Session Information
28 SES 06 B, New forms of elite education
Paper Session
Contribution
The surge of Swedish independent school has been enormous through the past 30 years as a consequence of educational marketization. While the majority of these schools have been run by smaller firms and foundations, the ownership pattern is rapidly changing as large conglomerates expand in every sector of the educational market. This expansion is supported by the directors of the education industry, i.e., board members centrally embedded in the heartland of political and financial decision-making (Larsson 2021). These directors link public and private institutions in a web of ties, function as “brokers of information” (Buch-Hansen & Larsen 2021) and central to corporate governance. As such, they represent the systematic potency of organizational control, providing insight, guidance and opportunities for investments.
This paper aims to examine corporate governance within Swedish independent school firms and foundations in the three years following the 2018 political proposal to limit
corporate profit-making in the education sector. We use untapped data set, combining an analysis of interlocking directorates in all educational firms and foundations and voluntary disclosure in annual reports. Our research questions are:
- What kind of board interlocks emerge in the network?
- How are boards of educational firms and foundations embedded in society?
- How does the behaviors of the largest 5 firms change as an effect of internal and external challenges?
We know little about corporate governance within Swedish education. Network entanglements of Swedish educational actors within global policy chains have been mapped (Rönnberg 2017) and also corporate strategies of independent school firms (e.g., Rönnberg et al. 2021; Ideland & Serder 2022). Edlund and Sahlin (2021), analyze the embeddedness of boards in Swedish higher education organizations. They display ties to organizations in public, private and civil society over time and their finding is that external board members have increased. The increasing number of board members from financial institutions as well as direct ties with external organizations, is not only seen as adjustment to corporate behavior – but also to policies mandating interaction with other societal institutions. Internationally, corporate governance and corporatization has been analyzed as part of understanding marketization in education and higher education. Pusser, Slaughter and Thomas (2006) untangle the difference between private and public universities in the US, concerning inter-sectoral variations of board interlocks. The cohesion of boards shows “institutional behavior” as boards work as “sources of information and legitimacy for institutional policymaking” (748). They claim that private institutions are far more embedded and connected to financial institutions and elite actors than public institutions. This provides advantages when prospecting future investment and navigating uncertainty. Eaton (2022) discusses the composition and embeddedness of US University boards. He argues that the density of high-profiled financiers and the ties with financial institutions reflect economic advantage of elite universities, as these convert endowments into educational and economic profits. Studies of US charter schools indicate that the density of board members originating from financial institution and the absence of educational professionals’ signals marketization advocacy rather than educational quality (Sparks, 2021).
Following Fligstein (2001, 170 ff.), we argue that corporate governance could be seen as the struggle of “managing interdependence”. That is to say, controlling “internal and external environments” as “smoothly and predictably” as possible “[t]o ensure continued growth and profitability” (Ibid.). This relates to what Mizruchi (1996) and others call “behavior of firms”. We approach corporate governance empirically, combining the study of interlocking directorates and voluntary disclosure within annual reports. This approach provides a structural analysis of educational firms and foundations, including hierarchies and variations in embeddedness, behavior and ways of exerting control.
Method
Our methodology consists of two interrelated sub-studies. In the first sub-study we approach the interlocking directorates 2019-2021 as part of understanding interfirm relations. This means mapping ties, i.e., primary and secondary interlocks, that exist between independent school firms and foundations and other societal institutions, by accounting for board members board connections (Scott and Griff 1984; Scott 2017). Here we focus on, type. cohesiveness, strength, density and duration of the ties. An overview could be fruitful, since it offers an opportunity to map structural transformations within interlocks (Jonnergård & Stafsudd 2011). Interlocks consistent of ties with multiple firms and institutions, could provide crucial advantages by access to information, status, resources and possibilities for action (Mizruchi 1996). Buch-Hansen and Larsens (2021, 19), argue for the need to combine existing and previous ties to fully understand “mechanisms” that regulates competition, control and domination. In this project, we also include changes in board member composition (background and affiliation), which transforms networks and provide indications on shifting embeddedness and behavior of firms and foundations (Jonnergård & Stafsudd 2011). In the second sub-study, we match the interlocking directorates with an analysis of annual reports produced by the five largest educational firms 2019-2021. Inspired by thematic disclosure analysis (Beattie et al. 2004), our ambition is to explore how changes in firm behavior corresponds to changes in board composition and hence, network embeddedness. The combination of interlocking directorates and thematic disclosure, provides the opportunity to not only understand the network dynamics but also get indications of “what flows across the links” and “in the light of what interests” as Stinchcombe (1990, 381) puts it. The use of thematic disclosure analysis means constructing indicators that are fitting to quantify, so that intra-firm and inter-firm comparisons could be made over time. We identify such indicators by, among other things, operationalizing topics that relates contemporary struggles (policy changes, financial problems etc.) and forwardly-looking ambitions of the firm (investments, expansion opportunities etc.). Furthermore, the quantitative analysis will be supplemented with qualitative measures such as topic-significant quotes. For both interlocks and the analysis of disclosed content, we use data collected from annual reports 2019-2021, financial databases and webpages. This includes board member info from firms and foundations, but also third-party interest organizations. All annual reports are public and accessible.
