A New Model for Higher Education

• Author: Geoffrey M. Cox
• DOI: http://doi.org/10.1111/puar.12576
• Published date: 01 September 2016
• Date: 01 September 2016

760 Public Administration Review • September | October 2016

Public Administration Review,

Vol. 76, Iss. 5, pp. 760–761. © 2016 by

The American Society for Public Administration.

DOI: 10.1111/puar.12576.

Geoffrey M. Cox is president emeritus

of San Francisco–based Alliant International

University, a nonprofit regionally accredited

university that converted to a public benefit

corporation under his leadership. Prior to his

work at Alliant, he served as vice provost at

Stanford University and associate provost at

The University of Chicago, where he earned

his doctoral degree.

E-mail: gcox@alliant.edu

Perspective

R ecent news like the closure of Sweet Briar

College raises the question of whether

traditional financial and governance models

of higher education are irreparably broken. The

issue is not only whether undercapitalized, tuition-

dependent institutions can ride out a downturn in

enrollments but also whether they can undertake the

changes necessary to respond to the evolving demands

of students, families, regulators, and employers.

Even if an institution is willing to undertake such

changes, it needs new resources to finance them.

Too many small institutions are constrained by a

fixed or declining asset base that cannot support the

kind of reinvestment that all organizations need for

sustainability.

The leaders of Alliant International University—a

tuition-dependent institution devoted primarily to

graduate and professional education—have concluded

that a new corporate structure gives us the means to

invest in innovation while assuring that we remain

true to our highest educational aspirations. We have

transformed Alliant into a benefit corporation—the

first not-for-profit, regionally accredited institution in

the United States to do so. We believe this will result

both in higher standards of accountability to our

students and the public, and access to new sources of

capital and a more sustainable financial future.

The New York Times ’ David Brooks has written that

benefit corporations “are a way to transcend the

contradictions between the ineffective parts of the

social sector and myopic capitalism.” The general idea

is to create shareholder-owned companies that are

publicly committed to socially beneficial purposes,

and to create governance structures that balance the

social mission and the profit motive. California ’ s

benefit corporation law, enacted in 2011, sets a

high standard for frequent independent review of

the organization ’ s progress in meeting its mission,

and creates a legally enforceable requirement that

managers and trustees consider the interests of

stakeholders—customers (students, in our case),

employees, the community, and the environment, as

well as shareholders—in all major decisions.

The corporate structure we have devised is compatible

with the best traditions of the academy. The university

is governed by a self-perpetuating Board of Trustees,

the majority of whom must have no financial stake

in the organization (a requirement of our regional

accreditor). A second Board of Directors will have

limited authority over the capital structure of

the institution and will retain the final fiduciary

responsibility for meeting the requirements of the

benefit corporation law. Our educational mission

will be enshrined in the organization ’ s charter and

bylaws, supplemented by a set of public commitments

to student success, shared governance, independent

scholarship, diversity, community service, and

academic quality. The law requires that we publish an

annual report documenting our progress in achieving

these commitments and engage an independent third

party to assess our public benefit claims.

We will also preserve a not-for-profit voice in the

management of the institution. An independent

foundation will operate alongside the institution as a

partial owner, with certain controlling powers over the

university ’ s mission. This foundation will be able to

partner with the university and other organizations to

work toward mutually compatible goals.

The benefit corporation requires a different kind of

relationship between an enterprise and its shareholders

than one finds in most companies. The investors must

be prepared to balance financial returns against the

expenditures required to support the public mission.

We are working with Arist Education Systems, which

is backed by the multinational media company

Bertelsmann, which is in turn majority owned by a

nonprofit foundation. It takes this kind of unique

investor to support a long-term effort to create

both educational and financial value. The benefit

corporation assures that there is an explicit agreement

between the university and its investors about the role

Geoffrey M. Cox

Alliant International University, San Francisco

A New Model for Higher Education