Business education and social policy have collided with a vengeance in Quebec. In the culmination of a long-simmering dispute, Canada’s French-speaking province has levied a C$2m (US$2m) fine on McGill’s Desautels School of Management to drive home its unhappiness at the school’s new self-funding model, which has required a steep rise in MBA tuition fees.

The move has also forced the school to sacrifice C$1.2m a year in government subsidies.

The government’s view is that McGill has violated a cornerstone of Quebec education policy, namely, guaranteed equal access to taxpayer-funded universities. The MBA tuition fees have jumped from as low as C$1,700 per annum in 2009, to C$29,500 last year and C$32,500 for the 2011 intake. McGill maintains that the higher fees are essential to maintain standards and compete with other business schools. Under the self-funding model, needy students would be helped through scholarships and low-interest loans.

Desautels put in a spectacular performance in this year’s Financial Times MBA rankings, climbing from 95th to 57th spot, the biggest improvement of any school in the world. The jump is mainly down to a rise in alumni earnings three years after graduation, compared with 2010 figures. Its ranking also benefited from a rising proportion of international students and faculty.

The performance is a sharp turnround from six or seven years ago, when McGill was forced into a period of belt-tightening that included axing more than a third of its tenured staff positions. It failed to make the cut for the FT’s top 100 MBA programmes in either 2008 or 2009.

The revival stems largely from a flurry of donations, notably C$32m from Marcel Desautels, a former head of Canada’s biggest commercial credit and debt recovery bureau. The university also stepped up its financial support.

McGill’s main selling point is its “integrated management” curriculum, which eschews traditional courses such as finance, accounting and marketing in favour of modules on leadership, managing resources, value-creation and global customers and markets that more accurately reflect life on the front lines of business.

The leadership curriculum was tweaked last year to include an introduction to the visual arts, drawing parallels between the creativity required for painting and drawing and for business.

“We started down a path three-plus years ago of building this new integrated management curriculum, teaching business in a different kind of way,” says Peter Todd, the dean. “We’re just starting to see the pay-off.”

Prof Todd envisages expanding MBA enrolment from 60 students to 80-90 over the next three to four years. “We’re not looking to be an MBA programme – at least in the medium term – that has 300-400 students a year coming in. Being able to focus on the individual student has great advantages for us and for the students.”

Whatever McGill’s recent achievements, the dispute over fees has forced it to confront wider political and social undercurrents that have buffeted it for the past half-century.

“This debate would not have happened if McGill was not located in the province of Quebec,” says Pat Teneriello, president of the MBA student association, whose members overwhelmingly support the fee increase.

For the first 150 years after its founding in 1821, McGill – named after its first benefactor, a wealthy fur trader – was Canada’s pre-eminent university.

But the rise of Quebec separatism in the 1970s and 1980s led to a flight of English-speaking people and their money to neighbouring Ontario. Montreal has been supplanted by Toronto as Canada’s financial capital, making it more difficult for the city’s anglophone institutions, such as McGill, to compete for funds and skills.

Meanwhile, the “quiet revolution” of the 1960s and 1970s spawned a class of French-speaking entrepreneurs that has broken the dominance of old Anglo money. Business education became a critical part of Quebeckers’ drive to become “maîtres chez nous”– masters of our own house.

Under the government-sanctioned system, McGill’s MBA fees were less than one-tenth those charged by its rivals in other parts of Canada.

“Tuition regulation in Quebec was the single most significant constraint on our ability to sustain and enhance the quality of our MBA programme and deliver high-level student services,” the university said this month.

“There is still a certain portion of the electorate sensitive to keeping the institutions of the ‘quiet revolution’,” says Michel Kelly-Gagnon, head of the Montreal Economic Institute, a non-profit research group.

Prof Todd adds: “Quebec is a place that wants to be and is open for business to the world, but it’s also a place that has always drawn firm lines around what it views as its social responsibilities.”

One prominent francophone put it more forcefully: “It’s always good politics to bash up on the Anglos. If it’s rich and Anglo, that’s about as good as it gets.”

Ironically, the government has given grist to McGill’s arguments by announcing hikes in all university fees barely a week after imposing the fine on the Desautels school.

“Quebec universities must have the financial resources necessary to ensure the quality of teaching and research and be among the best in the world,” Raymond Bachand, the finance minister, said in his annual budget speech this month.

Noting that fees have been frozen for 33 of the past 43 years, Mr Bachand plans to push them up by C$325 a year between 2012 and 2016. Even then however, students in Quebec will pay a third less on average than 2010 fees in Canada’s other nine provinces. The higher fees will still cover less than 17 per cent of university costs.

“We certainly applaud the notion that the government is recognising that the university system in Quebec has been chronically underfunded,” says Prof Todd. “It shows a recognition that students should have more skin in the game.”

Whether the government’s new tack on university fees affects its attitude towards the McGill MBA remains to be seen. A spokesman for the education minister told the Montreal Gazette before the budget that the department would continue to penalise Desautels so long as the school pursues its self-funding model.

The ministry has raised the possibility however, that McGill might be off the hook if it can show that its MBA is a “unique” programme not offered by other Quebec universities.

For instance, it has raised no objections to an EMBA, an MBA for working professionals, offered jointly by Desautels and the École des Hautes Études Commerciales de Montreal, the province’s leading French-language business school. The fee for the 16-month EMBA, introduced in 2008, is C$78,000, far above that charged for the McGill MBA.

McGill is in talks with Quebec’s education ministry.

“We are very hopeful that a reasonable compromise will be reached with the Quebec government that would minimise the currently proposed fine and eliminate the need for any fines in the future,” says McGill.

But in the meantime McGill needs to make up a C$2m hole in its budget. Prof Todd says that no decisions have yet been made, although he adds the fine would not be recouped from tuition fees.

“It makes us more reliant on external support,” says Prof Todd. “It’s going to cause pressures in a lot of different ways. But we’re committed to making the programme work and we will.”

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