Bishop Estate Debate
Price of Paradise · Hawaii Public Radio · aired 1994-03-05
Guests: Oz Stender (Bishop Estate Trustee); Desmond Byrne (Executive Director, Common Cause Hawaii)
Duration: 0:26:09

[00:00:01] Randall Roth: Good morning. I'm Randy Roth, host of the Price of Paradise radio show. My guests this week are Bishop Estate Trustee Oz Stender and Bishop Estate critic Desmond Byrne. I probably should add that Desmond is the chairman of Common Cause of Hawaii, a nonpartisan citizens lobby dedicated to open, honest, and accountable government. Desmond, did I get that right?
[00:00:21] Desmond Byrne: Yes, you did.
[00:00:22] Randall Roth: If common cause is focused on accountable government, why so much concern about a non-governmental organization like the Bishop Estate?
[00:00:31] Desmond Byrne: Well, we're not interested in the Bishop Estate per se. What we are interested in is that the justices of the Supreme Court in an unofficial capacity elect or select the trustees.
[00:00:44] Randall Roth: I see. Oz, what do you think about the Supreme Court justices making the selection?
[00:00:50] Oz Stender: Well, yeah, the that requirement is a requirement of the will. It was Bernice Pauahi's wish that the that the justices of the Supreme Court uh appoint the trustee. So that's and I I think it's Trustee's duty to defend, you know, her will and that's if that's her right.
[00:01:10] Randall Roth: Well, that sounds pretty straightforward, Desmond. What's the problem?
[00:01:13] Desmond Byrne: It's not so straightforward. Um no private citizen, however eminent or prestigious, can ever impose on our third branch of government. Um nowhere else in the United States, and we've done some research, do Supreme Court justices select trustees of a private organization.
[00:01:32] Randall Roth: But aren't they doing it voluntarily?
[00:01:34] Desmond Byrne: They're doing it voluntarily in their capaci in an unofficial capacity, but they're still uh Supreme Court justices. And what we contend before the Commission on Judicial Conduct is that they're violating three out of the five canons of judicial ethics.
[00:01:51] Randall Roth: Give us an example of one of the violations.
[00:01:54] Desmond Byrne: That they shouldn't get involved in outside activities which possibly could have any conflict with their official duties. And their official duties are to rule on the Supreme Court of cases and not that the Bishop Estate is unreasonable litigious, but because it's so big, cases do go to the Supreme Court and do go before the justices. And therefore, it to us is a conflict of interest.
[00:02:20] Randall Roth: Oz, what about that? You, you personally, and all the trustees were selected by the five Supreme Court justices. Does it feel a little bit odd your being involved in a case in front of them, the people who hired you?
[00:02:31] Oz Stender: You know, you're going to have conflicts of of, well, uh issues of conflict in almost in any any organization with individuals. And once you started start to eliminate people because there is a uh potential conflict, uh you'll have nobody participating in making decisions. And I really believe that, you know, the conflicts uh if it's declared, if everyone knows that I was a justice and I was appointed by uh uh uh by the State Senate to be a uh a justice of the Supreme Court and I'm going to rule on an issue, everybody knows that. And to me, as long as the world knows what that conflict is, you move on from there.
[00:03:17] Randall Roth: All being done out in the open, isn't it, Desmond?
[00:03:19] Desmond Byrne: No, not exactly. I think, first of all, the justices arrive with plenty of baggage already because of their previous appointments and law firms and everything else, and you can't avoid that in getting an experienced person on the Supreme Court. However, you don't voluntarily invite more conflicts than you already have.
[00:03:38] Randall Roth: I see. Well, Desmond, you wrote a chapter for the Price of Paradise Volume 2, and the specific question that you were responding to was whether we're adequately compensating the Bishop Estate Trustees. But you said that that's not the most important question or even the second most important question. Well, if one of these important questions has to do with selection of the trustees, what's the other or some of the others?
[00:04:02] Desmond Byrne: Well, the the most important question is how well is the estate and the trustees doing on accomplishing the objectives of the will and and reaching not only in growing the estate well but also in providing for the education of Hawaiian children. The accountability question is far more important. The compensation question is important, but it's really a distraction.
[00:04:27] Randall Roth: Well, who are they doing a good job, or at least in your opinion?
[00:04:31] Desmond Byrne: I'm not sure.
