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Apparently a new effort to track down on for-profit colleges involves executive compensation. This one is a little puzzling.
According to a press release by the House Committee on Oversight and Government Reform:
Today, Rep. Elijah Cummings, Ranking Member of the House Committee on Oversight and Government Reform, sent letters to the CEOs of 13 for-profit schools seeking copies of compensation agreements for senior executives as part of an effort to determine whether salaries, bonuses, and other compensation are appropriately tied to the performance of students they educate, the vast majority of whom pay for their education with federal tax dollars.
“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,” said Cummings. “Congress has a responsibility to ensure that taxpayer funds are being used first and foremost for the benefit of students, not to line the pockets of corporate executives.”
Cummings, a Democrat from Maryland, has long been an advocate for the poor and disenfranchised, but this seems a little misguided. I’m no great fan of much of the behavior of for-profit colleges, but the fact that the heads of such institutions might be well compensated doesn’t strike me, alone, as much of a problem.
They run businesses that earn profits. It’s entirely reasonable to expect the managers of institutions that earn money to be able to take home some of that money. That’s a fairly standard feature of executive compensation.
There’s no reason the CEOs of education companies should be paid based on “the performance of students they educate”; these are not real colleges.
They exist to make money for their shareholders. They are compensated based on that, how well their companies earn. They’re businessmen, not educators. It’s fine to acknowledge that.
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barney on December 14, 2011 11:46 AM:
The problem is "these businesses" are funding themselves with federal education loans. This is why Cummings is holding an inquiry.
If they want to pay themselves "businessman's salaries, don't do it with taxpayer monies, since approx half of loans eventually go into default
for example Kaplan paid their former CEO Jonathan Grayer $76 million as a golden parachute - this was subsidized by taxpayers - since many Kplan loans default.
The problem with Kaplan is they pretend to educate low income students. They will not admit the obvious that it is simply a bottom line business
Anonymous on January 09, 2012 8:58 PM:
Colleges are also businesses. This is already a fact, and we have no choice but to accept it. Actually, there's no problem with this as long as colleges will become really true to their services.