Do you work in public education? You could be an investor in Chegg
Think you can sell Juan B. Gutiérrez on Chegg? Probably not.
The math professor and department chair at the University of Texas at San Antonio is a critic of the ed-tech platform. He says he’s witnessed firsthand how the site’s services can be co-opted by bad actors, and he believes the company owes much of its success and profitability to academic misconduct.
“I definitely condemn this business model,” Gutiérrez said.
Gutiérrez also happens to be an investor in Chegg — one of more than 1.5 million current and former public education employees who rely on the Texas Teachers’ Retirement System to manage their retirement savings. .
According to the Securities and Exchange Commission, three other state-run pension funds for public education employees also own shares in the controversial education technology company: the California State Teachers’ Retirement System (known as as CalSTRS), the State Teachers Retirement System of Ohio, and the Kentucky Teachers Retirement System. When Chegg’s stock value peaked in the first quarter of 2021, the four repos held a combined $64 million worth of stock in the company. The systems are aimed at those who work or have worked in public education or in higher education. (Other public pension funds also owned and continue to own shares of Chegg. However, educators make up a smaller share of the membership rolls of these systems.)
Higher education is no stranger to controversy and activism around its investment practices. Typically, however, these disagreements are about the institutions themselves and whether or how much they have invested in controversial industries or countries. Investments in Chegg raise concerns about whether the values held by many professors are reconcilable with what is best for their long-term financial well-being.
Chegg is an educational technology company that was founded by students in 2005 and initially focused on textbook rentals. It has since expanded into other areas, such as a subscription-based tutoring service that many faculty members view as a means of cheating.
Indeed, as Chegg has added subscribers to its lists during the pandemic, alleged incidents of academic misconduct linked to the company have also proliferated. At the Georgia Institute of Technology, students reportedly posted final exam questions on the platform. Boston University chemistry students would then come under scrutiny for their use of the Chegg Tutors feature. And in an interview with the campus newspaper last year, a University of Oregon instructor recalled snapping a student who used Chegg’s services during an exam.
Asked about criticism of its platform and its relationship to cheating, a representative for Chegg said in a statement that the company is “committed to academic integrity, which we believe is fundamental to the process of learning and central to our mission to provide students with the support they need to navigate their own academic journeys and succeed.
Drops in the bucket
Investments in Chegg by these four funds are minor, in terms of the financial activity of both the listed company and the repos themselves. For example, at the end of the third quarter of 2021, the four funds collectively owned 764,000 shares of Chegg, or the equivalent of half a percent of Chegg’s outstanding shares. By comparison, 34 institutional investors or investment managers held a larger stake in Chegg than all four repos combined.
Likewise, the enormous size of the four pension funds means that any returns or losses from trading Chegg shares are negligible. Sure, $18 million worth of Chegg stock held by the Kentucky TRS at the end of the first quarter of 2021 might seem like a lot, but not for a fund whose assets under management were estimated at $10.1 billion at the end of the year. ‘era. The Kentucky $18 million is the largest reported investment in Chegg at the end of the quarter by any of the four repos – but it was still a tiny percentage of the estimated value of investments in the TRS portfolio. Kentucky on the last day of the first quarter of 2021.
Beau Barnes, assistant executive secretary and general counsel for the Kentucky TRS, said he was not aware of any complaints the pension had received from its members regarding the system’s investment in Chegg. Either way, the pension’s investments in the business are aligned with the fund’s fiduciary responsibilities to its members, Barnes said – “investing in the best financial interests of the system and its members by seeking good returns investment within acceptable levels of risk”.
Thomas Lawrence, chief information officer at CalSTRS, expressed a similar sentiment.
“CalSTRS makes all investment decisions on behalf of our members’ financial future,” Lawrence said. The Texas and Ohio pension funds did not respond to requests for comment at press time.
Criticisms of the morality of certain investment vehicles are an eternal topic, both inside and outside higher education institutions. In 1985, for example, student protests at Columbia University prompted the institution to divest its stakes in all companies operating in South Africa. Alternatively, the World Wildlife Fund sparked controversy in 2018 after the so-called Paradise Papers leak revealed the rights organization’s investment in a private equity firm specializing in oil and gas. gas, mines and other energy assets. More recently, a federal judge ruled that Texas could not enforce a ban against state government contractors who had boycotted Israel.
As for Gutiérrez, the UTSA math professor said he would rather the Texas teachers’ retirement system not invest in Chegg. Yes, the fund’s ultimate responsibility is the financial well-being of its members. But other investment opportunities are available beyond Chegg.
“Investing ethically does not necessarily mean investing less efficiently,” Gutiérrez said. “There are plenty of options out there that are pretty decent and pretty cost-effective.”