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Financial Realm Makes Private Hawaii School Target of Criticism

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From atop the terraced, hillside campus of Hawaii's private Kamehameha Schools, the panoramic view of Honolulu and Pearl Harbor is the kind worthy of a picture postcard.

Early in this century, the isolated location was viewed as ideal for keeping the girls who attended the school away from "unsavory'' urban influences below. Today, it means that some of the 3,000 boys and girls who attend day or boarding school on the 600-acre campus must board buses just to get to their next classes.

But if the school's Kapalama Heights domain is a lofty perch, its financial realm represents the Mount Everest of the private school world.

The school is the sole beneficiary of a charitable landed trust created more than a century ago with 430,000 acres owned by the royal family of Hawaii. Currently, the school's endowment dwarfs even that of Harvard University.

Totaling about $6 billion--Harvard's is $5.3 billion--the value of the Kamehameha Schools/Bernice Pauahi Bishop Estate, as it is formally known, makes the school the nation's richest precollegiate institution. It apparently is also the largest single beneficiary of a charity in the country.

Yet, the school's bountiful riches also insure it a high-profile existence that is marked by some criticism and controversy.

An annual report released this month by a court master, for example, questions how far the schools go in meeting the needs of the native- and part-Hawaiian children they were established to serve.

And summing up the feelings of several critics, State Rep. David M. Hagino, a Democrat, said, "If you've got all these billions of dollars, how come you don't do more?''

"Somehow the Bishop Estate has got to understand,'' he said, "that their mission, from an educational standpoint, is to touch the lives of every Hawaiian child.''

Hefty Paychecks

Consonant with their great wealth, the schools have a truly royal heritage.

Princess Bernice Pauahi Bishop, the great-grandaughter of King Kamehameha I--the unifier of the archipelago and founder of the ruling dynasty--set aside her family's lands in a trust to support in perpetuity the Kamehameha Schools, one each for boys and girls.

After Ms. Bishop's death in 1884, the boys' school was founded in 1887 and the girls' school in 1894. Their goal was to educate native Hawaiians and offer them a hopeful future in the wake of the dislocation and disease brought by the Western discovery of the islands.

The Bishop Estate is now the state's largest private landowner, controlling 8 percent of Hawaii's real estate.

While less than 2 percent of the 337,251 acres in Hawaii remaining from the bequest is developed, that portion is prime and includes 16 acres in Waikiki topped by two resort hotels and the estate's own Royal Hawaiian Shopping Center.

Largely because it has been under court order to sell off some of its Hawaiian lease-hold lands, the estate has become cash rich in the last decade and has emerged as a major investment and real-estate player worldwide, with such mainland holdings as Las Vegas residential properties, Michigan timberland, and Wisconsin's two largest shopping malls.

Among the beneficiaries of the estate's wealth are its five trustees, who last year earned $860,653 each. Their high pay, and the fact that Ms. Bishop's will stipulated they be selected by the appointed justices of the Hawaii Supreme Court, have rankled some critics.

Many others question whether the estate, which also runs a variety of preschool and community-education programs, does all it can to reach the members of an ethnic group that suffers disproportionately from poverty, poor health, low educational levels, and other social ills.

This month's probate review of the estate by the court-appointed master, James E. Duffy Jr., explores some of these issues.

Mr. Duffy recommended that the trustees do their best to insure that their compensation remain within its current "reasonable'' ranges--as defined by a report from an executive-compensation consultant. He also said the trustees should expand the schools' off-campus programs, especially the early-education programs for those ages birth to 5 years.

The master's recommendations are not binding on the court or on the trustees.

On yet another front in which the school finds itself in the news, the U.S. Supreme Court this fall will decide whether to review the schools' requirement that all teachers and trustees be Protestant, as stipulated in Ms. Bishop's will. (See Education Week, April 14, 1993.)

A federal appeals court said that requirement--observed by the schools in hiring teachers and by the state supreme court justices in selecting trustees--violates federal civil-rights law.

Unlike the Bishop Estate trustees, trustees of other nonprofit organizations, including independent schools, usually receive only reimbursement for expenses.