[00:04:33] Randall Roth: Tell me what you mean by that.
[00:04:35] Desmond Byrne: Um, it's difficult to evaluate if you first look at the it's really in two businesses. It's in the estate investment business, it's in the education business. And on the estate business, if you look at return on assets and that kind of thing, it's hard to evaluate and you segregate it out because some of the land is conservation agricultural land and has a very low yield or income. Um whereas there are then investments in Goldman Sachs at the other end, 250 million. Now, how do you get either segmented and say what the return on investment of how well they're doing on all of that? That is only a means to an end. The end is how well are they educating Hawaiian children in Hawaii.
[00:05:19] Randall Roth: Okay. Well, let's let's take it one at a time. Oz, how well do you think the Bishop Estate Trustees have done in terms of building up the estate and and investing the money prudently?
[00:05:28] Oz Stender: You know, one of the things that I learned when I came to the Bishop Estate that the estate is doing uh a lot more in educating Hawaiian children than I believed. And that's mostly because we've not uh I guess the estate had not publicized all of the uh the forms of education that they're doing outside of or off the campus. People view as being school, so well that's only a part of it. We deal with maybe 3,000 students there uh K to 12. But if you look at the programs that we have out in the community, which numbers maybe we touch maybe there are another 30,000 Hawaiians in different ways. You got the prenatal program, traveling preschool program, we've got the preschool program, we've got the keep program, community education program. So there's another 30,000, you know, Hawaiian Hawaiians out there that we do reach and which I was not aware of.
[00:06:25] Randall Roth: Now, Jim Duffy, who was the court-appointed master to evaluate how the the estate has been doing, uh according to him, much much more needs to be done. Uh is that a criticism of what's been done in the past or is that simply saying what we all believe and that is we should try to do more than we've done in the past?
[00:06:42] Oz Stender: You know, I agree with him. There's not enough being done. There's a lot more needs to be done, but we can we can only do as much as the resources available. I'd like to do more. I mean, I wrote a vision paper which you know, expanded on that. I'd like to do a lot more than we're doing now, and everybody wants that, but we have to be careful that we don't get so far ahead of ourselves that we'll end up where the estate was, you know, in the 60s and 70s, that they expanded program so fast there was not enough income then to meet the payroll. And then they had to borrow money, you know, to to make payroll and then sell land to meet the note. And so we have to be careful. We want to move rapidly and we have programs and plans to move more rapidly, but we have to be cautious that we don't move so fast that we rode away the the the endowment.
[00:07:34] Randall Roth: Now, a word used in a a column that Bud Smiser wrote a couple months ago uh was stingy. He was saying that uh the Duffy Master's report uh was was concerned about the stinginess in the spending. Would you simply disagree with with what the report was suggesting or um does that go to a question of money management?
[00:07:54] Oz Stender: I think it goes to a question of money management, you know, and and, you know, I would like to be more, I guess, benevolent. But I'd rather err on the side of being stingy, rather than being spending so excessively that you create a problem for yourself.
[00:08:09] Randall Roth: Desmond, that sounds reasonable to me. What do you think?
[00:08:13] Desmond Byrne: I don't believe at the moment they spend all of their income. I agree you can only expand at a certain rate before you get into problems. I think part of the problem and the the Master recommend it was that they they devise a strategic plan to take them into the next couple of decades. And whether this got delayed because of the appointment of two new trustees, but I think if the trustees can see that and the community can see that of what this strategic plan looks like, then I think things will become a lot clearer.
[00:08:44] Randall Roth: I see. You're listening to the Price of Paradise radio show. I'm Randy Roth, and my guests this week are Bishop Estate Trustee Oz Stender and Bishop Estate critic Desmond Byrne. Well, Oz, you mentioned that you had uh written something about the future of the Bishop Estate, uh according to um the Star Bulletin in a speech to the Social Science Association last November, you took a look at the Bishop Estate in the year 2034, 40 years from now. Uh tell us a little bit about what you see in that vision.
[00:09:14] Oz Stender: Two things, you know, I think the vision and actually the you know, go getting back to the strategic plan, you know, that vision came out of the work we're doing on the strategic plan. And I said to myself, before we could really put the words down to uh to document a strategic plan, we need to have a vision of where we're going to go. And so I that's that's what happened with the uh uh the vision 2034, was to think forward if the assets of the estate, so you have to translate the asset value today, what it might be in the year 2034 and then what would the income be uh then and then of course how it what it takes to manage it, manage these assets. And then with the income from the asset value improvement over the those years, uh which I think I came with a number of 1.4 billion and then how do you spend 1. 1.4 billion dollars, and that's uh and that's all reflected in that paper.
