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Where Was Career Education Corporation’s Board?

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By Douglas A. McIntyre Updated Published
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Career Education Corporation (NASDAQ: CECO) posted poor earnings, fired its CEO, and its board announced that an investigation by law firm Dewey & LeBoeuf had “confirmed the existence of improper placement determination practices at certain of the Company’s Health Education segment schools, and, for the Company’s Health Education and Art & Design segment schools.“ Where was the board of directors when the improper behavior was going on?

Additionally, the board failed to detect another problem. The Attorney General of the State of New York is reviewing practices at Career Education. Some of the company’s policies may not have complied with state consumer protection rules.

The corporation’s board does have members who should have seen warning signals if they had been on guard as board members should be. Lead director Leslie T. Thornton was a former chief of staff to the U.S. Secretary of Education. She is currently a partner at law firm Dickstein Shapiro Morin & Oshinsky. She has been a director at Career Education since 2005. Thornton can hardly take the position that she does not know that company’s operations very well and could not understand the legal ramifications of certain management decisions.

Director David W. Devonshire has an impressive background as a financial executive. He was executive vice president and chief financial officer of Motorola. He has a degree in accounting and an MBA. Board member Greg L. Jackson also has an MBA. He has been a mutual fund portfolio manager, which means he has spent years reviewing corporate business practices and balance sheets.

The board of Career Education Corporation will say that CEO Gary E. McCullough effectively slipped the company’s misdeeds past them. Thornton, the lead director, will take his place. She, more than anyone else outside management, should have been alert to the company’s problems.

Where were the board members when Career Education was acting in ways it should not have? Clearly not performing their fiduciary roles.

Douglas A. McIntyre

Photo of Douglas A. McIntyre
About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.

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