Online Schools

Virtual Charter School Network K12 Rejects Transparency Proposal

• By Richard Chang
• 12/16/16

Virtual charter school company K12 Inc. rejected a transparency proposal Thursday that would have required the company’s board of directors to create a new report detailing K12’s lobbying efforts.

The proposal came from a group of shareholders, represented by Arjuna Capital, who said the company spends millions on state lobbying, even as its stock has been dropping and revenues have decreased.

K12 Inc. has spent at least $10.5 million to hire lobbyists in 21 states, according to more than a decade of state lobbying disclosure forms examined by Education Week as part of a recent investigation into the lobbying efforts of for-profit virtual charter school operators.

The shareholders called on the company’s board to prepare an annual report detailing spending on “direct or indirect lobbying or … grassroots lobbying communications.” They also wanted the company to report K12’s membership in, and payments to, any tax-exempt organization that writes and endorses model legislation — such as the American Legislative Exchange Council.

The K12 shareholder effort to push for more transparency was headed by Bertis Downs, the legal counsel for the rock group R.E.M. as well as a traditional public school parent and advocate in Athens, GA.

Downs also sits on the board of the Network for Public Education, the group co-founded by education historian and traditional public schools advocate Diane Ravitch.

K12’s board of directors opposed the proposal. In a proxy statement put out ahead of the annual shareholder’s meeting, the board said the requirements outlined in the proposal are not necessary and could hurt the company.

“The expanded disclosure requested by this proposal could place the company at a competitive disadvantage by revealing strategies and priorities designed to protect the economic future of the company, its stockholders and employees,” the statement said.

K12 has faced major challenges in recent years. Revenues are down by $75 million from last year, according to an Education Week report. Investors sued the company in 2014, claiming it had misled them before its stock prices fell in 2013. A federal judge dismissed the suit last year.

And California Attorney General Kamala Harris launched an investigation into the company for alleged false advertising and unfair business practices. In July, K12 Inc. agreed to pay $8.5 million to settle the state's claims and provide $160 million in balanced budget credits to the nonprofit schools it manages, including California Virtual Academies.

Despite those setbacks, the company continues to open new schools in states such as Alabama, Maine and North Carolina.