[00:10:17] Randall Roth: Was that something that you wrote yourself or or is that based upon some sort of planning going on with the trustees as a group?
[00:10:24] Oz Stender: Well, I wrote that before we started doing the uh the strategic plan. It was something that I wanted to work out in my own mind before really dealing with the strategic plan issues or as we were dealing with it. I'm happy to report though that after uh spending the last two weekends working on the strategic plan, we have a draft out which we our target is to approve it by March 15th. And then of course, the development the operating plan comes of that. So we're getting there.
[00:10:54] Randall Roth: Are you going to let people like Desmond see that?
[00:10:57] Oz Stender: When we done with it, anybody can look at it.
[00:10:59] Randall Roth: And do you think it'll be publicly available fairly soon?
[00:11:03] Oz Stender: Well it'd be publicly available. I don't know. You know, one of the thing, one of the problems with these things is that, you know, we must we as trustees must be the managers of the estate and it always bothers me that there are always people out there trying to manage it for us. Uh so whether we would make it public or not, I don't know the uh the master will probably look at it because it's his duty to do so. But and I agreed with the with Duffy's uh comment that we should have a strategic plan and and it's more critical now because of the changes that are occurring at the estate, which is, you know, within the last I would say the last eight or 10 years uh if you look at the complexion of the estate, it's changed substantially.
[00:11:49] Randall Roth: Uh Desmond, in your chapter, you commented that there's at least a perception that the Bishop Estate trustees function as as five CEOs, as if they're not really uh operating the Bishop Estate in an efficient way. Can you comment a little bit on that?
[00:12:07] Desmond Byrne: Uh yes, I I think it's different from the operating from the Campbell Estate uh which has uh one CEO reporting to the trustees. I think they operate in a different way. Um
[00:12:21] Randall Roth: Well, let me stop you there since you mentioned the Campbell Estate, and we happen to have the fellow who at one time was the CEO of the Campbell Estate reporting to the trustees over there. Um is there a difference in how they operate, and if so, is that a good difference, Oz?
[00:12:38] Oz Stender: Well, that's a hard question to answer, you know, and and at the Campbell Estate um uh, you know, it's it's an environment that um I had been involved with for a long time. So I developed habits uh uh under that form of management. And at the Bishop Estate, yes, it is different. Um whether it's right or wrong, you know, I really can't comment on that. Uh uh for myself, it's a little difficult. I I because I'm got old habits, I guess. And so if you look at my vision statement, you know, I try to see the future that someday the complexion of the estate in its management of its assets would be different.
[00:13:20] Randall Roth: It it seemed to me as I read your your vision that the change in the trusteeship was a pretty major one going from from five who are based here in Hawaii to 16 that are from basically around the world and that offer all sorts of a special expertise that they're bringing to the table and and are paid based upon the number of meetings attended, which presumably would focus more on policy as opposed to day-to-day administration. That's a pretty big change from what from the way it works now, isn't it?
[00:13:49] Oz Stender: It's it's it's very different. It would be very different. And uh
[00:13:53] Randall Roth: How do your fellow trustees feel about that vision?
[00:13:55] Oz Stender: Oh, I don't know.
[00:13:57] Oz Stender: I think, you know, the the the reason the reason for uh you know, as I got into the uh strategic planning side of it and looked at the growth and the the the potential of the estate over time and the the assets that would and income that would be generated over that period of time tells me, and I tried to compare that then with a Fortune 500 company because, you know, if you're worth uh uh $60 billion, you're a pretty big company and I looked at the companies around the world and said, you know, while focusing on the Fortune 500 companies, I said if companies of that size that are successful are managed in this way, which is of course uh a corporate structure, and if it works there, something we should really seriously consider because the growth is happening and we should plan perhaps for that eventuality.
[00:14:52] Randall Roth: Desmond earlier was commenting about whether or not the Bishop Estate trustees are are doing a good job in in spending the money. And this may be an unfair question since you're a Kamehameha graduate, but uh what do you think of the quality of the education that the 3,000 odd kids are getting out there?
