the current battle between Chapman Capital and the company in determining this lapse in corporate governance. Clearly, there is an issue that needs to be addressed very soon before shareholders suffer even more.

In the end, the problems facing BMHC is one that can no longer be ignored. The imbalance between the ownership and governance of the company has resulted in a stock price that has declined nearly 60 percent to 2004 levels. The extraordinarily low valuation, trading around tangible book value, should send the board a very clear message of Wall Street's distrust and diffidence in BMHC's management and board members.

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