CEO Pay at For-Profit Colleges Targeted by Lawmaker
Executive pay at for-profit colleges is being investigated by the ranking member of a congressional oversight committee, who said “lavish” compensation at the schools bears little relationship to academic well-being.
Representative Elijah Cummings, the top Democrat on the House Oversight and Government Reform Committee, sent letters asking to see pay agreements from 13 companies, including Apollo Group Inc. (APOL), Strayer Education Inc. (STRA) and Washington Post Co. (WPO)’s Kaplan unit. Cummings cited a 2010 Bloomberg article that showed executives at the 15 U.S. publicly traded colleges received compensation that exceeded traditional colleges and collected $2 billion from selling stock over the previous seven years.
Congress and the U.S. Education Department are scrutinizing for-profit colleges, which received almost $32 billion in federal grants and loans in the 2009-2010 school year. Students at those schools are defaulting on government loans at higher rates than those who attend nonprofit and public institutions.
“The American taxpayers fund these schools through billions of dollars in tuition assistance, but there is little evidence that lavish executive pay is linked to the well-being of the students they are supposed to educate,” Cummings, who represents Maryland, said in a statement today.
Congress should examine all colleges, not just for-profits, said Brian Moran, interim chief executive officer and president of the Association of Private Sector Colleges & Universities, a Washington-based trade group that represents for-profit schools. He cited pay packages of football coaches at state and private universities.
“This appears to be just more politics and unfortunately fails to acknowledge the important role private sector colleges and universities have in educating non-traditional students to compete for jobs in a very difficult economic environment,” Moran said in a statement.
Apollo, the biggest U.S. for-profit college, fell 0.2 percent to $50.24 at the close of New York trading. Strayer rose 1 cent to $96.31. The Bloomberg U.S. For-Profit Education Index (USEDU) was largely unchanged.
“We appropriately base compensation on student satisfaction and educational outcomes,” Rick Castellano, a spokesman for Phoenix-based Apollo Group, said in a statement.
The other companies Cummings wrote to were: Bridgepoint Education Inc. (BPI), Capella Education Co. (CPLA), Career Education Corp. (CECO), Corinthian Colleges Inc. (COCO), DeVry Inc. (DV), Education Management Corp. (EDMC), Grand Canyon Education Inc. (LOPE), ITT Educational Services Inc. (ESI), Lincoln Educational Services Corp. (LINC), and Universal Technical Institute Inc. (UTI)
Strayer Chief Executive Officer Robert Silberman received in 2009 a $40 million stock grant that vests over 10 years as part of $41.9 million in compensation, according to the November 2010 Bloomberg article that Cummings cited. Andrew Clark, president and CEO of Bridgepoint, received $20.5 million, mostly related to the San Diego-based company’s April 2009 initial public offering.
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