The Rise and Coming Demise of the Corporate University

The corporate university is being undone by the very forces that created it. The defining characteristic of higher education in the last forty years has been its corporatization, which has transformed the university from an educational community with shared governance into a top-down bureaucracy that is increasingly managed and operated like a traditional profit-seeking corporation. Yet two developments—the collapsed business plan of the corporate university and the recent National Labor Relations Board (NLRB) decision in Pacific Lutheran v. SEIU—may portend dramatic changes in the way colleges and universities in the United States operate.

The Corporate University Business Plan

Since the end of World War II, two business models have defined American higher education. The first model, based on public investment in education, lasted until the 1970s. The second, a corporate model, flourished until the economic crash in 2008.

The first model began with the return of military veterans after 1945 and lasted into the 1970s as the baby boomers attended college. This model produced an ever-expanding number of colleges to meet the needs of a growing population and increasing demand for higher education. It coincided with the height of the Cold War, when public funding for state schools was regarded as an important part of the effort to achieve technological and political supremacy over communism. The period also saw more middle- and working-class students entering college. It was higher education’s greatest moment, characterized by the democratization of college made possible by the expansion of inexpensive public universities, generous grants and scholarships, and low-interest loans.

Public institutions were central to this model. They received much of their money from tax dollars that subsidized tuition and costs and from federal research grants for faculty. The business model was simple: tax dollars, federal aid, and an expanding population of often first-generation students attending state institutions at low tuition. Let us call this the Dewey model,after John Dewey, whose theories emphasized the democratic functions of education.

The Dewey model began to collapse in the middle1970s. Inflationary pressures caused by the VietnamWar and the energy embargoes of the 1970s, together with recessionary forces from relative declines in American economic productivity, generated significant economic shocks, and some state and local governments edged toward bankruptcy.

Efforts to revive declining corporate profits and productivity focused on restructuring the economy, including cutting back on government services. Under Ronald Reagan, this retrenchment effort included decreases in government expenditures for social welfare programs, cutbacks on business regulations, resistance to labor rights, and tax cuts. Collectively, these changes reflected the neoliberal faith that free markets would restore productivity. The Dewey model came to a halt as support for public institutions decreased and federal money dried up.

Higher education needed a new business model, and it found it in the corporate university. As corporate structures and management styles became widespread, the shared governance model long promoted by the AAUP was put under growing pressure.

For the corporate university, many decisions, including, increasingly, those affecting the curriculum, are top-down. Administrators with corporate backgrounds now make many decisions once made by faculty. Trustees, largely business leaders, select college and university presidents, often with minimal input from the faculty, and the presidents, in turn—again, often without faculty guidance—select deans, department heads, and other administrative personnel.

The corporate university took control of the curriculum in order to generate revenue. The new business model found its most powerful income stream in professional education, including programs in public or business administration and law school, which became the cash cow of colleges and universities. This was especially true with MBA programs, which rapidly multiplied. These programs were sold to applicants with the claim that the high tuition would be more than offset by future earnings.

This business model in part used tuition from professional programs to finance the rest of the university. Students in these programs were able to secure loans to finance their training. The model relied heavily on attracting foreign students, returning baby boomers in need of additional credentials, and recent “baby boomlet” graduates seeking professional degrees as a shortcut to professional advancement.

Corporatization accelerated with the growth of online classes, and especially with the emergence of for-profit colleges and universities. In many online programs, a specialist designs the curriculum for courses and sells it to a college or university, which then hires adjuncts to deliver the canned class. The costs of offering classes are reduced, the potential size of the classes is maximized, and the curriculum can easily be changed to reflect new market needs or preferences. Traditional institutions, seeing this model flourish, began emulating it, expanding their online programs, often with minimal investments in traditional, full-time faculty.

Overall, the new business model was facilitated by a management structure that drew higher education into closer collaboration with and greater dependence upon corporate America.

