Hurdle ahead for ASU merger with Thunderbird business school - East Valley Tribune: East Valley Education News

Hurdle ahead for ASU merger with Thunderbird business school

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Posted: Saturday, July 12, 2014 10:00 am

After signing a letter of intent to be acquired by Arizona State University, one of the state’s top business schools faces a hurdle that has hindered it in the past.

The Glendale-based Thunderbird School of Global Management must undergo review from its accreditation agency for a “Change of Control, Structure, or Organization” procedure. The Higher Learning Commission (HLC), which accredits Thunderbird and ASU, will decide the fate of the union.

The two schools issued a joint press release July 3, saying that Thunderbird would “join the collection of colleges, schools and institutes which constitute ASU.”

Thunderbird would remain separate from ASU’s W.P. Carey School of Business.

Both schools are ranked among the best in the nation. US World News & Report named W.P. Carey the 27th-best business school for 2015 and Thunderbird the second international full-time MBA.

The acquisition may provide needed security for the financially struggling Thunderbird. The school ran a $6.4 million deficit in the 2012 fiscal year, a step down from its $4.1 million deficit in 2011.

The eight-step Change of Control process requires an extensive amount of preparation for the petitioning school. Thunderbird and ASU are working together to finalize an agreement, said Richard Stanley, ASU’s senior vice president and university planner.

“We probably will not be fully complete until the end of the calendar year,” Stanley said.

They plan to submit their application to HLC by the end of the second or third week in July. According to HLC’s policy, “an institution seeking a Change of Control should submit its application no later than six months prior to the Board meeting at which it wishes the Board to review the proposed change.”

A July submission would line up the meeting for February of next year, when the HLC board of trustees will vote to approve, request additional review, defer the decision to a later time or deny the application altogether.

Thunderbird must pass all five approval factors: continuation of the institution’s programs and functions, preservation of the institution’s objectives, likelihood of re-accreditation, sufficient financial support and the acquiring organization’s previous experience in higher education.

The onus of the process, Stanley said, is on ASU to be a “strong-enough” acquirer, but Stanley was confident that ASU proved itself to HLC during the 2013 accreditation season.

“We passed with flying colors,” Stanley said.

Second go-around

This is Thunderbird’s second attempted Change of Control in as many years. The graduate-level school announced its partnership with Laureate Education, Inc., on March 18, 2013.

The alliance between the for-profit Laureate and non-profit Thunderbird caused the formation of the Thunderbird Independent Alumni Association (TIAA).

The TIAA criticized the Thunderbird Board of Trustees, whose agreement with Laureate “places one of the most respected business schools in the nation into the hands of a for-profit private-equity-owned educational conglomerate,” according to TIAA’s Oct. 29 press release.

In order to offer a counterproposal, the non-profit organization worked to raise a collective donation from more than 350 alumni.

The Thunderbird-Laureate merger collapsed Feb. 27 following the results of the HLC board meeting.

HLC rejected the Change of Control, saying that approval factors 2 and 3, preservation of the institution’s objectives and likelihood of re-accreditation, had not been met.

On March 26, TIAA formally offered Thunderbird its donation, named the Thunderbird Transition Fund. The stated purpose of the donation was to “to cover negative operating cash flow of Thunderbird for a period not to exceed 3 years, to enable the board to consider and carefully evaluate potential partnerships and/or alliances with other public or non-profit institutions of higher education.”

The stipulations of TIAA’s offer required that Thunderbird not seek any for-profit partnerships, provide TIAA with an audited account of the school’s financial needs and reconstitute its board of trustees.

TIAA required the board have a “supermajority” of alumni members and that one of the chairpersons be a trustee of the Thunderbird Transition Fund.

Will Counts, executive director of TIAA, said the board of trustees had lost touch with the interests of the alumni.

“It’s has been made clear that the government of the school has been less than stellar. Their decisions are usually not in the best interests of the alumni,” Counts said.

The board of trustees rejected TIAA’s proposal on April 2. Thunderbird chairperson Ann Iverson said it did “not constitute an offer.”

Thunderbird president Larry Penley announced in the spring edition of Thunderbird Magazine that the school would continue its search for a partnership.

ASU arose as a primary candidate. The Wall Street Journal had already disclosed that Thunderbird had negotiated with ASU and Hult International Business School prior to attempting the Laureate merger. Penley is a former dean of the W.P. Carey School of Business at ASU.

Counts and the TIAA showed a much more favorable disposition to ASU compared to Laureate.

“The biggest difference is the reputation and the type of institution, Laureate being a for-profit, private-equity-backed diploma mill,” said Counts.

Counts praised ASU president Michael Crow, citing his leading the university to “academic excellence.”

“I think the management ability of Michael Crow has been proven in what he’s done at ASU. It certainly could be beneficial for that management skill to be brought to Thunderbird,” Counts said.

The two primary concerns for the alumni, Counts said, are the correction of school government and preservation and the retention of Thunderbird values and culture.

“We’re optimistic about it, but we are holding ourselves neutral in some respects, not extending a backing until we are fully knowledgeable of what’s happening and we understand that the government is going to change for the benefit of our degrees and the future of the school,” he said.

Stanley, ASU’s senior vice president, said ASU hopes to finalize a relationship that “carries on the Thunderbird name and tradition.”

The July 3 press release said personnel reductions were “likely to result,” but Stanley said the details were yet to come.

Although the HLC accreditation is their primary concern, Thunderbird and ASU must also deal with Arizona licensure and business school accreditation, Stanley said.

Thunderbird School of Global Management did not respond to an interview media request by the Ahwatukee Foothills News. The Higher Learning Commission declined to comment, citing its policy of not making statements on pending cases

• James Anderson is a junior at the Walter Cronkite School of Journalism and Mass Communication at Arizona State University. He is interning this semester for the AFN.

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