Back to school at Corinthian Colleges…

RentrâŸe / Back to school

The for-profit education industry has had a rough time of it lately, as we’ve written about before (including in May, when we warned about uneven disclosure over pending federal rules in a FootnotedPro report). But the rocky ride doesn’t always seem to extend to the industry’s executives and directors.

Consider Corinthian Colleges (COCO), which came out with a preliminary proxy statement this morning, complete with raises for directors and hefty bonuses for its top executives — even as shareholders have suffered unpleasant losses over the last year and more.

Executive Chairman Jack Massimino took in $3 million, about 10% less than last year only because of a decline in the value of his option awards. His bonus remained a hefty $1.9 million, well above target for the year. Chief Executive Peter Waller snagged a $1.5 million bonus, plus hefty stock and option awards, sending his pay up to $4.5 million (though it was also his first year as CEO after serving as chief operating officer).

The proxy says the Annual Cash Bonus Program is supposed to “[d]rive annual corporate financial results, while maintaining high standards of regulatory compliance.” Judging from the summary of its regulatory issues by Todd Young, the Morningstar analyst covering the stock, we’re not so sure about that last part: One of Corinthian’s schools faces the loss of its accreditation and three others could see access to federal financial-aid dollars cut off. Those and other issues, Young wrote last month, “could result in a loss of more than one fourth of Corinthian’s current student population” between now and 2012.

Director pay is also worth raising an eyebrow over. The board, like some others lately, is switching over to paying chiefly through annual retainers instead of per-meeting fees. For many of Corinthian’s directors, that’s likely to pay off. The board eliminated the $1,500-a-meeting stipend for the first six board meetings a year, but jacked up the annual retainer to $60,000 from $40,000. At 11 meetings in a year — the number held in fiscal 2010 — that would imply a 19% increase. Meantime, pay for committee service would rise by anywhere from 8% on the compensation committee to 67% on the nominations and governance committee. (Audit-committee pay would fall, assuming the same number of meetings, while the chairman of the compensation committee would also see lower pay.)

And it’s not like Corinthian directors were hurting financially. While by no means the highest director compensation we’ve seen, they took home between $183,912 and $249,458 apiece last year, for part-time work: In addition to those 11 board meetings, the busiest regular committee met eight times (surprise! It was the compensation committee), while the nomination and compliance committees each met just four times.

From an operational standpoint, Corinthian has apparently executed a nice turnaround from the sorry state it was in a few years ago — for one thing, it no longer seems to botch significant disclosures; its profits were up nicely in the year ended this June.

But that’s small comfort to shareholders, who have seen Corinthian’s stock fall 65% so far this year, after a 16% decline in 2009. Nor is it outperforming its peers. In 2009, the company trailed education and training companies as a group by 5.3 percentage points (and the S&P 500 by 42 points). Year-to-date, the company is doing even worse relative to its peers — trailing them by 31 points.

And the headwinds are building for the industry as a whole. Among other things, there are those new rules in the works from the U.S. Education Department, as well as inquiries from Congress and perhaps even scrutiny from the military.

We don’t typically hand out grades here at footnoted. But in this case, we might suggest some remedial courses in corporate governance.

Image source: OliBac via Flickr


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