College Inc gets Stakeholder 101 crash course

Hard knocks. A degree in Middle East studies would be helpful at colleges se days, but business-school grs are even more valuable. From New York to Los Angeles, universities are grappling with violent clashes over Israel and Gaza amid final exams and commencements. Money is a big part of protests, which are also jeopardizing a lot more of it in higher education. re’s a corporate blueprint for diffusing activists, but campuses cater to an even wider array of constituents.

In just one of dozens of recent examples, Columbia University students locked mselves into a building this week, hoping to force Ivy League institution to divest funds invested in Israeli companies. immediate risk to students has subsided; one involving university finances has only just begun.

bigger a business that college becomes more company-like its framework. re are customers, who account for big slugs of revenue, in this case students – and ir parents – paying upwards of $90,000 a year for tuition, housing, food and books. Employees, including professors, help churn out alumni from factory floor. Rich and influential donors, meanwhile, write ever-larger checks to fund capital expenditures, R&D and investment. Media mogul Michael Bloomberg, for one, gave $1.8 billion to Johns Hopkins University.

Aggressive disruptions put finances at risk, as any CEO targeted by an activist investor knows. After four students were killed during anti-war demonstrations at Kent State in 1970, enrollment slipped for years. A dece later, one of university’s deans at time blamed tragedy for “attenuated fiscal problems.”

Controversy rattles or backers, too. Late last year, wealthy benefactors including buyout baron Marc Rowan, who runs Apollo Global Management, threatened to stop sending money to University of Pennsylvania and rallied fellow grs to do same because of how its president equivocated over how to handle campus protests. Last week, New England Patriots owner Robert Kraft pulled his support from Columbia.

Staff members are also clearly rattled. Columbia Law Professor John Mitts called protest “mob violence.” Faculty at University of Texas and University of California Los Angeles, where students are also protesting, have spoken out, too.

Different business models help explain varied responses. For example, tuition accounted for less than a quarter of Harvard University’s revenue last year. At Columbia, it’s responsible for half. Both are exclusive enough that even if number of applicants declined, y would still have plenty from which to choose. Not every school can say same if families start objecting to campus attitudes or oversight and seek degrees elsewhere. Colleges also have long lists of donors, but y depend heavily on richest among m, who wield outsized clout as a result.

Managing se competing factions is getting harder, just as it has been for companies increasingly trying to satisfy more than just investors. Because of disputes over LGBTQ+ policies, Walt Disney encountered pressure from Florida’s governor that threatened how it manages its me parks. BlackRock, $10 trillion asset manager, also has suffered outflows because of state treasurers disagreeing over boss Larry Fink’s investment strategies involving climate change. Modelo Especial became best-selling beer in United States after gender-issue boycotts dethroned Bud Light.

In that context, it’s hardly surprising to see some universities embracing corporate playbook for quelling dissent. Brown University successfully encouraged students to dismantle tent camps after agreeing to hear out ir complaints and consider divestitures. It’s similar to how companies increasingly acquiesce when under siege from mouthy investors like Elliott Management.

difficulty is that colleges have different mandates. Companies cling to a clearly delineated responsibility to shareholders, but universities grapple with a more muddled mission to educate. As a result, higher education's brand of stakeholder capitalism is far harder to manage. crash course universities are getting now makes clear just how much y have to learn.