Teachers’ union pension funds that invest in Pearson PLC joined with other public sector investors today in petitioning the education giant to “urgently review its business strategy,” citing the company’s “tumbling revenue and plunging stock prices.”
The coalition that submitted a shareholder resolution represents 40,000 of Pearson’s voting shares and hails from the United Kingdom and United States.
The Chicago Teachers’ Pension Fund and the Trade Union Fund Managers–which counts Great Britain’s National Union of Teachers among its members–are among the groups represented.
Other parties to the resolution are the UNISON Staff Pension Fund, which is based in the U.K., and 130 individual shareholders.
The concern is that “without a clear recovery plan, their [the investors’] multimillion-dollar investment in Pearson stock will continue to fall, jeopardizing pension payments to current and future retirees, and increasing the chance hedge funds will be attracted to the stock,” according to a statement released by the coalition.
The unions and other investors are taking Pearson to task for its reliance on the “high-stakes testing market” and they want the company to halt its plans to establish for-profit private schools in the developing world.
These two strategies are “politically risky,” Randi Weingarten, president of the American Federation of Teachers, said in a prepared statement. Her organization is the national affiliate of the Chicago Teachers Union, whose members contribute to the fund.
Pearson: Too Reliant on Testing?
About 60 percent of Pearson’s sales originate in the U.S. “Pearson has put too many of its eggs in the U.S. testing basket, and unions are right to be concerned that the company risks gambling away the current and future pensions of hardworking public sector employees,” said Dave Prentiss, general secretary of UNISON, whose union holds 33,000 Pearson shares, in a prepared statement.
That sentiment was echoed by Jay Rehak, an English teacher who is president of the board of Chicago Teachers’ Pension Fund.
Rehak, who agreed to speak about Pearson from his position as a teacher, but not in an official capacity representing the fund, said, “All of us in Chicago and around the country are concerned about over-testing and the amount of time we spend on standardized tests,” Rehak said in an interview. “There’s resistance out there amongst families, teachers and community members to slow down what I call ‘data-driven madness.’ ”
Rehak said members of the teachers’ pension fund “may be distressed to know we have significant shares” of Pearson in the portfolio. A National Board-certified teacher, Rehak is currently taking a re-licensing through a program that Pearson owns.
“This resolution is about creating a better, more profitable, more economically sustainable firm that works to advance public education in a spirit of collaboration,” said Weingarten in her statement. “If maintaining the status quo is the answer, the Pearson board is asking the wrong question.”
Pearson, which in January announced plans to cut its workforce by 10 percent–slashing 4,000 jobs–has found its fortunes reversed with a variety of setbacks. Its stock price, which was trading at about $20.68 per share when the annual general membership meeting was held on April 24, 2015, fell to $10.70 in mid-December and $11.53 at the close of trade today. (The company is listed on the New York and London stock exchanges.)
“We believe that Pearson PLC … is suffering a crisis of confidence precipitated by a confused business strategy,” the coalition indicates in its resolution, asking for a report to shareholders within six months.
ESSA Impact on Testing Market a Factor
The recently enacted Every Student Succeeds Act (ESSA), which replaces the No Child Left Behind law, could have a major impact on the testing aspect of Pearson’s market, the coalition argued.
In a briefing note prepared by the groups, they warned that business strategies that “profited from a large federal role in high stakes accountability and testing could become obsolete.”
While the federal requirement for annual testing in reading and mathematics in grades 3-8 and once in high school is retained in the new omnibus law, states will be expected to revamp their accountability systems—and they can significantly reduce the role those tests play in gauging school progress, as my colleague Alyson Klein explains.
The coalition will hold a shareholder briefing before Pearson’s annual meeting in April.
- Education Behemoth Pearson to Cut 4,000 Employees, 10 Percent of Workforce
- Pearson Agrees to Pay $6.5 Million to L.A. Schools Over Curriculum Mess
- Pearson Agrees to Compensate Minnesota for Testing Breakdowns
- Pearson to Sell Financial Times and Focus Solely on ‘Global Education Strategy’
- Pearson Loses Out on N.Y. Testing Contract to Questar
- Pearson to Sell PowerSchool, Cites Shift Away from Management Systems
- Technology to Bring an Assessment ‘Renaissance,’ Pearson Report Contends