But school officials and the compensation consultant hired by the estate argued that the duties of Bishop Estate trustees, who work full time, greatly exceed those at other nonprofits and more closely resemble the roles of corporate executives.

Topping Other Nonprofits

However, even the chief executives of large nonprofit groups do not make as much as the Bishop Estate trustees.

In a survey earlier this year of salaries of the top executives of major nonprofit organizations, The Chronicle of Philanthropy found the most highly paid one was the president of the Mount Sinai Medical Center in New York, who received $799,492, including benefits.

The highest-paid university president among the institutions surveyed was the president of Columbia University in New York City, at $363,600.

The president of the American Red Cross was paid $200,000, for example, while the head of the Boy Scouts of America made $255,000.

Strategic Compensation Associates, the firm that analyzed the pay of the Bishop Estate trustees, found in its report this year that the pay was not out of line for the trustees' duties.

"A reasonable and appropriate cumulative annual total compensation range ... falls between $2.5 million and $4.5 million,'' the report says.

For 1991-92, the five trustees together took home slightly more than $4.3 million.

Gary Hourihan, the president of the firm, said that the hands-on duties of the Bishop Estate trustees makes them "night-and-day different'' from trustees of other charitable organizations.

They are, he said, "similar to the top five executives in a major regional bank'' in the sense that they both operate a large facility--a school--and manage a diversified investment portfolio.

He also said he did not find it redundant to have five such executives--Ms. Bishop's will stipulated five trustees--because they do not have a large "caste of senior managers'' beneath them.

There are three managers under the trustees: a president of the education division, a director of asset management, and a director for administrative services. They were paid between $100,000 and $155,000 in the fiscal year 1991-92.

The 210 teachers at the Kamehameha Schools are paid between $30,500 and $62,845, said Elisa Yadao, the director of communications for the school and the estate.

In 1992-93, teachers' salaries at boarding-day members of the National Association of Independent Schools ranged from a low of $9,500 to a high of $64,200. The national average for those schools was $24,523.

More Pay, No Benefits

While the Bishop Estate trustees receive a hefty pay package, they are entitled to receive even more.

Under state law, the trustees are entitled to divide an amount equal to up to 2 percent of all monies handled by the estate each year.

In recent years, the trustees have voluntarily waived part of their commissions. In the fiscal year 1990-91--the most recent one for which such data are available--the trustees took home $704,660 each instead of a possible $1.08 million.

Myron B. Thompson, the president of the estate's trustees and a former head of Hawaii's Department of Social Services, is unapologetic about his pay.

"My response is I work for it,'' he said. "I do it according to the law.''

Tax and court documents indicate that the trustees are independent contractors, not employees of the Kamehameha Schools/Bishop Estate.

They are not entitled to receive such benefits as medical insurance or retirement and, unlike corporate executives, they do not get stock options or performance incentive benefits--a point Mr. Hourihan, the compensation consultant, mentioned as another justification for their pay.

In their written response to the master's report to the court, the Bishop Estate trustees said they will use the study by the compensation consultant as a "baseline'' and have national experts review their compensation at least every three years.

'Political Plum'

Although they are paid to manage a large investment portfolio, only one of the five current trustees--who serve from their appointment until age 70--has professional experience in that area.

Oswald K. Stender, an alumnus of the Kamehameha Schools, has spent 30 years in land and property management and served as the chief executive officer of another large private estate in Hawaii.

The three others, in addition to Mr. Thompson, are Lokelani Lindsey, a longtime educator who ran unsuccessfully for mayor of Maui County; Richard Wong, who spent 14 years as president of the State Senate; and Henry H. Peters, a current member of the State House of Representatives.

All three are Democrats.

According to Desmond J. Byrne, the state chair of the watchdog group Common Cause who for a decade has done research on the Bishop Estate, the trustee position is regarded as "the ultimate political plum'' by Hawaii's Democratic majority.

But Robert G. Klein, an associate justice on the state supreme court who is involved in the selection of Bishop Estate trustees, said politics does not play a role.

