Pearson (Mis)Education, the British-based global “education” publishers reported a net profit increased in 2015, but that was because it sold off assets including of the Financial Times and The Economist. It was also forced to eliminate 4,000 jobs, about ten per cent of the company’s workforce.
A closer look at Pearson’s bottom line shows a decline in revenue of about 2% in its core business, selling textbooks, texts, and online classes in the United States and Third World countries. Without the sell-off and some tax breaks, Pearson’s balance sheet would have been in the red. Pearson CEO John Fallon admitted 2015 was a “tough year” for Pearson, but he blamed “cyclical and policy challenges.” Shares in Pearson stock on the London Exchange climbed recently, but they are worth about half what they were a year ago. One major British market analyst concluded the report issued by Pearson undermines its “management’s stated claims of confidence in the longer-term business.”
Pearson management concedes problems will continue into the next business year. In their annual report, they acknowledged “we anticipate trading conditions to remain challenging in our major markets in 2016.” In the United States, Pearson expects “college enrolments will be flat given forecast modest improvements in US employment,” “a smaller adoption market in K-12 learning services,” and “reduced testing revenues in North America reflecting State and National Assessment contract losses worth approximately £100m announced in 2015.” Poor Person. Its profits suffer because Americans are working!
In British, Italian, and Australian markets, the company expects “declines in vocational course registrations.” Meanwhile, in Brazil, China, India and South Africa they are preparing for cuts in textbook purchases and lower enrolments in online classes.
Pearson (Mis)Education now faces an assault on its operations from another source. Major British and American labor unions purchased Pearson stock through their pension funds and they plan to challenge company management at its general stockholders meeting in April. The opposition group holds 40,000 voting shares and includes UNISON, one of Britain’s largest trade unions with 1.3 million public service industry members, the Chicago Teachers Pension Fund, Trade Union Fund Managers, and 130 individual shareholders. The coalition will enter a resolution at the stockholders meeting calling on Pearson to “end its over-reliance on the education testing programme in the US, which has been affected by a recent change in the law and is also becoming increasingly unpopular.”
According to UNISON General Secretary Dave Prentis, Pearson is “failing to respond to changes in the education market in the United States, where it makes 60 per cent of its profits. With the movement against compulsory testing growing in popularity across America, there’s an increasing likelihood that many cash-strapped states could look to reduce or even axe their testing budgets. Pearson has put too many of its eggs in the US testing basket and unions are right to be concerned that the company risks gambling away the current and future pensions of hardworking public sector employees.” Prentis argues that “”Rather than continue to focus the business on politically poisonous high stakes testing, and axing the jobs of thousands of employees, CEO John Fallon should be conducting a wholesale reassessment of Pearson’s strategic vision.”
In support of the boring-from-within campaign, Randi Weingarten, president of the American Federation of Teachers, charged: “Pearson could be a company that provides educational products and services critical to the success of students around the world. Instead, it has decided to embark on a politically risky path of high-stakes testing and low-fee private schools.”
Pearson Shareholders Resolution
To the Company Secretary, Pearson PLC: We the undersigned, being 100 members holding shares in the Company on which there has been paid up an average sum, per member, of not less than £100 per member,
Hereby require you, in accordance with section 314 of the Companies Act 2006, to give to members of the Company entitled to receive notice of the next Annual General Meeting notice of the following resolution, being a resolution that may properly be moved and is intended to be moved at that meeting, and to circulate to members receiving that notice a copy of the annexed statement with respect to the matters referred to in that resolution:
The Resolution: THAT the Board of Directors of Pearson PLC immediately conduct a thorough business strategy review of Pearson PLC including education commericalization and its support of high stakes testing and low-fee private schools and to report to shareholders within six months.
Supporting Statement: We believe that Pearson PLC (“Pearson” or the “Company”) is suffering a crisis of confidence precipitated by a confused business strategy. The evidence is presented by our reaction to the share price, which at the last Annual General Membership Meeting (AGM) held on 24 April 2015, was trading at approximately $20.68. On 15 December 2015, Pearson stock sold for roughly $10.70. This represents a drop in price of over 40% in only seven months. This significant drop in share price calls into question the board’s efforts to address the lack of confidence in the Company. We believe that the current strategic business plan has failed to produce the profits or the potential for profits that investors need. Therefore, it is time that Pearson conducts a business strategy review. We urge you to vote FOR this resolution.