Case:
Shareholders Complain
(This case was described in 1992 in both Business Week and in The Wall Street Journal.)

A group of Chicago businesses pooled funds to create a privately owned and operated elementary school in a Chicago inner-city neighborhood because of their concerns about the quality of education. Observing that American businesses spend $4 to $5 billion annually in training just to bring their workers to very basic skill levels, these businesses determined that they would help improve public education. The founders of this Chicago experiment believe the future success of their businesses lies in the skills of their employees. They used business notions on pay and accountability in the most challenging environment—an inner-city school.

The school is free for neighborhood children. Teachers are paid 10 percent more than their public school counterparts. The school is run like a private corporation, and the administrators and teachers understand that a lack of improvement in the students can result in termination of employment.

A shareholder of one of the businesses involved in this experiment has protested: “Why are my funds being used for an inner-city school? We have taxes for that. I invested in a distribution firm, not an education firm. Your job is to earn my dividend, not spend it on things you think are important.”

1. What do you think of the shareholder’s objection?
2. What is at stake? Who is involved?
3. What is the responsibility of those who invest other people’s money? What rights
   do shareholders have over their investments?
4. If you were the director of shareholder relations for the firm, how would you
   respond to the shareholder?

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