“In the grip of their own business goals,business school are

“In the grip of their own business goals,business school are legitimising practices _they_ should be challenging.”英文报刊上看到的,请问下这里的they should be challenging是定语从句吗?居然可以用they引导,还是they做形式主语呢?或是有省略的部分,请高手赐教,
先感觉两位的回答，可能是我没把问题表述清楚。我明白充当宾语的that可以省略，但是这个句子很奇怪，如果把practices they should be challenging还原成只有主干的简单句就是(they指代的)practices challenge (省略掉的that指代的)practices，意思就说不通了。所以...
问题①they的指代和如果有省略的that的指代
challenging在这里是-ing分词作动词还是做形容词的系表结构
呵呵，感觉自己有点钻牛角尖了，因为没遇到过，所以还是请有兴趣的朋友给指点下迷津吧:) 感恩