Saying it was time for "fresh leadership," the board of embattled for-profit college company Career Education Corp. has replaced its chief executive.
Gary E. McCullough resigned, and the Schaumburg-based company’s board appointed Chairman Steven H. Lesnik, former chairman of the Illinois Board of Higher Education, as president and chief executive until it finds a new CEO, the company said late Tuesday.
The move comes at a time of great upheaval for Career Education and many of the large U.S. for-profit colleges, which have come under regulatory scrutiny by the federal government. Some have been accused of unethical recruiting practices and not preparing students well for their careers. In recent months, both enrollment and the stock price of Career Education have plummeted.
"Given the complexities of the regulatory environment and other issues that have arisen over the last year, CEC is moving towards a new phase, and the board views it as the appropriate time to start the process of putting in place fresh leadership at the CEO level," the company said in a statement.
A company spokesman declined to comment beyond what was in a news release. Asked if McCullough was "fired," the spokesman said, "We didn’t say that."
Career Education, which employs about 4,100 workers in the Chicago region, revealed in August that some of its campuses improperly reported statistics about how successful students are at finding jobs after graduation, a metric central to the controversy surrounding the for-profit college industry and a crucial number that students focus on when deciding where to attend school.
Poor job placement is among the issues that have brought scrutiny to Career Education and the for-profit college industry. Others are high-pressure sales tactics, low graduation rates, excessive profit margins and saddling students with crushing debt, often from loans backed by U.S. taxpayers that students default on. Most for-profit colleges have seen enrollments decline recently as they change practices to comply with tougher new regulations linking access to federal aid with students’ ability to repay debt.
The scrutiny has affected the share prices of many for-profit colleges. Career Education shares, trading near $35 a share last year, closed Tuesday at $15.95, down 1.1 percent.
The company also reported dismal revenue and profit numbers Tuesday. Operating income was $15.8 million in the third quarter, compared with $39.5 million in the same quarter last year.
Lesnik has served as Career Education board chairman since 2008 and as a member since 2006. He is a visiting lecturer at Northwestern University and a director of the Illinois Math and Science Academy Foundation.
"In my capacity as chief executive officer, I will be focused on ensuring that the company accelerates its efforts at every level to support its 100,000 students and further positions itself to grow the potential value of the enterprise for stockholders," Lesnik said in a statement. "This is a critical time for Career Education, and we will aggressively implement initiatives to improve our business and drive improvements in our quality and compliance."
In the statement, Lesnik thanked McCullough, who was CEO since March 2007, for his service. "Under his leadership, the management and operations of this company have been both professionalized and improved," he said.
The company said it will be "deliberate and thorough" in looking for a new CEO and will not set a deadline for finding a new leader.
The board also appointed another member, Leslie T. Thornton, to a newly created position of lead independent director, "to ensure stability in transition to new leadership of the company," the company said. Thornton has served on Career Education’s board since 2005 and has chaired its compliance committee since 2006. Thornton is a partner at the law firm Dickstein Shapiro and served in the Clinton administration, including as chief of staff for U.S. Secretary of Education Richard W. Riley.
Career Education runs the American InterContinental University, Le Cordon Bleu North America and Sanford-Brown colleges, among others. It has about 101,700 students enrolled at its colleges.