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Predatory For-Profit Colleges Pay Executives Based on Corporate Profitability, Not Student Outcomes
Think Progress / News Analysis
Published: Monday 30 July 2012
“Companies use various combinations of these factors to determine the majority of executive compensation.”
According to preliminary findings of an investigation by Rep. Elijah Cummings (D-MD), the ranking member of the House Committee on Oversight and Government Reform, many for-profit colleges pay their executives based almost exclusively on corporate profitability, without taking into account student outcomes. Cummings’ office received documents from 13 for-profit schools, which showed just where the schools place their priorities:
The documents obtained during the course of this investigation indicate that the single most significant measure for determining executive compensation at these schools is corporate profitability, including factors such as operating income, earnings, profits, operating margins, earnings per share, net cash flow, and revenue. Companies use various combinations of these factors to determine the majority of executive compensation.
As discussed below, some companies provided no documents demonstrating links to student achievement when determining executive compensation, other companies provided documents with vague references to student achievement, and other companies provided documents that included specific compensation percentages linked to student performance measures. In all cases, however, the majority of compensation paid to company executives is based on measures relating to corporate profitability rather than student achievement.
As ThinkProgress has documented, predatory for-profit schools rely heavily on taxpayer dollars to produce revenue, yet leave many of their students buried in debt and without the education necessary to find a good job. They engage in aggressive marketing tactics, promising students employment opportunities that never materialize.
Meanwhile, CEOs of for-profit colleges make 26 times more in compensation than the heads of traditional universities. For instance, Strayer University CEO Robert Silberman was paid $41.9 million in 2009. (HT: Chris Kirkham)
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ABOUT Pat Garofalo
Pat Garofalo is Economic Policy Editor for ThinkProgress.org at the Center for American Progress Action Fund. Pat’s work has also appeared in The Nation, U.S. News & World Report, The Guardian, the Washington Examiner, and In These Times. He has been a guest on MSNBC and Al-Jazeera television, as well as many radio shows. Pat graduated from Brandeis University, where he was the editor-in-chief of The Brandeis Hoot, Brandeis’ community newspaper, and worked for the International Center for Ethics, Justice, and Public Life.
1 comments on "Predatory For-Profit Colleges Pay Executives Based on Corporate Profitability, Not Student Outcomes"
August 01, 2012 6:06pm
Many major universities in the United States today have mixed up their priorities and need significant reform. But while they are certainly not serving student needs anywhere near as well as they should, the for-profit diploma mills are actually working directly contrary to their students' interests! Every time I see an ad on TV for the "University" (what a joke) of Phoenix, I wonder how many unsuspecting people will be piling up huge debts to work toward a piece of paper that has so little value, even in an age of educational inflation.
It is always harder to tighten standards than to loosen them, but unless we try to recapture the educational spirit that built our American universities in the first place, the American dream will soon be regarded as a myth.