Keeping 2U and Coursera Accountable

This week at Georgia Tech’s annual Affordable Degrees at Scale Symposium, the group took some time away from their usual focus on building good programs to write a declaration of principles about the relationships between MOOC (or “at-scale platform”) providers and the universities that they serve. While this effort was triggered by angst among EdX stakeholders, both EdX and Coursera institutions attended. Their end product—The Atlanta Declaration—is worth a read. I was honored to be on a panel that provided feedback on the document, along with Doug Lederman, Phil Hill, and Paul Fain. (By the way, you should check out Paul’s new project, The Job, which is all about the college/work connection.)

I’m going to share some of the feedback that I provided to the group.

My frame of reference

Since some may interpret my advice as provocative or hostile, I will start by stating my priors.

First, I am entirely agnostic about the revenue share models that both 2U and Coursera use. While I believe each university should think carefully about the complex set of trade-offs that come with those agreements, I have no problem with universities deciding those trade-offs are, on balance, good for them. The revenue share model is a tool invented for helping universities with program startup costs. Revenue share companies act as banks. They give loans to universities using the courses they create together as collateral. All the usual caveats about financing something important with debt apply. (The same applies to Income Sharing Agreements (ISAs) for students.) There’s nothing wrong with debt financing if it is taken on for the right reasons and with reasonable terms from the lender.

Second, I have no beef with either of the MOOC companies or their leadership. I know 2U CEO Chip Paucek pretty well. We’ve talked often. I’m convinced he genuinely believes in universities and wants to help them succeed. While I’ve not had the pleasure of meeting Coursera CEO Jeff Maggioncalda, people I trust who know him tell me he is a decent human being. Further, Coursera is a certified Public Benefit Corporation (PBC or B corp), and 2U has promised that its EdX division will also be a PBC. While there is justifiable debate about how effective the accountability mechanisms of PBCs will be, there is no question that gaining and maintaining certification entails considerable work. It demonstrates good intentions. As with the revenue sharing provisions, each university should ask whether its interests align with how a given vendor operates. But I have no opinion about what the answer to that question should be with respect to 2U or Coursera.

Third, I worry a lot about the forces that shape EdTech companies across generations of leadership. For a long time, Instructure was a genuinely great and ethical company. When the original leadership left, it became a pretty lousy company pretty quickly. Now, under the current leadership, it seems…fine. Not great, and not terrible. Just another EdTech company. One short-lived CEO wiped out an enormous amount of goodwill in an astonishingly short period of time. Warren Buffet said, “Invest in companies that any idiot can run because, sooner or later, one will.” I am interested in building ethical EdTech companies that any jerk can run because, sooner or later, one will.

Finally, I believe that declarations of the kind that the Atlanta group made are only useful if they catalyze effective action. So a group of MOOC customers made a declaration. Now what? How will it shape the behavior of the companies they were thinking about when they wrote it? How will it create guardrails for future behavior or drive thought or change inside these organizations? By itself, it won’t. 2U and Coursera both seem good at listening to their university partners. They’ll likely read the document, affirm that they support it, and maybe make a gesture or two to show that they’re sincere. And then they’ll move on. The declaration may be useful to help a coalition begin to form, but that coalition then needs to take further action in order to have an impact. And this, in fact, is what the writers of the declaration hope to accomplish.

My recommendations are aimed squarely at the last two points. I have nothing against either company in their current incarnations. I simply believe we have a moral obligation to be stewards of the future as well as the present.

All 2U and Coursera university partners should become shareholders

I recommend that all universities that work with these two publicly traded companies buy the minimum number of shares required to become voting shareholders. They should appoint stakeholders to represent their interests in a way that balances any revenue goals with mission goals. The representatives from the shareholding universities should meet, discuss concerns, attend every shareholder meeting, and plan collective actions at the shareholder meetings. When necessary, they should make comments or motions.

The goal is to establish a direct line of communication between the university customers and the shareholders, unmediated by senior executives. If customers raise objections or make motions as a group, it will be hard for the shareholders to disregard those concerns. 2U and Coursera may seem big, but they’re nowhere near the top on the spectrum of publicly traded companies. If shareholder activism can force Exxon to change its behavior, then activism can influence any publicly traded EdTech company. Furthermore, PBCs explicitly allow shareholders—and only shareholders—to sue the company for failing to uphold its stated mission goals. I’m not suggesting that such a lawsuit is likely to be necessary, but I am suggesting that this particular feature of a PBC gives university shareholders extra clout.

The reasons universities should buy the minimum number of shares required to vote are twofold. First, I very much doubt that they could buy enough shares to outvote the traditional shareholders. It would be a waste of money to try. Second, if universities do become significant shareholders, then their internal stakeholders who are responsible for endowment funds will become entangled in the decision-making process and dilute the focus on shareholder activism. The power here isn’t in the number of votes. It’s in the number of customer voices.

2U and Coursera should embrace this

I imagine that my friends at 2U and Coursera may not love the idea of university folk showing up at their shareholder meetings. While I think I understand the risks and complications it would entail for them, it could be very good for them in the long run. Universities generally do not know the constraints and pressures that their vendors operate under. As a result, they can get angry about situations that they don’t have the context to fully understand or ask for their needs to be met in unhelpful ways because they don’t know how to work with the grain of the company. Having university stakeholders who feel responsible for understanding how the company functions and the pressures under which it operates could pull them further into the tent.

If this idea gains traction, the best move these companies could make is to create a university liaison within their investor relations office. Actively engage with the stakeholders. Take the opportunity to educate them on how the company works and how more traditional shareholders think. Give them separate briefings that help them formulate input that is useful and helpful. Provide them with opportunities to share their needs with conventional shareholders in ways that give the companies cover to do the right thing.

EdTech companies should have academic values woven into their structure

I’m proposing a method to create greater alignment between the companies and the universities they serve. This isn’t about creating an adversarial relationship. Rather, it’s about creating conditions that reduce the likelihood of an adversarial relationship. It raises the stakes of conflict while creating new channels of communication. When the next CEO takes the helm at one of these companies, she will walk in knowing that her customers speak at her shareholder meetings. She will be motivated to ensure those customers can speak positively about how well she is serving the PBC’s mission goals.

Even if she’s a jerk or an idiot.