Shareholders Reject Career Education Plan.

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Author: Strout, Erin

MONEY & MANAGEMENT NOTES

The owners of two-thirds of the shares in the Career Education Corporation withheld their votes in May for a slate of directors that was backed by the company, in a signal to its beleaguered management and a bid to overhaul its governance.

Such a rejection is rare in corporate America, where the management's choices are routinely approved with the support of 90 percent of shares.

In the show of no confidence in the company's management, which took place at Career Education's annual shareholder meeting, about 62 percent of the shares were voted in favor of three proposals by R. Steve Bostic, the leader of a group that is dissatisfied with the company's leadership. The nonbinding proposals, which Career Education officials oppose, would drop some of the anti-takeover provisions in the company's bylaws.

Career Education also announced that its Board of Directors had approved an expansion of its size, to nine members from seven members. The two new positions, which are supposed to be held by people independent of the company, "will result in a further increase in the independence of the board," John M. Larson, Career Education's chairman and chief executive, said in a written statement.

"A message has been sent by our stockholders to further enhance our corporate-governance practices," Mr. Larson said, "and we will heed that message."

Earlier in May, Career Education announced that an independent committee had found no evidence that senior managers were involved in securities violations alleged in a class-action lawsuit by shareholders, but had concluded that some individual employees had engaged in "wrongful conduct." The lawsuit, filed in December 2003, alleges that the company manipulated student records and financial statements to inflate its stock price.

Career Education also faces investigations by the U.S. Securities and Exchange Commission and the U.S. Department of Justice.

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By Erin Strout