Press Release

Investors, Union Pension Funds Submit Shareholder Resolution Condemning Pearson Strategy

For Release: 

Monday, February 22, 2016

Contact:

Andrew Crook
202-393-8637
acrook@aft.org

WASHINGTON—Serious concerns about the performance of Pearson PLC, the world’s biggest education publisher, have prompted a trans-Atlantic alliance of pension funds to call on the company to urgently review its business strategy in the wake of four straight profit warnings, tumbling revenue and plunging stock prices.

The coalition, representing 40,000 of Pearson’s voting shares, has submitted a shareholder resolution, which will be heard at the company’s annual general meeting in London in April. The resolution asks the education conglomerate to look again at its future business plans and end its over-reliance on education testing in the United States, the market that produces 60 percent of its profits and stands to be impacted by the recent signing of the Every Student Succeeds Act (ESSA).[i]

Signed by the powerful UK-based UNISON Staff Pension Fund, the Chicago Teachers’ Pension Fund, Trade Union Fund Managers, and 130 individual shareholders—the resolution also calls for a halt to the multinational’s plans to establish for-profit schools in parts of the developing world.

Last month, Pearson announced 4,000 job cuts (10 percent of the company’s workforce) across its worldwide operation, after a serious misreading of the U.S. educational landscape forced a new round of cost containment. The firm extended its faltering 2013 turnaround strategy by another three years, to 2018.

The coalition will hold a shareholder briefing later this month, in advance of the Pearson annual general meeting. Their concern is that without a clear recovery plan, their multimillion-dollar investment in Pearson stock will continue to fall, jeopardizing pension payments to current and future retirees and increasing the chance hedge funds will be attracted to the stock.

The U.S. testing materials and test-preparation market has slumped following the growth of the anti-testing opt-out movement sweeping the country. In December, the signing of the new ESSA ended unpopular federally mandated test-based accountability, handing control back to individual states. Pearson is now beholden to financially stressed state governments that could move to eliminate spending on test preparation, accountability mechanisms, teacher appraisal and Common Core standards.

Randi Weingarten, president of the American Federation of Teachers, the national affiliate of the Chicago Teachers Union (whose members contribute to the pension fund that signed the resolution), said Pearson needed to embrace its role in the public education system:    

“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.

“This resolution is about creating a better, more profitable, more economically sustainable firm that works to advance public education in a spirit of collaboration. If maintaining the status quo is the answer, the Pearson board is asking the wrong question.”   

UNISON General Secretary Dave Prentis, whose union holds 33,000 Pearson shares, said:

“UNISON will be raising serious concerns about how Pearson PLC is being run at its annual meeting this April.

“The company is failing to respond to changes in the education market in the United States, where it makes 60 percent 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 ax their testing budgets.

“Pearson has put too many of its eggs in the U.S. 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. The company is shedding thousands of jobs in an attempt to turn the business around, but this flawed approach won’t address the deeper problems in its main U.S. market.

“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.”

Kevin Courtney of Great Britain’s National Union of Teachers, part of Trade Union Fund Managers, said: “It’s clear that Pearson’s business model is failing shareholders, and it’s also clear that the high-stakes testing regime promoted by the company is damaging children and the teaching profession‎ leading to an ‘exam factory’ culture in schools. We want Pearson to base its business model on helping teachers deliver the best for children across the globe.”

Pearson analysts, including Liberum’s Ian Whittaker, have pointed out the firm is facing an existential problem, not just a cyclical one. Whittaker said last month’s cost-cutting announcement “strengthen[s] our conviction that this company is both facing severe structural headwinds and … showing an unwillingness to face up to its issues.”

Notes to editors:

The Trade Union Share Owners is hosting the shareholder briefing in London on Thursday, February 25. AFT can arrange a media briefing under the Chatham House Rule after the event.

A copy of the resolution to the Pearson PLC annual general meeting can be found on the UNISON website.

A briefing note for shareholders in the U.S. is also available on the UNISON website.

The Trade Union Fund Managers manages the assets of client unions’ general funds: http://www.tufm.co.uk/

UNISON holds Pearson PLC shares as part of its staff pension fund: https://www.unison.org.uk/

The Chicago Teachers’ Pension Fund holds Pearson PLC shares: http://www.ctpf.org/



[i] The ESSA requires states to create school accountability systems that use a number of measures beyond test scores. The accountability system must be developed using the input from a large cross section of education stakeholders, including teachers and other school employees. The law also allows states to use federal funds to eliminate some tests and even pay costs associated with terminating procurement contracts. In an unprecedented move, the new law strictly prohibits the federal government from any involvement in teacher appraisal, and the federal government cannot advocate any specific standards or curricula. This change will have an immediate effect on those businesses that used these two policies to grow their profits in the United States.

 

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The AFT represents 1.6 million pre-K through 12th-grade teachers; paraprofessionals and other school-related personnel; higher education faculty and professional staff; federal, state and local government employees; nurses and healthcare workers; and early childhood educators.