Thursday, September 23, 1999

Should Bishop Estate
trustees be paid?

Bullet The issue: A consultant firm has recommended that Bishop Estate trustees receive virtually no compensation.

Bullet Our view: Trustee compensation should be sharply reduced, if not entirely eliminated, to discourage the use of trustee appointments for political purposes.

A consultant firm has recommended that future Bishop Estate trustees receive no compensation except an annual allowance of $5,000 for travel expenses and $200 for each meeting that lasts longer than six hours, with an annual limit of $20,000. This would be a dramatic change in view of the fact that the recently ousted trustees were receiving as much as $1 million each.

Info Box The recommendation is less startling if it is assumed that the trustees will no longer devote full time to their estate duties, in effect serving as administrators -- they claimed that the estate had five chief executive officers -- as well as policy makers.

Even under that arrangement they were greatly overpaid but they could claim that they were devoting all their time and energy to the job, which involved managing billions of dollars worth of assets.

Presumably in the future the estate will be run on a day-to-day basis by a single CEO, as a court order mandates. The trustees will be restricted to a policy-making role, which will involve much less of their time than has been the case in the past. This is the customary arrangement for nonprofit organizations.

The consultant firm, Solutions Network Inc., in its report to the state attorney general's office, cited a 1997 study of grant-making foundations. Seventy-three percent said they did not pay compensation to outside directors. For those that did, the median pay was $12,500 a year.

In the context of the Bishop Estate's recent troubles, the recommendation is important because the former trustees' huge income made the positions attractive as political rewards, assuring an affluent retirement. Thus the appointment of such Democratic Party luminaries as Richard Wong, former Senate president, Henry Peters, former House speaker, and William Richardson, former lieutenant governor and chief justice of the Supreme Court.

Appointment to the Bishop Estate board would lose its financial appeal -- and probably its political taint -- if this recommendation was adopted. That would be a great improvement, but the same effect probably could be achieved even if the trustees received a modest amount of compensation, perhaps $25,000 a year.

Governor Cayetano has commented that the problem of political influence over the trustee appointments would disappear if the compensation was reduced. This is largely but not entirely true.

It is also necessary to eliminate the role of the judiciary in trustee selection -- for the sake of the judges as well as of the Bishop Estate. The justices of the Supreme Court have allowed themselves to be used for political purposes, and this must end.

Trustee appointments should be made by the Probate Court on the basis of recommendations by alumni and parents of students at the Kamehameha Schools. Coupled with a sharp reduction or elimination of trustee compensation, such an arrangement should restore community respect for the trustees and promote the proper functioning of the Bishop Estate.

Bishop Estate Archive

Tobacco lawsuit

Bullet The issue: The federal government has filed suit against the tobacco industry to recover damages for medical costs.

Bullet Our view: Litigation will be successful only if it results in a reduction of people choosing to smoke.

A federal lawsuit against the tobacco industry following a $206 billion industry settlement with Hawaii and 45 other states is sure to result in higher cigarette prices. Any further effect on smoking may rely on the suit's success in generating proceeds for anti-smoking programs, which should be the goal of such litigation.

The stated purpose of the lawsuit, which accuses the industry of racketeering, is to recover more than $20 billion a year spent by the federal government on health programs to treat smoking-related illnesses. It grew out of the 1998 Senate rejection of a $568 billion measure that would have raised cigarette taxes by $1.10 a pack.

A settlement appears unlikely, at least anytime soon, which means the tobacco industry will be spending millions to defend itself in court against damage claims. That in itself probably will result in price increases.

Smoking among young people has been on the rise for most of this decade while prices have increased and a massive effort has been waged to discourage them from acquiring the habit. Per capita cigarette consumption fell by 40 percent from 1975 to 1993, but it has dropped little since then. Cigarette smoking among teens has increased substantially, even in Britain, where cigarettes cost twice as much as in the United States.

Price increases have had an effect, but only when they are significant. Researchers say that every 10 percent price increase will result in a 7 percent reduction in the number of adolescents who start smoking. Anti-smoking advertisements also have had little effect, studies have found.

Attacking the tobacco industry and forcing further price increases may be justified, but people need to take personal responsibility for their health decisions instead of regarding themselves as helpless victims. The anti-smoking movement has faltered because of its alarmist charges against secondhand smoke. Credibility is crucial in persuading people that smoking is harmful.

The federal lawsuit will be successful if it helps people to appreciate the real health dangers of smoking and decide to quit or never begin. Continuing to blame the tobacco companies for illnesses that smokers have been warned about for decades is not enough.

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