Karl McDonnell - Chief Executive Officer | Strategic Education (STRA) Executive Profile & Compensation

About Karl McDonnell

Karl McDonnell is Chief Executive Officer (since May 2013) and a Director of Strategic Education, Inc. (STR A), previously serving as President and Chief Operating Officer from 2006–2013; earlier roles include COO of InteliStaf Healthcare, VP in Goldman Sachs’ Investment Banking Division, and senior management roles at The Walt Disney Company. He holds a BA from Virginia Wesleyan College and an MBA from Duke University; age 59; director since 2011 . Company five-year performance: revenue rose to $1,219.9 million in 2024, with operating income $155.6 million and net income $112.7 million; diluted EPS was $4.67 in 2024; total assets $2,049.7 million and no long-term debt at 2024 year-end . Over the five-year pay-versus-performance window, STRA’s TSR cumulative index was 67.79 vs peer group 180.45; 2024 net income was $112.7 million and revenue $1,220.9 million; compensation actually paid to PEO (McDonnell) was $6.13 million .

Past Roles

Organization	Role	Years	Strategic impact
Strategic Education, Inc.	Chief Executive Officer & Director	2013–present	Led integration of acquisitions (e.g., Torrens ANZ) and oversaw accredited university operations and regulatory compliance-focused performance metrics .
Strategic Education, Inc.	President & Chief Operating Officer	2006–2013	Operational leadership prior to elevation to CEO; drove execution and growth in U.S. Higher Education segments .
InteliStaf Healthcare, Inc.	Chief Operating Officer	Pre-2006 (not dated)	Managed one of the largest privately-held healthcare staffing firms .
Goldman, Sachs & Co.	Vice President, Investment Banking Division	Pre-2006 (not dated)	Capital markets and transaction execution experience .
The Walt Disney Company	Senior management positions	Pre-2006 (not dated)	Large-scale operations and human capital development .

External Roles

Organization	Role	Years	Notes
Torrens University (Australia)	Director	Current	Torrens Board comprises independent SEI directors and SEI executives; Karl McDonnell serves alongside Daniel Jackson; governance aligned with accreditor guidelines .

Fixed Compensation

Multi-year NEO compensation for Karl McDonnell:

Metric ($)	2022	2023	2024
Salary	933,180	961,175	990,010
Non-Equity Incentive Plan Compensation	1,166,475	1,196,663	1,237,513
Stock Awards (grant-date fair value)	3,360,000	3,250,000	3,250,000
All Other Compensation	9,150	9,900	10,350
Total	5,468,805	5,417,738	5,487,873

Additional context:

CEO target non-equity incentive is 125% of base salary per employment agreement .
2024 CEO pay ratio was 88:1 (CEO $5,508,734 incl. health/welfare benefits; median employee $62,861) .
Say-on-pay approval exceeded 94% at the 2024 meeting .

Performance Compensation

Non-equity incentive plan metrics and outcomes (2024):

Metric	Weight	Target	Stretch	Actual/Result	Calculated % of Target	Weighted payout %
Revenue (000s)	25%	$1,200,000	$1,245,000	$1,220,907	123.2%	30.8%
Operating Income (000s)	20%	$150,000	$166,000	$156,961	121.8%	24.4%
EPS ($)	20%	$4.50	$5.00	$4.83	133.0%	26.6%
Grow employer-affiliated enrollment	15%	+50 bps	+250 bps	+239 bps	147.3%	22.1%
Non-quantitative strategic goals (capital allocation; regulatory/legal/ethical standards)	20%	Achieve	—	Achieved	100.0%	20.0%
Total payout vs target	100% cap	—	—	123.9% calculated; capped at 100%	100.0% paid	100.0%

Equity award structure (2024 grants):

Performance-based restricted stock; 4-year cliff vest on 2/28/2028; grant-date fair value $3,250,000; 34,189 shares for McDonnell; vesting requires maintaining accreditations and regulatory approvals, 90/10 Title IV compliance, and cohort default rates below proprietary sector average for Strayer and Capella across 2024–2027 .
Robust clawback policy covers any accounting restatement or miscalculated metrics; forfeiture provisions apply to equity tied to restated goals .
No options granted to NEOs in 2024; historically options not used; no option repricing policy; hedging and pledging prohibited .

