As they beg for government assistance, Australia’s public universities are sitting on a $1.6 billion windfall courtesy of their collective 40% shareholding in listed education services provider IDP Education Limited.
IDP’s share price has surged since 2015, having risen from its listing price of $3.40 to $14 this month, giving it a market capitalisation of $3.9 billion.
The little-known company burst out of the shadows last week when boss Andrew Barkla was revealed had drawn the largest annual salary of any chief executive in the country for the 2018-19 financial year: $38 million.
The bulk of the pay packet came from 3.5 million options exercised by the former IT industry executive that he was handed by the board as a “signing-on bonus” in 2015. They came in addition to his $1.2 million salary cash payment during his first year in charge. They had an exercise price of $1.44, handing him the stonking bonus.
But amid the shock horror headlines and understandable teeth-gnashing over the obscene payday, and questions (again) over executive remuneration, there was little investigation into IDP itself.
The company is in fact controlled by the universities that started the business 50 years ago. They own 40% through Education Australia Limited (EA) — held jointly and equally by Australia’s 39 public universities — which has sold down its stake in IDP by 10% in the past 12 months.
Perhaps it’s little wonder the IDP’s board signed off on such a handsome package for Barkla. Education Australia’s board consists of five Australian vice-chancellors as well as two accountants, including chair Greg West.
Australian vice-chancellors are already collectively the world’s highest paid. More than half of them earn more than their peers at Oxford and Cambridge universities and the top tier — led by Sydney University’s Michael Spence, who made $1.5 million in 2019 — earn twice as much.
Perhaps envious of Barkla’s payday, IDP’s directors handed themselves pay rises of between 60% and 78%. Chairman Peter Polson’s fees rose from $233,000 to $350,000. Other directors took home between $160,000 and $190,000 for attending seven board meetings. West and EA deputy chair David Battersby both sit on the IDP board, and have both taken home more than $500,000 since the float.
IDP has been able to ride this wave by virtue of its two core businesses.
Its foundation is the International English Testing System (IELTS) exams that is jointly owned by the British government agency British Council and Cambridge English Language Assessment. Last year that business grew by 17% to $360 million, and remains the standard test for Australian universities in a competitive market — leading some in the sector to suggest there may be competition issues that ought be looked at by the Australian Competition and Consumer Commission.
There have also long been serious questions over serial rorting of IELTS, landing university lecturers in Australia with students whose English is sub-standard.
IDP’s other main business is a student placement business, placing students in Australian universities as well as universities in the United Kingdom, the United States, Canada, New Zealand and Ireland, plus a string of English-language courses in a range of Asian countries.
Last year the placement business pulled in revenues of $170 million, up 39% from the year before.
Still, no one at IDP or its university shareholders should rest easy. COVID-19 has created an existential crisis for universities that depend on international student fees (as all IDP’s client universities do).
This calendar year the IELTS business has gone into freefall, with exams cancelled across China and elsewhere for the first three months. IDP’s study abroad business is similarly under extreme pressure, sending its shares down 25% from their February peak. In April it issued a profit warning.
“COVID-19 is having a material impact on IDP and other organisations globally, however IDP is taking decisive action to ensure we have sufficient liquidity to trade through the current situation,” Barkla said.
A further complication may be the rails run the company is getting over its competitors from federal government agencies, including a deal with Austrade, which may also pique the interest of the competition watchdog.
Due to collective hands-off risk management that appears to have ignored the risk of a pandemic that many saw coming, the universities are now exposed to a revenue and profit collapse. It appears that IDP’s risk management committee was similarly unprepared.
If EA was willing to sell down its IDP stake, it appears there would be no shortage of institutional shareholders prepared to buy into the company. In April a capital raising initially scoped at $190 million that was lifted to $225 million due to strong demand. In June Merrill Lynch’s stockbroking desk picked up 5.1% of the company sold down by Education Australia for a cool $220 million.
EA has committed, after its last divestment, not to sell any more shares for six months, but if it did sell down its whole stake, each university would receive $40 million in cash, substantially ameliorating losses in the sector.
The rest of the losses — estimated by Universities Australia to be between $3.1 billion and $4.8 billion this year — would be covered by the past two year’s worth of bumper profits that nearly every Australian university banked. It would also free the sector up to invite competition into English testing and dodge the gaze of the competition watchdog were it bothered to have a look.
More importantly, it would remove a questionable collective vested interest by Australia’s universities and be a concrete sign that they are committed to ensuring they are not, any more, mortgaging the future of Australian higher education to international students.
I’m not quite sure what to make of articles like this. Unis turn to foreign students to support their research needs because they are underfunded by the federal government. The overpayment of Aussie VCs is clearly a topic worthy of scrutiny, but conflating it with the overall cashflow and funding of unis is both misleading and completely misrepresents the difference in scale. Finally, a large shareholding does not equal available cash to pay academics and professional staff actually providing teaching and research at unis. I wonder if a few articles on the incredibly stressful life of research students and academics might be well placed? The precipitous drop in research funding opportunities? The war on tertiary education by the current federal minister? The lack of job security? I am fortunate enough to be completing a professional doctorate in public health at a major Sydney public uni, and all I see is a lot of incredibly smart, underpaid, under appreciated people who are working bloody hard to make the world a better, healthier place while also being worried about their job security.
My understanding was that IDP was based upon collective ownership via the AVCC Australian Vice Chancellors’ Committee, plus some linkage with AusAid, and the legacy of the original Colombo Plan (same students often later sending their own children to Australia for fee based study) with now strong monetisation of the international education industry.
