Editorial: Educators answering to investors

Wednesday, May 15, 2002 | 9:11 a.m.

Edison Schools is in trouble. The nationwide school-management corporation, which runs seven campuses in the Clark County School District, is in terrible shape financially. In a month's time the company's stock has plummeted: On April 16 the stock traded at $12.90 per share and it closed Tuesday at $2.94. Investor confidence in Edison was shaken a month ago when the Philadelphia school district opted to give the company a contract to run 20 schools instead of an expected 45. Meanwhile, Edison took another hit when the Securities and Exchange Commission announced Tuesday that the company had provided inaccurate information in its financial statements. The SEC found that the company didn't disclose that a significant amount of its reported revenues consisted of payments that never reached Edison.

Clark County School District officials say that if Edison was forced to leave it wouldn't cause too much disruption. All the teachers are employees of the school district, and the district would revert back to its prior management before the takeover. In addition, the district claims that the $1.4 million in improvements that Edison has made at the seven schools, such as new computers, would stay even if the company pulled out.

Still, there are worrisome questions out there as Edison tries to regain its bearing and reassure investors. Will the company cut costs by reducing the educational research and development program that it has long touted? More importantly, will the education the children receive get shortchanged if the company has to further reduce operating expenses?

Edison, which has been controversial from its inception, was founded by Chris Whittle, who also has the dubious distinction of creating Channel One, a company that brought commercial television programming to public schools before that venture eventually met its demise. Private schools, whether they're K-12 or colleges, have played a crucial role in educating children and adults. But Edison is something altogether, a profit-making venture that seeks to run public schools. Unlike the government, which has a duty to educate all children, Edison can pick up and leave if it's failing financially.

It's possible that Edison, which never has made a profit in any year, still will survive. But the downward spiral its stock has suffered will leave nagging doubts, not only about the company's future but also about letting a for-profit company, whose ultimate bosses are shareholders, run what should be a public trust.

AT ISSUE:

Edison Schools, which operates seven public schools in Clark County, is having financial problems.

OUR TAKE:

The downward spiral of the company's stock has added to the concerns of letting a for-profit company assume management of public schools.