Bloomberg Businessweek,

Activist investors aren’t changing one thing about the status quo: wo1n Nominees of 5 big activists ——Carol Hymowitz, Brandon Kochkodin, and Stephanie Ruhle 2011. 5went seats since to women.

Archdiocese of Philadelphia’s 17 high schools and four special education institutions. They all see a chance to improve a system that, despite crumbling infrastructure and tight budgets, produces students who test better and graduate at higher rates than their public school peers.

“That’s what Wall Street does,” Brennan says. “We look for inefficiencies in things that have massive potential, like a good company with a bad balance sheet. We look for upside—and we see upside here.”

These active donors are most often drawn to institutions in the poorest, most dangerous neighborhoods, says Andy Smarick, author of Catholic School Renaissance. The latest technology, higher teacher salaries, and upgraded curricula are among their priorities, he says. “They want the room to roam” as they test new ideas.

In that sense, they share plenty with their counterparts in the charter school movement. There, hedge fund managers including Carl Icahn and Daniel Loeb have ponied up millions and stirred the ire of critics who say they divert badly needed resources from existing public schools.

Wall Street’s Catholic school activists stand similarly accused. And though test scores have improved where the donors have jumped in, skeptics are raising questions about the impact on the schools’ religious identity.

Among those concerned is Jamie Arthur, senior fellow at the Cardinal Newman Society, founded in 1993 to oppose secularism in Catholic education. Arthur says she finds some schools focus too much on academic excellence alone and not enough on weaving Catholic values into every lesson. “Having a prayer at the beginning and end of the day is great, but it’s not enough,” she says.

Principals, for example, should be practicing Catholics, she says. That’s the rule in the Archdiocese of New York. But Mcniff, the superintendent, granted two exceptions after a mostly lay board insisted the best candidates weren’t of the faith. (One converted after being hired.) Mcniff backs existing policy, but he expects the debate to intensify.

The Second Vatican Council prescribed an expanded role for laypeople in running Catholic schools. Dwindling numbers make it necessary: The ranks of U.S. priests have dropped to 38,000, from 59,000 in 1965, according to Georgetown University’s Center for Applied Research in the Apostolate. The number of nuns has fallen to less than 50,000, from 180,000.

As for student enrollment, it peaked in 1965-66, with 5.6 million in 13,000 schools. Now 1.9 million attend 6,500. Only 12 percent of Catholic children go to Catholic schools, compared with 48 percent in 1965.

The enrollment trend could end disastrously, says Jack Connors, co-founder of the Boston ad agency Hill Holliday and head of the city’s Campaign for Catholic Schools, which has raised $79 million. There are 90 parish schools left in the Boston Archdiocese, he says, down from 250 in 1965. At the rate of three closings a year, the number will be zero in 30 years. “If that happens, it’s the end of our faith,” he says.

Saint John Paul II is the consolidation of seven parish schools in some of Boston’s poorer neighborhoods; there are four retrofitted campuses. Annual tuition is $4,600. At the new Lower Mills campus in Dorchester, only half the students are Catholic, but a 10-minute prayer session in the gym starts the day. “I believe this is the best school in Boston,” says principal Lisa Warshafsky, who is Catholic and supervises a faculty of 20 full-time teachers, all laypeople.

Many donors aren’t Catholic. The late Robert Wilson, a hedge fund founder who gave tens of millions of dollars to New York Catholic schools, was an atheist. Stephen Schwarzman, the Blackstone Group CEO who, with his wife, Christine, donated $40 million last year to the New York Archdiocese’s Inner-city Scholarship Fund, is Jewish. (Peter Grauer, chairman of Bloomberg LP, which owns

is president of the fund’s board of trustees.)

San Francisco Bay Area venture capitalist B. J. Cassin and his wife, Bebe, are pushing the frontiers of lay involvement. Their foundation has given $22 million to more than 50 Catholic educational institutions across the U. S., including 18 Cristo Rey high schools, which focus on lowincome students who help pay their way by sharing off- campus jobs. Last year, Cassin started the Drexel Fund,

These investors try to influence companies by shaking up their boards

Icahn Associates Third Point Partners Pershing Square Capital

Valueact Capital Elliott Management

Over the same period, women filled

about 26 percent of board openings at 08board S&P 500 companies Diverse perspectives “help represent the shareholders,” says Beth Comstock, a vice chair at General Electric and a director

on Nike’s board A spokeswoman for Daniel Loeb’s Third Point, which nominated no women, says the firm played a role in making Marissa Mayer

the CEO at Yahoo!

0 The number of women Carl Icahn nominated

for 94 board seats he tried to fill

which puts money into a range of faith-based schools. So far, he says, more than $15 million, or half the $30 million goal for the year, has been raised.

A Massachusetts native who graduated from the College of the Holy Cross in 1955, Cassin can remember the authoritarian ways of clergy-run education. “The vibe now is more reallife,” he says, and educators “with families and children can relate to the students better.”

Atchinson of Adage Capital was a Presbyterian when he started raising money for Saint John Paul II. He converted a year and a half ago, inspired by how much the faculty and staff did for their students. “We need these schools,” Atchinson says, “and we need them to be run as well as they can.” �Tom Moroney

The bottom line Catholic schools no longer have an army of priests and nuns to rely on. Wall Street donors see a chance to make an impact.