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The Honolulu Advertiser
Posted on: Wednesday, August 6, 2008

COMMENTARY
Estate trustees should decline pay increase

By David Shapiro

It was a trip down bad-memory lane to read that a court-appointed panel is again proposing to virtually double the pay of the five Kamehameha Schools trustees, to $217,500 for chairman Nainoa Thompson and $187,000 for trustees Diane Plotts, Robert Kihune, Corbett Kalama and Douglas Ing.

We're not talking the million-dollar salaries of the disgraced trustees who were ousted in 1999 in a corruption and mismanagement scandal, but it's a disturbing move in the wrong direction for the $9.1 billion charitable trust that still bears scars from the turmoil of a decade ago.

The current compensation of about $100,000 a year is more than generous for part-time positions that the salary panel appointed by the Probate Court says take 2 1/2 to 3 days a week.

This is the second attempt to significantly boost trustee pay since the 1999 reformation. Trustees declined similar raises in 2004 in the face of strong community opposition that is likely to re-emerge this time around.

"Give me a break," said Roy Benham, a former president of the Kamehameha alumni association who thinks the money would be better spent educating native Hawaiian children. "I can understand a cost-of-living increase, but 65 percent or more is a little bit out of hand."

The current pay level was set by the court not only to end the outrageous compensation collected by the former trustees that threatened the estate's tax-exempt status, but also to limit the trustees to a broad policy-setting role and reduce their involvement in hands-on management.

The former trustees ridiculously considered themselves to be five CEOs and micromanaged every aspect of Kamehameha Schools.

But under court order, the trust now has a $591,677 professional CEO and a $689,560 vice president of endowment to do the heavy lifting on administration and asset management.

If trustees are putting in more time on the job than their counterparts at other charitable institutions, as the salary panel says in pushing for higher pay, that's not necessarily a good thing.

Some experts, such as senior U.S. District Judge Samuel King, co-author of "Broken Trust," think Kamehameha Schools should be moving in the opposite direction — toward conversion into a nonprofit corporation with directors serving for little or no compensation, such as schools like Harvard and Yale.

Even at a tenth of the compensation of the former trustees, a seat on the Kamehameha board at $100,000 a year is still considered a plum. Increasing the pay wouldn't attract better trustees; it would only make it a bigger plum.

The last board opening in 2006 drew numerous qualified applicants, and the three finalists openly lobbied for support.

Corbett Kalama, a First Hawaiian Bank vice president who was Probate Judge Colleen Hirai's excellent choice for the position, was questioned about trustee pay at a meeting with Kamehameha Schools alumni and indicated that he thought the current compensation was quite adequate.

Bill Coleman of Salary.com told Advertiser reporter Rick Daysog that the Probate Court's salary committee made a mistake when it compared Kamehameha Schools trustee pay to the directors of for-profit corporations.

A better comparison, he said, would have been large tax-exempt organizations with similar assets such as the Ford Foundation and Robert Wood Johnson Foundation, where board members receive $21,500 to $46,500 a year.

Salary increases of this magnitude are especially ill-timed in the current sour economy; University of Hawai'i regents were skewered in some quarters for giving UH President David McClain a 5.5 percent raise.

If the court doesn't reject the recommendations of its salary panel, the trustees should step up and decline the raises as they did in 2004.

David Shapiro, a veteran Hawai'i journalist, can be reached by e-mail at dave@volcanicash.net. His columns are archived at www.volcanicash.net. Read his daily blog at http://volcanicash.honadvblogs.com.

Reach David Shapiro at dave@volcanicash.net.