IDP’s earlier corporate model seem influenced by single marketing desks of e.g. Wheat Board, Wool Board etc., in the ’80s described international students as a ‘commodity’ (according to related literature) , almost an Austrade like diplomatic status for personnel and a global presence like the British Council, without the focus upon English teaching and learning resources of the latter (which has also become more commercialised).
Issues within the industry included IDP’s focus upon or support for universities, over TAFE/VET or the private ELICOS English sector, privilege of automatic or blanket agency contracts for all universities, not possible for independent agencies, and no generic strategy for global market development for diversity vs. relying upon existing or large markets (often developed by local independent agents, word of mouth and film/music etc. culture).
However, a major ethical issue one had with IDP, universities and related agencies, was their lack of support for international students being pilloried in media and subjected to nasty racially based attacks, physically and metaphorically e.g. Indian students over ten years ago and more recently Chinese students (PRC and/or ethnic). The same could be said of most Australian media, commentators and society.; and Australia still struggles to avoid white nativist obsessions about identity, immigration, population and international education.
Absolutely no conflict of interest in the IELTS, landing university lecturers in Australia with students whose English is sub-standard.
With due respect to Michael Sainsbury there are many things that our universities don’t want to talk about. My experience of the higher education sector is a fairly long one based upon many years first as a Doctoral student and then as a casual academic. In that 20 plus year period I and others are of the opinion that our universities have fallen to a pathetic level in terms of quality of teaching and quality of graduate produced and are havens of gross structural inequality.
Assessment has descended to farcical levels as online multiple choice exams flourish. Full time academic staff find marking extended written pieces from students far too taxing in terms of time. Time is better spent doing career driven research and lifting the status of one’s university. This is also cheaper as next to no casual academics are required for marking. In terms of teaching it has been quite comical to hear the universities whinge and whine about having to present a far greater number online of courses in light of COVID19 and how this has compromised the quality of teaching able to be given to students. It is comical in the sense that universities have been doing away with face – to –face teaching over the last decade again as a money–saver by reducing the numbers of casual staff employed. In fact it almost appears that universities would be quite happy to deter undergrads from coming onto campus while encouraging research students and staff to do so.
The joke of the above is that universities by cutting back their face to face contact with students and small group learning are penalizing the very group of students who they claim to be extending enrollment to as an example of social justice that is prospective students who would previously have missed out due to their low tertiary entrance scores. In actual fact it is an excuse to justify the over-enrollment of students in courses as an additional source of income or using the most vulnerable students as a means to an end. . Naturally these additional dollars are invariably not used for improving teaching quality but to be siphoned over to research.
One of the most hilarious reasons I was given for the ending of face – to face tutorials when I asked the question of administration just what are the students getting in return for paying higher fees was that students do not attend tutorials, that is, students vote with their feet and just do not turn up. Really??? I know for a fact that a core number of students will come to weekly tutorials whether they are mandatory or not because they can see the positives in doing so. So where are the needs of these bottom end students being met? There is some evidence that students from lower socio-economic that is, those at greater risk of struggling are the ones who favour face –to –face learning rather than the trendy and cheaper online method. Tutorials ought to be a key factor in any first –year subject in particular.
In terms of failing students the last thing you want is for overseas students and their parents to think that your institution has a set of high standards and so to lower the risk of failure they choose to go to the alternative institutions that wave all through via lowered standards. If you require further ‘evidence’ of the fall in standards I suggest you dig up a Four Corners episode called ‘Degrees of Deception’’. Here you will hear stories of university teaching staff choosing to resign rather than sign off on giving students inflated grades – especially NESB students. At QUT the co-ordinator of a large first –year sociology class, of which I was a teaching team member, was instructed to raise some students marks to get more students through. You will also hear of a NESB nursing graduate who upon the completion of his Nursing degree gave a patient under his care a dose of disinfectant by mistake as his was unable to read the label on the bottle.
So I am sick and tired of the self –servers trying to paint a rosy she’s right picture of universities while they grow increasingly rotten to the core. Increasing fees for increasingly sub-standard service to students, bloated wages for our million dollar VC’s (not counting all the added on lurks and perks) and their management cronies, yet sub-standard wages, conditions and job prospects for their increasingly growing and exploited army of casual/part-time workers. Full time academics who do all they can to avoid teaching, especially the numerous and overly needy first year students. Their main preoccupation is their next overseas jaunt (conference/study leave) or who they need to screw over to gain promotion.
It is time these bastions of inequality and privilege for the few are given a good clean out. Despite their vacuous claims to enlightenment these institutions are one of the largest exploiters of insecure work in society. It is the casual academics that make up over 50% of the teaching staff in the university sector. I have seen some excellent casual teaching staff turn up semester after semester working themselves into ground with overly long contact hours and jobs on more than one campus to give their students a quality educational experience and show some actual concern for their students well being. All the while living in hope that one day their university might show some appreciation for their efforts and give them some job security. They live in a fool’s dream.
These are some of the things any review of universities should be focused on. In the meanwhile the winners under the current set -up will do all and say anything to prevent their privileged fiefdoms coming under scrutiny.
Education Australia having 40% stake in an education agency that in turn also recruits for non Australian destinations including all kinds of institutions is by itself a “conflict of interest”. The conduct of the agency in no better than any other commercial broker if not worse.
It is time that EA sells off its stake. If not now then when?
Last FY their overall revenue is only marginally down and that is understandable since the first intake revenue were coming in. The challenge is the current FY. However investors and shareholders didn’t understand that and were waiting to see a drop in the annual report. So what happened yesterday: IDP shares that had dropped from $25 in March to $12 just jumped up yesterday to $19. Anyone who had bought its shares in recent days could have sold it yesterday at more than 50% gain. I do believe many will sell and then wait for it to fall again before buying it back.
If EA sells at this time, it will be a much higher cash boost per university.