[00:15:09] Desmond Byrne: See the comparison, the only comparison I can make is, of course, when I was there, which was in couple years ago. I yeah a couple years ago. Uh in the way it is today, I think the quality of the education has improved immensely. You know, where we have I have a report here that shows that uh 95%, I think uh 95.8% of the class of 93 went on to high education. When I was at Kamehameha, uh lucky we had 10% going on to high education. So the quality has changed. I also make the comparison. I sit on the Board of Governors at Iolani School. So we make comparisons uh in that way and I think Kamehameha has come to the point that it can stand toe to toe to to Punahou and Iolani. Now, the difference we must recognize is that at at Kamehameha, we don't take all the very best as Iolani has that choice and Kamehameha and Punahou has that choice. We try to take those that are the very best and those that are perhaps not the very best. So our numbers will be a little different, but I think the effort is there. I think we're trying to balance uh uh, you know, the uh secondary school effort in trying to educate how many children in that level, but also at the other end of the scale.
[00:16:32] Randall Roth: I see. Desmond, you feel good about that? Not that it's your job to feel good, but you've read the Master's report. Do you feel confident that the quality of education is is high?
[00:16:44] Oz Stender: It's come a long way, even since I've been in Hawaii, which is 30 years when they were change when they were training key punch operators up on campus, which was uh not my idea of the future, but um I I think so. But I think the more important question be and it's been raised, it's not the 3,000, it's the 40,000 and beyond. And I I agree with the what the Bishop Estate has said, the main responsibility for training Hawaiian children or any other children in this state is the DOE. And I don't think they should ever be let off the hook here, because and I see Kamehameha schools is more complementing that system and adding value to it, especially for the needs of Hawaiian children and not so much duplicating it.
[00:17:29] Desmond Byrne: I think, you know, I think Desmond that's precisely the kinds of things that we're looking at and I think we should never be satisfied with what we're doing. You know, we should always find that there's a need to do more and I think that's the uh, you know, to me, that's the attitude that any trustee should have. We're not doing enough and we must do more. So I really don't have a problem when people have, you know, have comments to make as to how we operate because as always say, you know, it's it's um it's okay to be criticized. It's what you do about it that's important and and we should never be satisfied with what we do.
[00:18:07] Oz Stender: I want to point out Randy that you labeled me at the beginning as Bishop Estate critic uh I'm an observer who likes to raise questions because I feel that the level of discussion in the newspapers by writers is is pretty low and dismal because of the level of information put out by the Bishop Estate.
[00:18:27] Randall Roth: So you're a newspaper critic and a Bishop Estate observer?
[00:18:31] Desmond Byrne: Well, I I'd like to see more information. Um Oz said, they may be reluctant to put out the strategic plan, and they may get all kinds of criticism, but getting it out there because what the estate does, it's so big on the land side and important on the education side that everything they do is of consequence to Hawaii, and there's a lack of good information and the discussion is dismal.
[00:18:57] Randall Roth: You're listening to the Price of Paradise Radio show. I'm Randy Roth and my guests this week are Bishop Estate Trustee Oz Stender and Bishop Estate critic Desmond Byrne. Well, Oz, do you agree that the the quality and amount of information that's out there is is not what it should be?
[00:19:13] Oz Stender: I agree with that and I think the other trustees recognize that uh that we need to be communicating more with our public, uh with the public that's out there, we need to communicate more, uh, you know, with our students. Uh, we find that there's a shortcoming there too. Uh, I know when I was at Camay, I didn't know what the bishop estate was all about. And I think it's the same story. I think the kids at Camay are maybe more aware because we were in the press more recently uh and they are becoming aware, and I agree, we should be communicating more with the the public in general.
[00:19:46] Randall Roth: Well, I guess when you're a multi-billion dollar organization and own a a relatively high percentage of land in in a state, there are bound to be a lot of controversies. Uh, the most recent has to do with the uh county of Honolulu ordinance calling for mandatory condo leasehold conversion. Uh, can you tell us just generally what the Bishop estate position is on that right now?
[00:20:08] Oz Stender: Of course we've opposed uh the uh ordinance 9195 because of the as we keep people characterized it in all kinds of different ways, but the whole problem with that ordinance, it's government, you know, has determined that it has a right to take property from one owner and sell it to another. And that's the that's the the whole problem with with that ordinance, as it is with chapter 516.
