Wednesday, September 22, 1999

Zero salary for
Bishop trustees,
study says

The report, commissioned
by the state AG, recommends
a volunteer board

By Rick Daysog


Bishop Estate trustees, whose $1 million-a-year paychecks have fueled recent public criticism of the trust, should receive no compensation for their work for the charitable trust, according to a new study commissioned by the attorney general's office.

In a 54-page report, Radnor, Pa.-based Solutions Network Inc. recommended future board members should serve on a voluntary basis and should be paid no more than $5,000 a year for out-of-pocket expenses.

"It is our conclusion that the trustees of (Kamehameha Schools/Bishop Estate) should not be paid an annual retainer," the study said. "The evidence is also strong that compensation is unnecessary to attract dedicated and appropriate candidates to such honored appointments."

Solutions Network's report was submitted to a court-appointed Trustee Compensation Committee whose task is to determine reasonable compensation for the Bishop Estate trustees. The panel has hired the Towers Perrin consulting firm to come up with their own report on reasonable compensation.

The Internal Revenue Service, as part of its four-year audit of the multibillion-dollar trust, has recently argued that the trustees should not have been paid more than $160,000 a year for the 1990-1996 period.

Solution Network's study assumes that the Bishop Estate trustees would serve as outside policy makers and would not be involved in the day-to-day management of the trust as they had been the in past.

The estate is under court order to implement a management system headed by a chief executive officer who would be in charge of running the trust on a daily basis. Such a CEO would likely earn an annual salary of about $500,000 a year.

Solutions Network cited a 1997 study by the Council on Foundations, which surveyed compensation policies of 650 grant-making foundations. Of those foundations, 73.8 percent said they did not pay any compensation to outside directors. And for those that did, the median pay was just $12,500 a year.

The state's report also found that most independent universities and colleges paid no compensation for their trustees while public universities paid board members less than $5,000 a year.

Solutions Network likened the Bishop Estate to the $5 billion Milton Hershey School Trust, which pays no compensation to its 16 directors.

Ousted trustee Henry Peters defended trustees' past compensation as performance-based, saying it relied on state law, which allowed board members to receive a percentage of the trust's income. Previous studies by the mainland consulting firms of Towers Perrin and SCA Consulting found the compensation was reasonable, he said.

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