For Leaders, Colleges Turn to Business

[flashl]

BusinessWeek
By Geoff Gloeckler

Call Steve Spinelli a businessman, or call him an academic. Either way, you're right. His career is split evenly between the two fields: 15 years in the business world as a member of the team that founded Jiffy Lube (NYSE:RDS-A - News) and 15 years as a professor of management at Babson College, during which time he earned tenure and the title of vice-provost. For anyone else, this would amount to a pretty good career, but not for Spinelli. Last September he accepted the position of president at Philadelphia University. He figured the job would be equal parts business and academia, but what he found surprised him.

After a week on the job, Spinelli saw that running a university was more like his experiences at Jiffy Lube than at Babson. "I was able to approach it like a business," he says.

Spinelli isn't the only one who has come to this realization. As higher education becomes more and more complex, especially on the funding side, many colleges -- including the University of Missouri system, Oberlin College, the University of Kentucky, and Harvard -- are turning to the corporate world for help, specifically to fill high-profile leadership positions. But given the sometimes strained relationship between the two worlds, this kind of change comes with a few hurdles.

Corporate-Style Structure

The main reason for the shift to corporate hires is that higher education's business model is changing rapidly, especially at public universities. State funding decreases more and more each year, and state schools are being forced to look elsewhere to meet budgets. Many times, this means partnerships with the business world. Moreover, today's university is structured a lot like a corporation. -- Universities are complicated businesses," says Paul Osterman, an expert in work organization at companies and a professor at Massachusetts Institute of Technology's Sloan School of Management. "You need a good HR department, IT, construction, someone to manage the portfolio. You need someone with a business background running these operations."

Now 'we' know where some of the 'leaders' of the business world will resurface, to colleges, to 'manage' those colleges like corporations and 'manage' the complexities of the colleges' and universities' endowments.

Interesting, all that education on campuses, but, they 'need' a business person to 'lead' them.

[Wickerman]

1. Think of all those lovely endowments that could be tapped

All that magnificent infrastructure that could be hedged against some other risky investment! Sure, lets take our successful college system and turn it over to the kleptocracy. :eyes:

[rurallib]

2. education factories

[flashl]

3. Corporate bundling, servicers. investors, and securitization worked so well for mortgages ...

Sallie Mae to Sell Stock to Pay Off a Failed Bet

Sallie Mae, the troubled student loan giant, said Wednesday that it would raise $2.5 billion by selling stock in the public market and would use most of the money to pay off a disastrous bet that the company made on its common stock price.

Sallie Mae, whose formal name is the SLM Corporation, did not give details of the pricing or terms of the securities. Nor did it say whether the additional $500 million in capital would be enough to assure that its bond ratings would not be cut.

At the same time, Sallie Mae disclosed that it had already posted the cash needed to pay off the stock price wager. The fact that Citibank had required that move had not been disclosed, and was another sign of the problems the company faces at a time when regulation of the student loan business is increasing and Sallie Mae is finding it more difficult to sell securities backed by student loans.

Goldman Is Buying Stake in a Troubled Student-Loan Company
Dec-27-07

Goldman Sachs ... agreed to buy a $260.5 million stake in the First Marblehead Corporation, shoring up the troubled student-loan company and sending its stock soaring.

...

The sale will give Goldman a 16.7 percent stake in the company, which, along with the student-loan giant Sallie Mae, has been battered by the turmoil in the credit markets. The deal marks a homecoming of sorts for Goldman: the Wall Street bank helped take First Marblehead public in 2003.

First Marblehead and other servicers do not lend money to students. Instead, they bundle loans made by universities and banks into securities for sale to investors. Rising default rates and the spreading credit squeeze, however, have made it difficult to repackage these loans, sapping the company’s finances.

Credit Rating Cut for Sallie Mae

March 5, 2008
By BLOOMBERG NEWS

The SLM Corporation, the educational lender known as Sallie Mae, had its long-term credit ratings cut by Moody’s Investors Service to two levels above junk Tuesday on concern that a change in the company’s strategy will erode profitability.

Moody’s reduced Sallie Mae’s senior unsecured long-term debt rating to Baa2 from Baa1 and said the outlook was “negative,” according to a statement Tuesday.