Transparency Through E Corps for For-Profits
Career College Central Summary:
John Katzman is the founder and CEO of Noodle, a Web site that provides educational advice. He also founded The Princeton Review and 2U. In an op-ed, Katzman writes:
I have watched managers and investors (including my own) succumb to the temptation to place financial targets above academic goals.
This should not be surprising – educational results take years to measure, but profits and bonuses for executives are calculated annually. I would like to believe that strong financial performance and educational excellence are not mutually exclusive. After all, for-profits can hire high-quality staff, respond nimbly to changing conditions, and raise the capital required to scale up quickly. American Public University System and Renaissance Learning, for example, have demonstrated that one can "do well by doing good."
One of my own companies brought together the capital, technology, and people needed to enable students worldwide to access America's leading graduate programs online.
Unfortunately, such projects are exceptions.The education sector must find a better balance between quality and financial returns.
Fourteen US states have started to do that by authorizing so-called benefit corporations (or B Corps) – businesses that promise to consider more than shareholder value in their strategic decisions. Though B Corps are expected to act in the public interest, they cannot be forced to do so; if they look beyond the bottom line, they do so voluntarily.
One solution might be to create a variant of the B Corp – call it the E Corp – that could transform the for-profit education sector. An education company could attain E Corp status only if it became transparent about its values and outcomes. For example, E-Corp-owned colleges might be required to provide prospective students with the graduation rate, average student-debt levels, and the average starting salaries of students with similar academic records and educational goals. Furthermore, E-Corp colleges might be required to reveal their per student instructional, marketing, and executive-compensation costs, as well as their pre-tax profits.
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