Nation’s largest virtual school chain faces heat Thursday from shareholders concerned about lack of lobbying disclosure, poor performance

“Absolutely Flunks When It Comes to Transparency”: K12 Spends $2 Million for State Lobbying, Even Though Profits Dwindle and Stock Is Down 55 Percent from High.

Boston (December 14, 2016) – Shareholders of problem-plagued, for-profit virtual school K12 Inc. (NYSE: LRN) will vote this Thursday on whether the company should disclose its multi-million-dollar state lobbying activities and spending to investors. The proponents of the shareholder proposal question whether that lobbying has been in the best interests of shareowners and the company’s stated mission “to put students first and maximize their potential to learn and achieve.”

Since 2004, K12 has spent nearly 2 million dollars on state lobbying, per the National Institute on Money in State Politics. Yet over that same period, K12 stock has fallen dramatically, -35 percent since the company went public in 2007, and -55 percent since hitting its 5-year high in 2013. And despite a nearly -6% drop in revenue over the last 12 months, and a -12% drop in profits (Bloomberg), executive compensation has climbed +18.6 percent (Morningstar).

K12, the nation’s biggest virtual school operator, funded by nearly 90% taxpayer dollars, has been highly criticized for targeting the least-supported population of students, poor academic performance, high dropout rates, low test scores, and low graduation rates, as well as financial mismanagement.

K12 is a member of the highly controversial American Exchange Legislative Council (ALEC), which has put forth model legislation and at least 139 bills to promote private for-profit education models since 2013. Education Week reports virtual charter schools have spent over $12M to lobby states over the last decade.

Natasha Lamb, managing partner at Arjuna Capital, said, “K12 would probably get failing marks on its results, but it absolutely flunks when it comes to transparency. K12 is dependent on taxpayer dollars, yet there is neither transparency nor accountability to taxpayers, students, or investors. The academic outcomes are troubling and investor returns have suffered. Shareholders need to understand how K12 is using investor dollars to lobby for what appears to be a failing business model.”

Proponent and Athens, GA public school parent Bertis Downs, added: “I think investors should be clued in on what K-12 is doing on various political levels. Something isn’t quite right with this picture— and we suspect shareholders will weigh in on the part of greater transparency.”

The full text of the Arjuna Capital shareholder resolution is available online at

Leading proxy advisor firms Institutional Shareholder Services (ISS) and Glass Lewis have recommended votes in favor of the proposal. ISS notes “additional information on the company’s direct and indirect board‐level oversight mechanisms, as well as trade association payments, would give shareholders a comprehensive understanding of the company’s management of its lobbying activities and any related risks and benefits.”

In January 2016, proxy advisor Glass Lewis recommended shareholders vote against the executive pay package, noting a “substantial disconnect between compensation and performance results,” awarding the company an “F” rating for how it pays executives compared to peers.

In July 2016, the California Attorney General announced the state had reached a $168.5 million settlement with K12 (including $160M in forgiven debt for the schools it manages) after allegations K12 and the California Virtual Academies published misleading advertisements about students’ academic progress, class sizes and hidden costs. In 2012, K12 was the subject of a federal lawsuit, settled for $6.8 million, alleging its executives, Chief Executive Officer Ronald J. Packard and Chief Financial Officer Harry T. Hawks, pumped up stock prices by misleading investors with false student-performance claims.”

President-elect Trump’s Secretary of Education nominee, Michigan billionaire Betsy DeVos has a longstanding history of backing virtual schools, despite their less-than-stellar performance record, and disclosed an investment interest in K12 Inc. during her husband’s 2006 gubernatorial campaign.

Arjuna Capital is an investment firm focused on sustainable and impact investing.


CONTACT: Max Karlin, (703) 276-3255 or [email protected]


Image credit: “NYC – New York Stock Exchange” by Jean-Christophe Benoist, CC by 3.0

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