[00:20:40] Randall Roth: But the government has the power of eminent domain and if it decides it's in the public's interest to build a new road, for example, it goes in and and buys that land. That's No, we have no problem with that. No problem with that? No problem with that. What's the difference here?
[00:20:53] Oz Stender: We have a contract as other owners have with their lessee and the contract is very specific as to what the lessor does and what the lessee does and it's very specific as to when the lease terminates. Never intended, there's nothing in there that says we intend to sell the property to the lessee. Mhm.
[00:21:13] Randall Roth: Desmond, is this tyranny of the majority?
[00:21:16] Desmond Byrne: No, I I don't not at all. I Well, I I don't think it's been properly researched all the effects of this kind of thing. And uh, because this is not just the bishop estate. This is a lot of small people, uh, who have these family land under a condo, and I don't, it often when legislation is passed, the economic and legal consequences and social consequences should be looked at far more deeply than they are, and there's just a a lack of homework has been done on the subject.
[00:21:47] Oz Stender: My comment in that is uh, it's it's been looked at but overlooked.
[00:21:55] Randall Roth: Well, well, people think it's a Bishop Estate problem whereas whereas it it's not a problem but of just of the concern, but it's widely distributed the land under condos. Exactly. There's uh some 60,000 and more condo leases you know, in this state. And the Bishop State is only about 12,000 of those. So here is 48,000 uh 58,000 no 48,000 other owners out there that have a problem. But the Bishop Estate, let's just focus on it. It's been selling the the land in a voluntary program. Yes. Um what difference really does it make that it's being forced to do it. I know nobody likes to be forced to do anything. But assuming the Bishop Estate was going to sell that land anyway, what's the problem with the ordinance?
[00:22:39] Oz Stender: You're still getting to basic premise that government is taking land from one individual to to sell it to another. But but aren't you going to get adequate compensation? No. Why? The way the formula reads and the way it reads in Chapter 516, you discount you discount the fee value by the lease term and rent. The council tried to pass an ordinance that fixed the rent and which is discounting the rent to minimize then the land value, then they passed another ordinance that says, now we can come and condemn that property, and you use the the the fix rent and the term of the lease to determine the least fee value. I mean so blatant that I can't believe that people really believe it's fair.
[00:23:24] Randall Roth: It sounds to me Desmond like they're defining fair market value in a way that's likely to not result in fair market value. What do you think?
[00:23:32] Desmond Byrne: From what I've heard, I agree there's a big problem with it, which should get resolved properly. I see. Well, before we uh wrap this show up, Oz, is there anything we've skipped over that you would like to add?
[00:23:45] Oz Stender: Nothing really, you know, I think uh, you know, I welcome, you know, uh people who have views on the Bishop state. It's always good to hear what people are saying and what they think ought to be done and and you know, we're going to do the best thing we can. The urgency to educate Hoan children has always been our mission. We should never be satisfied that what we're doing is enough or right. And I think there's always a room for us to do better and that should be, you know, that should be our goal, is to do better everyday.
[00:24:14] Randall Roth: Desmond, it sounds to me like they're pointed in a good direction, what do you think?
[00:24:19] Desmond Byrne: I think their objective is so large and so extensive and so important that they need all the help also and participation of a lot of the community in this. And I think to do that, they do need to tell people where they're going and what they're doing because from good information out there, and if they took a proactive role, I think they would get much higher level of feedback and and criticism in its best sense than they're getting now.
[00:24:51] Randall Roth: Let me read a a line from Oz's vision of uh the future of the Bishop estate 40 years from now. It's a time when Hawaiians are the most well educated, culturally rich, socially responsible and successful people in the world. Oz, that sounds like a pretty good objective.
[00:25:07] Oz Stender: Thank you.
[00:25:08] Randall Roth: My guests this week were Bishop Estate Trustee Oz Stender and Common Cause of Hawaii's current chairman Desmond Byrne. This week's show was produced by Jill Senner with technical assistance from Mark Wagner. Be sure to tune in next week when my guests will be the editors of Hawaii's daily newspapers, Jerry Kier of the Advertiser, and John Flanagan of the Star Bulletin. You've been listening to the Price of Paradise radio show. I'm Randy Roth. Aloha.