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The Honolulu Advertiser
Posted on: Wednesday, March 4, 2009

VOLCANIC ASH
School trustees put Kamehameha first

By David Shapiro

The rejection of big pay raises by Kamehameha Schools trustees shows how far they've come in putting the estate's interests ahead of their own since the scandal of a decade ago and how out of touch the state probate court remains in its oversight of the $7.7 billion trust.

With the economy in freefall and Kamehameha investments down more than $1.7 billion, Probate Judge Colleen Hirai outrageously approved raises of up to 69 percent for the five trustees, from $120,000 to $207,000 a year for the chairman and from $97,500 to $165,000 for other trustees.

To their credit, trustees Douglas Ing, Corbett Kalama, Robert Kihune, Diane Plotts and Nainoa Thompson immediately rejected the raises as inappropriate in the current economy and went a step further by taking a 10 percent cut from their current compensation until the economy improves.

It's a refreshing change from a decade ago, when an earlier group of greedy trustees each made $1 million a year and got themselves removed for scheming to use their positions to profit even further.

It was the second time in five years the current board has turned down outsized pay raises offered by the court, a sign they get it that Bernice Pauahi Bishop intended her bequest to enrich Hawaiian children, not the adults who run Kamehameha Schools.

Hirai and the estate's court-appointed master David Fairbanks don't seem to get this; they've consistently tried to push trustee compensation beyond reasonable levels compared to the pay received by directors of similar nonprofits.

The high salaries paid to former trustees were at the heart of a corruption and mismanagement scandal that nearly cost Kamehameha Schools its tax-exempt status in the late 1990s.

To head off IRS sanctions, a different probate judge removed the five previous trustees, cut the pay of new trustees to the current level and ordered them to hire professional executives to do the heavy lifting on administration and investments.

Critics thought trustee pay was still too high relative to what board members make at other charitable trusts, but within a few years Hirai approved a plan to nearly double their salaries. Trustees declined the raises in 2004 in the face of outrage in the Hawaiian community.

Last year, yet another court-appointed salary panel recommended the current pay raises for trustees, who work 2 1/2 to three days a week.

Fairbanks argued that trustees deserve more compensation because they work twice as many hours as trustees of other nonprofit and for-profit boards.

That still leaves them ahead of the game at their current salaries, since directors of other tax-exempt organizations with similar assets make less than half as much as Kamehameha Schools pays.

The $12.3 billion Ford Foundation, for instance, pays board members between $24,090 and $35,650, and the $9.4 billion Robert Wood Johnson Foundation pays between $21,500 and $46,500.

The Kamehameha Schools job is considered a plum appointment at the existing pay, and higher salaries aren't needed to attract qualified trustees.

The last opening that ended with the appointment of banker Corbett Kalama featured spirited competition among a number of high-powered and politically well-connected applicants.

The court's continuing effort to boost trustee pay beyond what the Hawaiian community and trustees themselves think appropriate only raises suspicion that the political establishment is back at work trying to re-inflate the patronage value of a Kamehameha Schools trusteeship.

As long as current trustee pay keeps drawing qualified applicants like Kalama, it's time for the court to end the needless and expensive salary studies and simply institute regular cost-of-living reviews based on objective economic measures.

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 blogs.honoluluadvertiser.com.