"I think it's pretty naÃive to think a supreme court justice can be pressured by political pressures when you have a 10-year term'' as justice, he said.

Justice Klein said that he believes experience in investment matters is not crucial for a trustee.

"My question is who can do the best to fulfill the mission of the estate'' and how well the group of trustees will work together, he said.

From Infant to Adult Education

Even critics of the estate's financial setup acknowledge its success in providing a high-quality, college-preparatory program at its exceptional Kapalama Heights facility, which features a television studio, a performing-arts complex, tennis courts, and a chapel.

Because of the composition of the student body, the schools feel a special obligation to suffuse the curriculum with Hawaiian culture, said Kahele Kukea, the principal of the elementary division. Hawaiian language--taught through music, movement, and traditional games--is integral to the elementary curriculum, he said.

Because the native culture emphasizes cooperation over competition, teachers may allow a more free-flowing exchange of ideas rather than call on children one at a time. And since Hawaiians have a visually oriented learning style, students may be asked to diagram their ideas on paper.

While the selectivity of its admissions draws some grumbles--the schools accept about one out of seven applicants--the estate subsidizes more than 90 percent of the tuition and other fees for its native- and part-Hawaiian students.

Scholarships are also available for those students who cannot afford the $940 annual charge for elementary school or the $1,289 for secondary-day students and $2,544 for secondary-boarding students.

Some tuition is charged because the trustees feel that education "means more if you pay for it,'' said Ms. Yadao, the estate's communications director.

Among its off-campus programs, the estate operates early-education programs on five islands--supplemented by some federal funds--including a parent-infant program and two different kinds of preschools.

It also develops methods of effective language instruction and provides teacher training for the elementary-grade public schools.

In addition, the estate runs a number of community programs offering adult education, alternative education, counseling, and higher-education scholarship programs, some of which are federally funded.

In an interview, Mr. Thompson, the trustees' president, said he would push in these last six months of his tenure for a possible shift of more of the estate's resources to the early-childhood-development programs.

The community programs in particular elicit the praise of human-services workers and other supporters.

The estate has made a real effort in recent years "to embrace the Hawaiian community more, not just the students on the hill,'' said Haunani Apoliona, who heads Alu Like, a private human-services agency.

Charles Nakoa, the executive director of the Queen Lili'oukalani Children's Center, a private child-welfare agency that works with the estate, said he has seen teachers and students alike benefit from the estate's research on the learning styles of native Hawaiians.

"I think that [research] is going to help the public schools in the long run,'' he said.

'Have and Have-Nots'

The master's report notes that during the 1990-91 school year, the early-education division served 6,397 students and families while the community-education division served 35,315 students, totaling 41,712.

The estate maintains the figure is closer to 50,000.

Such figures do not impress Mr. Hagino, the Democratic legislator.

"They ought to be tracking every Hawaiian kid in the state,'' he said.

In his report to the court, Mr. Duffy seemed to be of the same mind, noting that students enrolled at Kamehameha make up about 6 percent of the state's school-age Hawaiian population.

"It would seem the present situation is perpetuating 'the have and have-nots' in the Hawaiian community,'' the report says.

Mr. Duffy suggested that it was time for the school to "seriously consider'' establishing alternative educational programs, such as telecommunications and satellite links--something the trustees said they are investigating--other campuses for schools throughout the state, partnerships with public schools that serve predominantly Hawaiian students, and additional multipurpose education centers around the state.

In their written response to the report, the trustees said that, while the resources of the estate are "vast,'' they cannot begin to solve all of the problems of native- and part-Hawaiians.

"The existence of the [school and estate] does not give the community at large license to abdicate its obligation to all of the people, including the Hawaiian and part-Hawaiian community,'' they wrote. "The estate is not the sole or even primary vehicle for the advancement of the Hawaiian people.''

The trustees' statement argues that, even if financial resources were unlimited, there are not enough teachers qualified to teach Hawaiian languages and culture or enough versed in Kamehameha's cooperative-education methods to spread educational programs a great deal wider.

Their statement concludes: "The legacy of Bernice Pauahi Bishop is a magnificent resource, but it is not a substitute for public obligations.''

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