Thursday, June 30, 2011

Breach of trust-how corporates earn profits operating trust owned schools

On the face of it, it seems innocuous. A company renders services to a school, and gets paid for it via an operating fee. Whether the school owner(typically a trust) pays directly or not, the ultimate fee impact is on students. For specialized services like computer centers, entrance exam coaching etc, one can understand the need for trusts to outsource their functions to companies.

But when everything from curriculum to strategic initiatives to teacher training is outsourced(in return for fees), one must wonder whether the trust merely acts as a legal conduit for the corporate to 'own' the school viz derive economic benefits. Sample this clause in the 'management and consultancy services agreement' between MT Educare(Mahesh Tutorials) and a charitable trust settled by its promoter Mahesh Shetty(Source:-Page 15 draft prospectus filed with SEBI) 
The scope of management and consultancy services shall include advice on structuring of the PUC courses/curriculum and classes, assistance and consultancy services with respect to recruitment of teachers for the PUC, training of the PUC‟ teachers, providing techniques based on usage of technology, management of tests/examinations conducted by the PUC, advising on and assisting with marketing activities of the PUC,infrastructure management/advisory and support services (including designing of classrooms and laboratories of the PUC and facilitating optimum utilisation by the PUC of the available infrastructure) and other administrative and information technology related services. Our Company may provide all or any of these services to the PUCs 

One wonders what is left? When the core functions of the school are privatized en-masse, then does that service the policy mandate? Now, these private sector operators(MD Educare is NOT alone) will get private equity investments, acclaim for improving education quality, depict photos of the students/schools in their annual reports etc. But at what cost? Instead of lobbying the state Govt to make the required changes allowing private schools as in Haryana, they have chosen this backdoor method. To adopt that famous question, It may be legal but is it ethical?

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