Virginia-based K12 Inc. is the largest operator of for-profit charter schools in the country and is a national leader in running online full-time public schools in numerous states. The company, based in Herndon, has long been a target of critics who have questioned the quality of its schools as well as its spending and lobbying practices — and now, the company will face new questions, this time from stockholders.
At a meeting scheduled for Thursday, shareholders are going to ask for a vote on whether the company should be required to publicly disclose details about its lobbying efforts in various states. The Arjuna Capital shareholder resolution asks that K12 prepare an annual report showing:
- Company policy and procedures governing lobbying, both direct and indirect, and grass-roots lobbying communications.
- Payments by K12 used for (a) direct or indirect lobbying or (b) grass-roots lobbying communications, in each case including the amount of the payment and the recipient.
- K12’s membership in and payments to any tax-exempt organization that writes and endorses model legislation.
- Description of the decision-making process and oversight by management and the board for making lobbying payments.
At its annual meeting in December last year, investors voted down the company’s plan for executive pay based on a recommendation from Glass Lewis & Co., a governance advisory firm. Glass Lewis has endorsed the stockholder initiative being submitted on Dec. 15 at this year’s annual K12 meeting, as has proxy adviser firm Institutional Shareholder Services.
The new shareholder effort is being led by Bertis Downs, a public school advocate in Athens, Ga., who spent his career providing legal counsel and managing the rock group R.E.M., and who bought K12 stock a few years ago. Asked why he is taking this action, Downs said in an email:
My motivation in filing for this disclosure of K-12’s lobbying activities stems from my overall curiosity and interest as a parent and a shareholder in knowing more about what lobbying is done, whether through ALEC or directly, that leads to the so-called “education reform” laws being passed all over the country. How much does the company spend and how do they spend it and what results do they get for it? And is any of that good for meaningful teaching and learning in our schools? And is it good for the company and its shareholders?
K12 is one of a number of education companies that have been attempting to exert influence on education policy in states. Their efforts come at a time when corporate school reformers have supported the expansion of online education for students from kindergarten through college. In Florida, for example, legislators passed a law requiring all students to take at least one online course to earn a high school diploma.
Virtual schools as a whole are often cited for poor academic performance. A 2015 national study found that students in these schools who receive no instruction from an “in-person teacher” showed academic results in math equivalent of what would be expected if a student skipped 180 days of school. The deficiency in reading was reported to be the equivalent of 72 days of school. Virtual schools and their operators say that they often cater to students who struggle in traditional settings and that results should not be expected to be the same as traditional schools.
Education Week said in a recent report:
Despite more than a decade of state investigations, news media reports, and research that have documented startling failures and gross mismanagement in full-time online schools, the sector — dominated by two for-profit companies — continues to expand, spreading into new states and enrolling more students. Virtual charter schools, which collectively receive more than $1 billion in taxpayer money each year, are rarely shut down.
One big supporter of virtual education is Betsy DeVos, the Michigan billionaire tapped by President-elect Donald Trump as his nominee for education secretary. Her husband, Dick DeVos, listed on a financial disclosure form in 2006 that he and his wife owned K12 stock. The nonprofit organization she runs, the American Federation for Children, lists K12 on its website among organizations that support school choice.
Enrollment at the schools K12 manages almost quadrupled from 2008 through 2015, according to Bloomberg, reaching more than 120,000, about one-third of students enrolled in full-time online schools.
K12 — which receives most of its funding from public funds used to pay for the virtual schools to operate — “runs effective lobbying efforts in more than 20 states,” according to Education Week. That includes Indiana, where it spent, since 2007, nearly $1 million lobbying Indiana lawmakers and donating to their campaigns and political parties since 2007.
A Mercury News investigation published in April revealed how California’s online charter schools — run by K12 — have “a dismal record of academic achievement” but have won more than $310 million in state funding over the past dozen years. In July, California’s attorney general announced that his office had reached a $168.5 million settlement with K12, and the 14 affiliated nonprofit schools known as the California Virtual Academies that it manages, over alleged violations of California’s false claims, false advertising and unfair competition laws.
K12 is a member of the American Exchange Legislative Council, known as ALEC, a controversial group that advances model legislation about numerous issues, including at least 139 bills to promote private for-profit education models since 2013.
K12’s stock price has gone up and down in recent years. According to Bloomberg News, “K12 shares have tumbled by two-thirds since reaching a near-record high in September 2013,” but it has rebounded some from its low.
Natasha Lamb, managing partner at Arjuna Capital, said in a statement:
“K12 would probably get failing marks on its results, but it absolutely flunks when it comes to transparency. K12 is dependent on taxpayer dollars, yet there is neither transparency nor accountability to taxpayers, students, or investors. The academic outcomes are troubling, and investor returns have suffered. Shareholders need to understand how K12 is using investor dollars to lobby for what appears to be a failing business model.”
The full text of the Arjuna Capital shareholder resolution is available online at http://arjuna-capital.com/wp-content/uploads/2016/12/K12-Lobbying-Proposal-2016.pdf.