Expected Outcomes
The interlocking directorates will show some variations of ties and levels of embeddedness over time i.e., the structural dimensions of exerting control in an emerging educational market. Our hypothesis is that the networks of smaller firms will experience fewer changes, but larger firms will change somewhat more, adapting to both external forces (competition, policy etc.) and internal (expansion, direction). Secondary interlocks will tie larger firms among larger firms and foundations together in a more densely connected component, while smaller firms become isolated by having fewer or no ties. Early prognosis also shows the necessity of analyzing board composition. This has to do with what we call professionalization of boards and changing embeddedness of directors within larger firms. We expect that these directors will function as key “linkers”, creating cohesiveness in the ties with other key societal institutions. Related to this, we also expect to see small number of school professionals (teachers etc.) within larger independent school firm boards, while the number stays largely unchanged in smaller ones. This could be interpreted as an adaption to the market rather than emphasis on educational quality among larger firms (Sparks 2021). Correspondingly to the interlocks, we expect to find a continuous adaptation and behavioral changes in the voluntary disclosure within annual reports as a response to the political discussion in 2018. This especially true for how these five large firms communicate and promote future visions.
References
Beattie, V., Mcinnes, B. & Fearley, S. (2004). “A methodology for analysing and evaluating narratives in annual reports: a comprehensive descriptive profile and metrics for disclosure quality attributes”, Accounting Forum, 28:205-236. Buch-Hansen, H. & Grau Larsen, A. (2021). ”The chemical brothers: Competition and the evolution of board interlock network in the German chemical industry, 1950-2015”, Business History, DOI: 10.1080/00076791.2021.1923696. Eaton, C. (2022). Bankers in the Ivory Tower. The Troubling Rise of Financiers in Us Higher Education. Chicago: University of Chicago Press. Edlund, P. & Sahlin, K. (2021). ”Society on board? External board members and the embedding of Swedish higher education organizations in society, 1998-2016”. Studies in Higher Education, https://doi.org/10.1080/03075079.2021.1925239, 1-15. Fligstein, N. (2001). The architecture of markets: an economic sociology of twenty-first century capitalist societies. Princeton: Princeton University Press. Ford, M.R. & Ihrke, D.M. (2015). ”A Comparison of Public and Charter School Board Governance in Three States”. NONPROFIT MANAGEMENT & LEADERSHIP, 25(4), 403-416. Ideland, M. & Serder, M. (2022): “Edu-business within the Triple Helix. Value production through assetization of educational research”, Education Inquiry, DOI: 10.1080/20004508.2021.2019375. Jonnergård, K. & Stafsudd, A. (2011). ”The making of active boards in Swedish public companies”, J Manag Gov, 15:123-155. Larsson, M. (2021). De expansiva: en bok om skolmarknadens vinnare och förlorare. Skarpnäck: Balans. Mizruchi, M.S. (1996). “WHAT DO INTERLOCKS DO? An Analysis, Critique, and Assessment of Research on Interlocking Directorates”. Annu. Rev. Sociol, 22, 271-298. Pusser, B., Slaughter, S. & Thomas, S. L. (2006). “Playing the Board Game: An Empirical Analysis of University Trustee and Corporate Board Interlocks”, The Journal of Higher Education, 77 (5):747-775. Rönnberg, L. (2017). ”From national policy-making to global edu-business: Swedish edu-preneurs on the move”, Journal of Education Policy, 32 (2):234-249. Rönnberg, L., Alexiadou, N., Benerdal, M., Carlbaum, S., Holm, A-S. & Lundahl, L. (2021). “Swedish free school companies going global: Spatial imaginaries and movable pedagogical ideas”. Nordic Journal of Studies in Educational Policy, https://doi.org/10.1080/20020317.2021.2008115, 1-11. Scott, J. (2017). Social Network Analysis. London: SAGE Publications Ltd. Scott, J. & Griff, C. (1984). Directors of industry: the British corporate network 1904-76. Cambridge: Polity. Sparks, D (2021). School Board Privatization: A Case Study of New York City Charter Schools. Working Paper 245. New York: National Center for the Study of Privatization in Education, Teachers College. Stinchombe, A. L. (1990). “Review: Weak Structural Data”. Contemporary Sociology, 19(3):380-382.
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