From Nonprofit to Benefit Corporation: A viable solution for colleges with a mission

        Earlier this month, the blog featured a piece on for-profit college conversions. Citing a recent New York Times article, the post noted that several for-profit colleges have decided to become nonprofits to escape certain governmental regulations and bad publicity. Interestingly, a third option is becoming apparent for colleges as reported in Inside Higher Education: becoming a benefit corporation. As you may know, a benefit corporation exists in the space between the for-profit and nonprofit sectors and focuses on achieving a double bottom line: profit and social impact. The first regionally accredited college to take the route of benefit corporation status is Alliant International University in California. Alliant was previously a California nonprofit accredited by the Western Association of Schools and Colleges (“WASC”). Last summer, WASC approved Alliant’s change of status. It is anticipated that other nonprofit institutions will follow suit due to the desire to participate in a new system of health sciences institutions known as Arist Education System. Arist Education System is headed up by University Ventures Fund and supported financially by Bertelsmann, the German media giant. Its purpose is to train health professionals who can work in collaborative teams, which is a new focus of a significant number of hospitals and health systems. It is envisioned that this goal will be accomplished through a focus on student outcomes, and Arist is convinced that such focus will be achieved if the social mission of universities is protected.

        The benefit of the change to Alliant is that it may now solicit much needed private funding while still maintaining a public commitment to its mission and public purpose. As a California public benefit corporation, Alliant is required to remain accountable not only to board members and in terms of profit but also to the larger society and in terms of social good. In contrast to for-profit colleges that are changing to nonprofits, Alliance will actually face more regulation as a result of its change in status. As Alliant President Geoffrey Cox noted, by becoming a benefit corporation rather than a for-profit, colleges can preserve their unique missions and attract investors who are looking to leave their funds with them for the long-haul. Finally, I would add that benefit corporation status will keep accountability and transparency in the equation of measuring the performance of colleges in terms of both bottom lines.

Khrista Johnson