View Point

By Robert R. Midkiff

Friday, August 13, 1999

Use Yale as model for
Bishop Estate

OPERATING the Kamehameha Schools trust has brought huge managerial problems. Its recently ousted trustees hired compensation consultants to justify their huge annual salaries, which the IRS recently ruled were exorbitant.

One of its problems is that the estate is operating as a trust. Bishop Estate must be converted to a nonprofit corporation similar to all major educational institutions in America.

Harvard, Yale and Stanford universities, and Punahou and Iolani schools in Hawaii, all operate as nonprofit corporations with world-class chief executive officers and honorary, uncompensated boards of directors.

Harvard, for example, has two boards. One is a 30-member board of overseers elected by all the alumni for two five-year terms. The other is called "The President and Fellows," who are appointed, after a careful nominating process, by its own members. These five people are responsible for Harvard's assets and management.

It is the Yale University model, however, that might be emulated in Hawaii. It calls for a majority of directors to be self-perpetuating through a rigorous nominating process. At Yale, there are 19 directors. Three -- the governor and lieutenant governor of Connecticut, and the appointed president of Yale -- serve ex-officio.

The balance of the directors comes from two tracks. The first is made up of 10 outstanding men and women who serve as successors to the original seven ministers who were the first trustees of Yale. Each is nominated for a six-year term and can be renominated for a second six years.

The maximum age of service is 70. A careful search process provides Yale with exemplary people who will provide wisdom and wealth to the university.

The second Yale track consists of six alumni representatives who also serve for a maximum of two six-year terms. The alumni vote annually for one of two persons nominated by the Yale Alumni Association to join the overall board. Terms are staggered and the maximum age is 70.

Applying this model to the board of 15 directors of the Kamehameha Schools, the five interim trustees could propose a panel of names of outstanding mainland and Hawaii leaders for nine directors.

The probate judge, who now has the appointing authority, would select the initial directors from the panel. The nine initially appointed directors would serve one- to five-year terms by drawing lots to provide for a future rotation of directors.

Like Harvard, Yale or Punahou, these nine directors would be self-perpetuating, with a careful selection process to seek outstanding persons.

The Kamehameha Alumni Association would nominate 12 candidates for six directors to be elected by a vote of the alumni. The six with the greatest number of votes would be elected. They would serve initially for one to five years, again determined by drawing lots.

Each year thereafter, the alumni would vote for one of two candidates proposed by the Kamehameha Alumni Association. Write-in nominations would be allowed.

The candidate with the largest number of alumni votes would be elected for a five-year term with the possibility of re-election for a second five-year term. The maximum age to serve would be 70.

All directors would serve without salary. A nominal fee would be earned for each meeting attended; travel and lodging expenses would be reimbursed.

THIS proven method of selecting the best possible directors for a world-class Kamehameha Schools should provide an outstanding board of directors who could come together to hire and provide competitive compensation for a world-class CEO.

He or she would then be authorized to hire and provide competitive compensation for a top-quality administrative, investment and educational staff.

Bishop Estate is estimated to be worth $10 billion. Just a 5 percent payout based on market value could provide $500 million annually for salaries and continuing education for teachers, scholarships, money for building construction and maintenance, and proper compensation for investment and administrative staff.

Bishop Estate Archive

Robert R. Midkiff, president of the Atherton Family Foundation,
is the son of Frank E. Midkiff, who for a 50-year span served as president
of the Kamehameha Schools or a a trustee of the Bishop Estate.

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