Decline of the Corporate Model

The corporate business model worked until 2008, when it faltered along with the economic policies that had nourished it since the late 1970s. The global economic collapse produced even more pressures on governments to shrink educational expenditures. But the high and persistent unemployment also yielded something new: a decline in the number of students seeking more education. The decline occurred for two major reasons. First, baby boomers were retiring and no longer needed educational training. At the same time, the baby boomlet had run its course, and the pool of potential students rapidly decreased. In effect, the demand for education dropped. Second, MBA and other professional degrees did not flourish as they had in earlier tough economic times, in part because of persistent high unemployment and the rise of consumer debt.

Unlike previous post–World War II recessions, the most recent one wiped out consumer wealth—some$13 trillion was lost—and caused consumer debt to skyrocket. Student loan debt ballooned and is now greater than personal consumer debt, exceeding $1trillion. The average student loan debt for a graduate of the class of 2008 was $23,400; for the class of2014 that number had reached $33,000, according to the Wall Street Journal. In effect, potential students are tapped out: they have no money to finance further education, they see that companies are not hiring, and they find little incentive to take on debt to train for jobs that may not exist. The result? A crash in applications to graduate professional programs, including business and law schools.

Even such mainstream publications as the Economist noted the collapse of this old model. The corporate business model had been exposed as an education Ponzi scheme. Like all Ponzi schemes, the model fell apart.

The End of Shared Governance

The Supreme Court’s 1980 NLRB v. Yeshiva University decision declared that because faculty participated in crucial decision making in areas such as the curriculum, academic standards, and even institutional finances, they were managers and thus were ineligible to unionize under the National Labor Relations Act.

The Yeshiva decision gave strong impetus to the development of the corporate university. It empowered administrators to restructure institutions from the top down without worrying that a union or a threat of unionization would serve as a countervailing force. As colleges and universities took advantage of Yeshiva, they created a workplace where faculty had a diminished voice. Shared governance was undermined, and faculty increasingly occupied roles similar to workers in traditional corporations. The time was coming to revisit the fiction of Yeshiva. This is precisely what the NLRB did in its December 2014 decision Pacific Lutheran University v. SEIU.

The Pacific Lutheran decision recognizes that the nature of universities has changed significantly in the last three and a half decades, with many colleges and universities taking on more characteristics of a traditional corporation. According to the decision, for faculty to be considered managerial they must have a real and meaningful role over not just academic affairs such as the creation and selection of curricula but also issues such as enrollment management, finances, and creation of new programs or schools.

The NLRB asserts, “In order for decisions in a particular policy area to be attributed to the faculty, the party asserting managerial status must demonstrate that faculty actually exercise control or make effective recommendations.” The decision further states that “faculty recommendations are ‘effective’ if they routinely become operative without independent review by the administration.” This is significant. It means that simply pointing to faculty handbooks or official policies is not enough. An institution must prove that faculty have a real say over a range of matters for them to be considered managerial.

In supporting its decision, the NLRB noted the significant changes that had taken place in higher education since the Yeshiva decision was issued: “Over the 30-plus years since Yeshiva was decided, the university model of delivering higher education has evolved considerably.. . . Indeed, our experience applying Yeshiva has generally shown that colleges and universities are increasingly run by administrators, which has the effect of concentrating and centering authority away from the faculty in a way that was contemplated in Yeshiva, but found not to exist at Yeshiva University itself.”

The increasing use of contingent and part-time faculty has been one symptom of corporatization. Such faculty, Pacific Lutheran notes, hardly have the voice in governance assumed in Yeshiva.

If the Pacific Lutheran decision is upheld by the federal courts, it opens up two possibilities. Colleges and universities could restructure and give faculty a meaningful and effective voice. Such a restructuring would be a major threat to the corporate model. The other option would be to accept the realities of the corporate model and accept the unionization of faculty at private institutions. Unionization, too, could challenge the current top-down model, forcing administrators and trustees to acknowledge publicly what their institutions have become and potentially changing the way decisions are made on campus. Neither of these choices sits well with those who run colleges and universities.

David Schultz is professor of political science at Hamline University. He was formerly AAUP chapter president at Trinity University in Texas and Committee A state chair in Minnesota. His e-mail address is dschultz@ hamline.edu.