View Point

Friday, November 7, 1997

Trustees must change
how they run Bishop Estate

By Gerard Jervis

OVER the last 12 weeks, I have been spending time simply talking with people -- at the Kamehameha Schools, at the Bishop Estate and in the community.

I am convinced that a fundamental reason for the current controversy is the lack of meaningful communication that has as its core mission the participation of people who can make a difference in improving the institution.

The controversy began with deeply felt charges of mishandling of school governance. Pauahi said that the trustees shall have the decision-making power, but it makes sense for the trustees to seek meaningful input in developing strategic plans.

That is wise management and simple human dignity.

In turn, key administrators should be held accountable for the development and implementation of operational plans.

These plans should include the broadest possible participation of the teachers and staff who are, after all, on the front line.

Certainly, it will take time to rebuild the trust between people and institutions. We can start by "talking story" but need to move beyond that. We must set up formal advisory and communication structures for students, teachers, staff, parents and alumni.

Our Hawaiian communities have a special interest in KS/BE, and they should be consulted in how Pauahi's mission can be carried out in ways that make sense for them.

People who disagree along the way should not be intimidated.

Beyond the Hawaiian community, it has become abundantly clear that the general public has a special and understandable interest as well.

It makes sense for us to share plans and ideas with public officials, affected communities and the general public -- not only with respect to the schools but the estate as well.

KS/BE needs to expand its formal linkages with educational, trust and business organizations throughout the world, in order for us to learn from the best examples of achievements and mistakes, and to form strategic alliances when it makes sense to do so.

Next, we must improve fiduciary standards, safeguard against conflicts of interest and bring management of Kamehameha Schools/Bishop Estate into the 21st century.

The necessity to have formal fiduciary and communication procedures in place underscores one of the fundamental realities of our situation: Although our scope, assets and mission have dramatically grown in the last 113 years, our governance and management structures have not kept up with either the job or the times.

One way to restore public confidence is for KS/BE to file a regular report that describes our fiduciary guidelines with the attorney general and probate court and within our annual report. This would provide a clear measuring stick against our actions for the master and others.

Another idea focuses on avoiding the conflicts that could arise between the interests of individual trustees and the interests of the trust. In order to avoid conflicts, you need to what know the conflicts might be.

The individual and institutional trustees and high-level officers of all charitable trusts should be required to file annual financial disclosure statements with their trusts, the probate court and the court-appointed master of those trusts.

Trustee compensation must be fair and reasonable. It is clear that the values of the community do not support our level of remuneration; Therefore we should remove this barrier to restore the estate's credibility and establish a fair but lower level of pay.

An experienced and professional compensation review panel could be appointed by the governor, the probate court, the trus-tees and alumni.

The panel could enlist the help of a professional compensation review consultant, and conduct comparative studies and other recognized methods of determining compensation that are widely used by the national philanthropic community and private businesses.

The panel can also hold open hearings or otherwise solicit public input, and report its recommendations to the probate court and the Legislature for their action.

Changing the selection of trustees is perhaps the topic of most public discussion. I strongly believe that we must stay true to Pauahi's instructions and her wish for the trustees to be selected by the five Hawaii Supreme Court justices, acting in their individual capacities.

To do otherwise would cause incalculable harm to the integrity of not only this trust, but also establish a bad precedent for all other existing and future trusts.

Having said that, it doesn't mean that the process of trustee selection by the justices cannot be improved. If the goals are citizen confidence, credibility and input, then public visibility or transparency of the process is the ticket.

For example, the Supreme Court justices -- in consultation with others -- can establish and publish qualifications and desired qualities of prospective trustees.

They can establish and publish specific nominating and review processes, the names of persons who are nominated, and invite public comment on the nominees.

The justices can formally interview candidates, perhaps have more than one cut, all the while keeping the public appropriately informed.

Once a trustee is selected, the trustees could issue a statement, citing their reasons for the selection.

One idea that deserves consideration is the establishment of terms. Once given life terms, trustees are now limited by a retirement age of 70.

We should consider terms of, say, 10-15 years that could be renewed by the justices using the same public process that was previously described.

OUR commitment to change must be balanced with an equal commitment to preserving what is working well. And as I am always reminded, Pauahi intended her bequest to be in a position to educate Hawaiian children in perpetuity.

So, above all, we must do no harm in the disguise of reform that cripples the Kamehameha Schools/Bishop Estate in ways that prevent it from its mission and being a leader far into the future.

We must take up the responsibility to clean up our house and move on for the good of our children and our children's children.

These are edited excerpts from a speech given by
Gerard Jervis, one of five trustees of the Kamehameha Schools/
Bishop Estate, to the Rotary Club of Honolulu on Tuesday.

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