2024 non-equity incentive payout for McDonnell:

Target as % of Salary	Target Award ($)	Achievement %	Actual Award ($)	Award as % of Salary
125%	$1,237,513	100.0% (cap)	$1,237,513	125.0%

Equity Ownership & Alignment

Beneficial ownership: Karl McDonnell owns 173,465 shares (<1% of outstanding; includes restricted shares entitled to vote) as of March 3, 2025 .
Stock ownership guidelines: CEO must hold shares equal to 5× annual salary within three years of hire/promotion; Board reviews compliance periodically; directors must hold 5× cash retainer .
Hedging, pledging, short sales, and margin purchases of company stock are prohibited by policy .
Outstanding unvested equity schedule (as of 12/31/2024):

Grant date	Type	Unvested shares	Vest date	Market value at 12/31/24
2/25/2021	Restricted Stock	55,267	2/25/2025	$5,163,000
2/24/2022	Restricted Stock	67,133	2/24/2026	$6,272,000
2/22/2023	Restricted Stock	34,531	2/22/2027	$3,226,000
2/28/2024	Restricted Stock	34,189	2/28/2028	$3,194,000

2024 vesting realized: 20,518 shares vested on 2/27/2024; value realized $1,966,650 .
Equity compensation plan capacity: 266,010 shares available under 2018 Plan as of 3/3/2025; 1,243,183 restricted shares/units outstanding; proposal to increase 2018 Plan share pool .

Insider selling pressure indicators:

Large scheduled vestings in 2025–2028 could create selling supply, subject to trading windows and policy prohibitions; company disallows hedging/pledging; Recoupment Policy and compliance requirements may temper discretionary sales .

Employment Terms

Term	Detail
Employment agreement term	Five years ending July 26, 2028; auto-renews one year unless notice .
Base salary	$961,175 set in agreement; subject to COLA and Board-approved increases (2024 actual salary $990,010) .
Target non-equity incentive	125% of base salary; Board sets quantitative financial and strategic goals annually .
Equity grants	Annual restricted shares with 4-year cliff vest; robust performance criteria (accreditation, 90/10, cohort default rate thresholds) .
Severance (without cause)	Lump sum 3× salary ($3.0 million currently), up to 3 years medical benefits ($63,000), immediate vesting of all restricted stock .
Change-of-control	Double-trigger; same as severance plus 3× latest annual non-equity incentive actually paid (~$3.7 million currently) .
Non-compete & confidentiality	Non-compete for six years post-termination; confidentiality covenants .
Tax gross-ups	No excise tax gross-ups .
Clawback	Amended Recoupment Policy (Nov 2023) applies to incentive-based compensation upon restatement or miscalculated metrics .
Insider trading policy	Prohibits hedging, pledging, short selling, margin purchases; Code of Conduct updated Feb 26, 2025 .

Board Governance

Role: CEO & Director; not independent; Chairman role is separate (Robert S. Silberman); Presiding Lead Independent Director: Viet D. Dinh .
Committee memberships: McDonnell is not listed on Audit, Compensation, or Nominating Committees; committees are fully independent .
Board meeting attendance: Each director attended at least 75% of Board/committee meetings in 2024; independent directors meet in executive session at each regular Board meeting; Lead Independent Director presides .
University governance: McDonnell serves on Torrens University Board; SEI Board oversees risk; CEO designated “Chief Risk Officer” .
Director compensation: Employee directors (Silberman and McDonnell) receive no additional director compensation .
Code of Business Conduct: prohibits hedging/pledging; stockholder communication and independence policies detailed .

Compensation Committee Analysis

Committee: Brogley (Chair), Casteen, McRobbie, Slocum; met 4× in 2024; fully independent .
Consultant: Equilar engaged; ~$30,800 paid in 2024 for benchmarking (CEO/CFO) .
Peer group for compensation benchmarking (2024): Adtalem, Bright Horizons, Chegg, Graham Holdings, Grand Canyon, Stride, Laureate, Pearson, Perdoceo, 2U; approach: salaries at midpoint; incentives at/above midpoint to emphasize pay-for-performance .
Stockholder outreach: Discussions with 40 institutions holding ~34% of shares; feedback informed governance (e.g., election of Presiding Lead Independent Director) .

