University of Phoenix CEO gets lavish retirement package

For more than a decade public school teachers and college and university faculty have been demonized for negotiating modest pensions and retirement benefits even as private sector CEO's walked away with multi-million dollar retirement packages and funding for public education and higher education was slashed.

Now the Apollo Group Inc., owner of the University of Phoenix, the nation's largest for-profit college, has given its retiring founder and CEO, John Sperling, what can only be characterized as a lavish retirement package despite declining student enrollment, multiple government investigations, and intense media scrutiny.

Sperling, who retired at the end of 2012 and now holds the title of chairman emeritus, will receive a $5 million “special retirement bonus” this month, according to a securities filing Thursday, spotted by Footnoted’s Michelle Leder. He also gets a lifetime annuity—$70,833.33 a month— and ownership of the two company vehicles he used when serving as executive chairman. Apollo will also cover “reasonable out-of-pocket” medical- and dental-care coverage the 92-year-old incurs for the rest of his life. 

Sperling's retirement package defines nepotism. Apollo's board chairman is John Sperling’s son, Peter Sperling. 

It isn't as if the elder Sperling was underpaid. He received total compensation valued at $6.95 million in fiscal 2012, including salary, options and non-equity incentive pay, according to an earlier securities filing.

A Senate committee chaired by Senator Tom Harkin of Iowa has criticized the costs of for-profit colleges like University of Phoenix, arguing that too small a share of the taxpayer-funded loans on which the schools rely for most of their funding is being allocated to instruction and academic support and that their graduation and job placement rates are abysmally low. More than 90% of University of Phoenix’s net revenue in fiscal 2012 came from Title IV federal financial aid programs. For-profit colleges are notorious for investing more in marketing and recruitment than in education.

Nor can Sperling's exorbitant taxpayer funded retirement be justified by the University of Phoenix's financial performance or enrollments. Apollo lost nearly two-thirds of its market value in the past year, and on Jan 8 it reported  that its fiscal first-quarter revenue had fallen nearly 10% to $1.06 billion as enrollment tumbled by more than 14%.

That doesn't mean that the Sperling's aren't fighting back.

The school rolled out a new marketing campaign last year to stress its offerings of practical, career-oriented courses. And earlier this week, WSJ reported, it unveiled an executive-education course on innovation, taught by top business-school faculty, as part of an effort to tap into the corporate-training market and diversify beyond its shrinking University of Phoenix revenue stream.

To be sure, Sperling isn’t alone in getting cushy compensation upon retirement. The WSJ’s Joann Lublin wrote in November about some of the more generous consulting agreements for ex-executives at companies including IBM, First Cash Financial Services Inc. and elsewhere. Some, Lublin reported, even struck deals to get paid after their death.  That doesn't appear to be part of Sperling's deal. But unlike the students who the University of Phoenix has preyed on and left with little more than shattered dreams and mountains of debt, John Sperling will have nothing to worry about for the rest of his life.

This blog is based on an article in the Wall Street Journal entitled "University of Phoenix retirement plan: nice work if you can get it" by Melissa Korn.