Changes in Organizational Governance:
Speaker: Colbert Matsumoto, the court-appointed master for Bishop Estate
A Perspective from Bishop Estate
League of Women Voters of Honolulu Annual Meeting, April 21, 2001
It is an honor and pleasure for me to speak to you today. I have been an admirer of the League for over 30 years since I first learned about the League because of its significant and frequent involvement in elections.
What is remarkable is how, from that time till today, the League has maintained an untainted reputation for integrity in the democratic process. No other organization commands the degree of trust and confidence that the League holds in the public's eye in connection with the electoral process. Your organization has also played an important role in education, making sure that the general public is knowledgeable about our electoral system.
Today I want to talk to you about organizational change with a particular view from my involvement with the Bishop Estate controversy. The Bishop Estate saga is a remarkable story because of the impact it has had on our governance processes in Hawaii. Ever since its creation, the Bishop Estate has been a major institution in Hawaii and its trustees have been important public figures in our community. As a result there has always been a certain awe associated with the Estate and its trustees. The power and wealth of the Estate made it a force to be reckoned with and, as a consequence, few dared challenge the actions and decisions of its trustees.
So what caused such a radical change in that scenario? A convergence of forces provided the catalyst for change. The sun, the moon, and the stars all lined up and produced a result that demonstrated the genius of our democratic system of governance.
Looking at the episode in a larger context, it is apparent that what happened at Bishop Estate was not an isolated event. It was another example of the revolutionary change in organizational governance that is occurring throughout the world.
What happened during the last 10 to 15 years is historically unprecedented. The prevailing model of democracy until recently was one where leaders would typically define the agenda and lead the masses. It was a top down model dependent upon charismatic leaders emerging and leading the process for change.
Today, there is a different model that is emerging. It is one where there are no clear centers of power but rather a dispersal of influence among diverse groups. If anything, the agenda for change is being driven from the grass roots in all organizations.
The role of leadership is undergoing a transformation. No longer are leaders viewed as being so powerful so as to be above reproach. Leaders today are being held accountable by their constituencies in ways unheard of just 20 years ago.
Who would have then thought that two presidents of the Republic of Korea, Roh Tae Woo and Chun Doo Wan, would be put on trial, convicted and one of them sentenced to over 20 years in prison and the other to death for public corruption and other offenses? Who would have then imagined that a sitting president of the United States would have his sexual indiscretion graphically described to the world by the media and subjected to potential impeachment and criminal indictment because of it? Who would have predicted that, within 20 years, two presidents of the Philippines would be ousted, not by coup d'etats, but by peaceful popular uprisings? Who would have then ventured to guess that so many top executives of huge multi-national corporations would find themselves forced to resign in response to minority shareholder demands for accountability?
A paradigm shift has occurred within one generation regarding organizational governance. Why? My opinion: 4 major forces have had significant impact.
- Education. More people today are better educated than ever before. Educational institutions globally have done a tremendous job of making people more aware of democratic principles and how democratic processes are supposed to function.
- Information. More information is available to more people through different means and from multiple sources than ever before.
- Technology. Technology has made information readily accessible with speed and at a fraction of what that access used to cost before.
- Organization. There are more interest groups organized to demand accountability of leaders and to promote better governance. Organizations like the League, Common Cause, Sierra Club, ACLU, etc. all act as watchdogs in the public sector. Organizations like TIAA-CREF, CALPERS have had major impact on corporate governance in the for-profit sector.
These forces all impacted the Bishop Estate trustees controversy. What used to exist was a trustee regime that thought it was beyond reproach. Trustees believed they had the financial resources and the political clout to define their own destiny. They tried to maintain their positions through the control of information. They tried to squelch voices of opposition through financial and political influence.
Nonetheless, these elements of power were inadequate to preserve their position. Why? Because there was that convergence of forces that I spoke of earlier. The sun, the moon and the stars all lined up to bring about change.
Foremost among those forces was the grass roots uproar fostered by the arrogant and insensitive behavior of the trustees. When the alumni, faculty, parents, and students marched on Kawaiahao Plaza en masse in May of 1997, it marked the starting point of the saga with the grass roots defining the agenda for change. The Bishop Estate trustee saga was not the result of any single influential leader leading the change process. Instead, it was a popular-based revolution that forced the institutions of democracy to work in the way they were intended to.
As a consequence of popular demand for reforms:
- Several leaders in the community took up the mantle for change.
- The media took an intense interest in what was occurring.
- The Broken Trust group of authors emerged.
- Na Pua 0 Ke Alii Pauahi organized and found effective spokespersons in Beadie Dawson and Toni Lee.
- The Governor directed the Attorney General to initiate an investigation.
- The Probate Court appointed a fact finder to investigate the controversy at the schools.
- The Hawaii Supreme Court announced that they would recuse themselves en masse because of the potential appearance of a conflict stemming from their involvement in the appointment of the trustees.
- As the court-appointed master, I issued one of the most pointedly critical reports regarding the administration of the Estate in its 100-year history.
- The IRS initiated a wide-ranging audit stemming from concerns regarding financial practices by the trustees and the extraordinarily high levels of compensation they paid themselves.
- The faculty organized themselves into the school's first union.
- Many different community organizations promoted dialogue centered around the need for change at Bishop Estate.
- Two trustees filed legal proceedings against their fellow trustees to seek judicial intervention in Estate affairs.
- Two trustees were indicted by the grand jury.
- The Probate Court acted in a decisive manner by removing the trustees from their positions and replacing them with interim trustees.
This process took place over a 3-year period from 1997 through 1999. And as you know, in the end, the trustees were compelled to vacate their positions.
Today, Bishop Estate is a very different organization. It is now known as Kamehameha Schools. It is headed by trustees who have part-time roles and who are compensated at a fraction of what their predecessors received. Furthermore, instead of extended terms, the five trustees are appointed by the Probate Court to staggered five-year terms with a two-term limit. The Estate is now managed and operated under a CEO-based management structure. And the trustees have adopted a strategic plan to guide the organization that is the product of broad grass roots participation. It is an exciting time at Kamehameha Schools as it enters a new era of change.
What are the lessons of this saga? It is a wake up call to entrenched leadership that they will be held to new standards of performance and accountability. No longer should leadership assume that their constituencies will be compliant and passive. No longer should they expect that they can avoid disclosure and hide information so as to avoid scrutiny.
The Bishop Estate saga will have a lasting impact on Hawaii if we learn the lessons of the controversy. Organizations like the League of Women Voters will have important roles in preserving and communicating the lessons that this historic episode holds for future generations. I hope that you will undertake that role with the same enthusiasm and commitment that has enabled your organization to become such a valuable civic resource today.