Performance & Track Record

Metric	2020	2021	2022	2023	2024
Revenues ($000s)	1,027,653	1,131,686	1,065,480	1,132,924	1,219,930
Income from operations ($000s)	109,384	73,912	70,760	95,321	155,628
Net income ($000s)	86,268	55,087	46,670	69,791	112,684
Diluted EPS ($)	3.77	2.28	1.94	2.91	4.67
Long-term debt ($000s)	141,823	141,630	101,396	61,400	—

Pay vs performance highlights:

2024 Compensation Actually Paid to PEO: $6,126,678; TSR index 67.79 (2020–2024 cumulative) vs peer group 180.45; net income $112.7 million; revenue $1,220.9 million .
Equity adjustments detail and CAP methodology disclosed; large equity-based pay share consistent with long-term alignment .

Risk Indicators & Red Flags

Clawback policy robust; implemented Nov 2023 .
No hedging/pledging/short sales permitted; insider trading policy embedded in Code of Conduct .
No related party transactions in 2024 under Item 404; conflicts prohibited absent advance approval .
No executive pensions or SERP; no perquisites for NEOs; no excise tax gross-ups; no stock option repricing .
CEO and Chairman contracts include double-trigger CoC protections; long non-compete (6 years) .

Compensation Structure Signals

Cash/equity mix: CEO comp ≥50% performance-based; 2024 equity grant $3.25 million with stringent vesting criteria; indicates emphasis on regulatory-compliant academic outcomes and long-term sustainability .
Non-equity incentives: 65% financials + 35% strategic; 2024 exceeded targets but payout capped at 100% of target; disciplined design limits windfalls and caps overall payout .
Ownership alignment: 5× salary guideline for CEO; significant unvested equity through 2028 creates retention and alignment incentives .
Peer benchmarking: salaries at midpoint; incentives at/above midpoint—risk-balanced tilt toward at-risk pay .

Equity Ownership & Pledging Status

Beneficial ownership: 173,465 shares (<1%); outstanding unvested restricted stock/units scheduled to vest through 2028 (see Vesting table); company prohibits any pledging of securities .

Board Service History, Committees, Independence

Board service: Director since 2011; age 59; CEO & Director; not independent; Chair of Board is separate; Presiding Lead Independent Director in place; independent directors meet quarterly in executive session; committee rosters entirely independent (Audit, Compensation, Nominating) .
Dual-role implications: Separation of Chair and CEO mitigates concentration risk; Lead Independent Director structure enhances independent oversight of CEO performance; McDonnell not on Board committees, supporting independence of compensation and audit oversight .

Director Compensation (for McDonnell as Director)

Employee directors (McDonnell, Silberman) receive no additional director compensation; director retainer is $200,000 with ≥60% paid in restricted stock for non-employee directors; committee/lead fees apply only to independent directors .

Say-on-Pay & Shareholder Feedback

2024 advisory vote: >94% approval for 2023 NEO compensation; ongoing outreach with 40 institutions (~34% of shares) led to governance updates (e.g., Presiding Lead Independent Director election in 2024) .

Compensation Peer Group (Benchmarking)

2024 compensation peer group: Adtalem Global Education, Bright Horizons, Chegg, Graham Holdings, Grand Canyon Education, Stride, Laureate Education, Pearson, Perdoceo, 2U; design: salaries ~midpoint, incentives ≥midpoint .
TSR peer group used in 10-K performance graph includes broader set (adds Wiley, Udemy) for market performance comparisons .

Investment Implications

Strong alignment via performance-contingent equity and strict academic/regulatory vesting criteria; large unvested tranches through 2028 incentivize retention and long-term focus; hedging/pledging bans reduce misalignment risk .
Pay-for-performance discipline evident: 2024 exceeded targets across financial and strategic metrics, but payout capped—signals conservatism; equity-heavy compensation maintains sensitivity to TSR and fundamentals .
Scheduled vesting sizes (2025–2028) could produce episodic insider supply; watch Form 4s around vest dates and trading window openings; absence of options limits repricing risk; no related-party transactions or gross-ups—clean governance profile .
Governance structure (separate Chair/CEO, Lead Independent Director, independent committees) and high say-on-pay support investor confidence; however, TSR lagged peers over 5 years, placing emphasis on execution of enrollment shift to employer-sponsored funding and regulatory compliance to unlock value .