This article was first published by School Management Plus. https://www.schoolmanagementplus.com/bursars-finance/why-non-profit-doesnt-always-mean-better/.
A good mate and I have been arguing about international schools and the ‘non-profit tag’, to the extent that he now twists almost every school discussion towards the subject.
His position is simple: in a for-profit school, the owner takes money out of the school to fund their lifestyle; expensive cars and luxury holidays. In a non-profit school, every penny goes back into educating children.
Of course I understand his point, but in my experience it is also far too simplistic.
I am sure it is true that there are some international schools out there that do operate to earn healthy profits for owners. Having worked in both models, I can say I’ve never experienced a school where enriching the owners appeared to be the driving priority.
It simply does not follow that every for-profit school behaves this way. Nor does describing a school as ‘non-profit’ guarantee generosity, educational quality or some apparent moral high ground.
Prior to a career change over 20 years ago, I worked in the non-profit sector in the UK. Most of us accepted lower salaries than we might have earned elsewhere because we wanted to work there, and money clearly wasn’t the motivation.
I remember my friend Paul ringing me around Christmas in 2003, furious that his bonus at a London investment bank was only $100,000. At our Christmas party, our charity’s CEO put two bottles of wine on the table. We were ecstatic; we had not expected any bonus at all.
That is my context of ‘non-profit’: lower salaries, personal sacrifice and every available pound directed towards people in need. In an international-school context, it means something rather different.
Broadly speaking, although the precise legal structure varies between countries, a non-profit has no private owner or shareholders entitled to receive its surplus as dividends. It can still charge substantial fees, accumulate significant reserves, and pay generous salaries and benefits. Charity Commission guidance in England and Wales, for example, explicitly recognises that charities may hold reserves for financial resilience and future needs.[1] All of those may be perfectly legitimate. Cars can be bought for the head of school, with drivers. There may be lavish end of year parties with free-flowing booze.
When a non-profit school says all its income is ‘reinvested in the school’, the statement may technically be true, but it may also tell us little. Reinvestment can mean more teachers, learning support, scholarships and great CPD. It can also mean high salaries, staff housing, marketing, landscaped campuses and substantial reserves.
The point is not that such expenditure is wrong. International schools must recruit good staff, maintain facilities and remain financially sustainable. It is that saying all the money goes back to the school, isn’t quite the same as saying it’s all spent directly on students, or even that it’s spent wisely.
A non-profit can still be bureaucratic, wasteful or extraordinarily cautious about spending money in classrooms. It may hold large reserves while departments struggle for resources, protect senior positions while reducing support staff, or offer poor salaries while fees are high for parents. Even Charity Commission guidance recognises that unnecessarily high reserves can limit the amount spent on charitable activities.[2] There may not be an owner buying a new Mercedes, but that does not automatically mean the money is producing the best possible education.
The opposite mistake is to assume that every pound of profit represents money stolen from children.
A well-run for-profit school has strong reasons to invest in educational quality. It needs families to enrol, teachers to stay and graduates to succeed. An owner taking a long-term view may invest heavily in staff, facilities, learning support and innovation because those investments are both educationally sound and commercially sensible.
Profit can also represent a return on genuine financial risk. Someone may have bought land, constructed buildings, borrowed money and funded several years of operation before a school became sustainable. Whether the eventual return is proportionate is a legitimate question; the existence of a return is not itself proof of exploitation or a lack of ethics.
A for-profit ownership structure makes it a possibility that educational interests may lose out to financial returns. But that’s a far cry from claiming that they always will. The non-profit tag just removes a formal entitlement to take profits.
Non-profit status in schools does not necessarily mean lower salaries or restrained spending. Teachers in some established non-profit international schools receive excellent salaries and generous benefits. That contrasts sharply with my experience of working for a UK charity, where non-profit status meant lower pay. Of course, many prominent non-profit schools are also older, wealthier, and more established. But that reinforces the key point: ownership status alone tells us surprisingly little about how much money an organisation has or how it spends it.
The serious question is not simply, ‘Does this school make a profit?’ It is: How is it governed, and what happens if financial and educational priorities conflict?
Parents and teachers should ask who controls the school, how transparent its decisions are, why teachers leave, and whether educational leaders can challenge financial decisions. These questions reveal far more than the label beside a school’s registration status.
All fee-paying international schools must pay salaries, maintain buildings, recruit students and remain financially viable. In that operational sense, they are all businesses. It should go without saying that a school should never be only a business.
There are countless examples of educational obligations that don’t fit a balance sheet; supporting students with diverse needs, retaining staff at the top of pay scale, providing academically robust subjects despite small classes, and so on.
A non-profit structure can provide important protections. It prevents the straightforward distribution of surplus to owners and can support more accountable, mission-led governance. Teachers, like my mate, are entitled to see those are genuine advantages. But structure tells us what may happen to a surplus. It does not tell us whether a school is ambitious for its students, respectful of its teachers or courageous in its educational decisions.
For-profit and non-profit are useful facts about a school. They are not verdicts.
Ultimately, the better distinction is not between schools that make a profit and schools that do not. It is between schools in which money serves education, and schools in which education serves the money.
References
[1] Charity Commission for England and Wales, Charity reserves: building resilience (CC19).
Charity reserves: building resilience (CC19)
[2] Charity Commission for England and Wales, Charity reserves: building resilience (CC19), section 3.2.
Charity reserves guidance, section 3.2