For-Profit College Becomes a 'Public-Benefit Corporation'

January 23, 2014

Rasmussen College, based in Minnesota, has recently made a transition from a traditional for-profit corporation to a public-benefit corporation, a move that college officials say will increase transparency, accountability, and public service throughout the communities the institution serves.

One education-industry analyst said the move might also help the college's relations with its accreditor, which has called on institutions to demonstrate a commitment to the public good.

Becoming a public-benefit corporation is a new model of corporate organization in which a private entity commits to do good for the community as much as increase the wealth of its stockholders. While the model neither puts limits on profits nor guarantees corporate behavior, it is chartered by a state—in this case, Delaware, where Rasmussen is incorporated—to provide a service benefiting the community, a college spokeswoman, Erin Werthman, said.

Rasmussen, which enrolls more than 14,000 students on its 25 campuses in six states and online, offers associate and bachelor's degrees and certificate programs. Its transition to the status of a public-benefit corporation was completed on January 1, a college official said.

Public-benefit corporations are "introducing a values-focused way of doing business," Tom Slagle, the college's chief executive officer, said in a news release. "We are thrilled to demonstrate what is possible when we define success not just on achieving business objectives but also on our ability to use our resources for community good."

In Delaware public-benefit corporations may be formed in the same manner as any other corporation, but their certificate of incorporation must identify one or more specific public benefits. At least once every two years, such a corporation must send its stockholders a statement about the public benefits identified in its charter and its promotion of the best interests of those materially affected by the corporation's conduct.

'A Big Experiment'

Rasmussen College was founded in 1900. Its president, Kristi A. Waite, said her grandfather purchased the college in the 1940s, and her father and uncle acquired it from him in 1961. Additional investors have bought ownership shares in the company in recent years.

The college has a mission of community-mindedness, Ms. Waite said, and its becoming a public-benefit corporation aligns with the spirit of that mission. It's also "a great way to give back to the community," she said.

Along with doing volunteer work and providing nonprofit groups with the use of on-campus space, Ms. Waite said, Rasmussen will offer career and volunteer fairs.

Trace A. Urdan, an analyst at Wells Fargo Securities, said Rasmussen was the first example he had seen of a public-benefit corporation in the for-profit education sector.

"I think it's a big experiment," Mr. Urdan said. "It certainly can't hurt the relationship with their accreditor, and with regulators in general."

Though Ms. Waite said criticism of for-profit higher education was not a factor in making the transition, Mr. Urdan said he suspected that Rasmussen's experiment may in part be a response to a call from its accreditor, the Higher Learning Commission of the North Central Association of Colleges and Schools, for institutions to demonstrate a commitment to serving the public good. He called the accreditor's mandate "something that really sent shock waves throughout the for-profit companies."

A move like Rasmussen's, Mr. Urdan said, could help for-profit colleges counter a charge leveled by some critics that they benefit their owners more than their students. "This creates at least a basis," he said, for colleges to say, "‘That's not true. We don't always put shareholder interests first, we put our mission to serve the community first and sometimes shareholders come second.'"