By Matthew Madden
One predictable result of the past decade’s crop of corporate scandals, peaked by the current financial crisis, is renewed criticism of one of society’s most influential institutions – the elite graduate business programs. In response a number of schools, often via student-organized efforts, have taken actions designed to, depending on your level of cynicism, either address these ethical concerns or protect their investment in such costly degrees. In 2004, the Thunderbird School of Global Management became the first graduate business program to incorporate an oath to integrate sustainable values into their program. During the 2007 graduation season, Columbia’s graduate school of business introduced an honor code, pledging integrity during their tenure as students and beyond. Typically, Harvard Business School garnered the most press coverage as a result of their recent, student-initiated oath to maintain ethical business practices. Given the status of HBS as the world’s most influential business school – and the disdain associated with that honor given the current age of corruption and uncertainty – it’s fitting that their oath garnering the most significant reaction, both praise and skepticism.
Admittedly, it’s easy to criticize these oaths. The HBS oath, for instance, is voluntary and, at last report, still only secured commitments from approximately 50% of their students. This level of participation for an oath without any teeth – there aren’t any real means of enforcement nor any consequences to not upholding your commitment – is not comforting. Yet, the most profound criticism is the fundamental contraction between the intent of the oath “to serve the greater good” and the culture of self-interest that has emerged in today’s elite graduate business programs. Should a reminder to act ethically really be required for the future masters of the universe? And, if it is, are these individuals really the people we want anointed as our leaders? Conversely, these efforts are praiseworthy in the same manner green-washing is praiseworthy. As Hunter Lovins, the author of Natural Capitalism, often states, “hypocrisy is the first step towards real change.” The students responsible for these efforts should be commended for starting a much-needed conversation.
Today’s honor codes, oaths and pledges are only the latest examples in a long historical record of business schools searching for both legitimacy and identity. Rakesh Khurana, a professor at the Harvard Businss School and faculty advisor to the students who developed the recent oath, expertly documented this search for professional legitimacy in his book From Higher Aims to Hired Hands. Yet, identity still eludes this institution. To celebrate its’ recent 100 year anniversary, Harvard Business School initiated a research project – coordinated with over 30 other top business schools – to investigate the need for curriculum reform. The drive for legitimacy and identity dates to the founding of the first business schools and the oath, in its’ efforts to equate business men to doctors and research scientists – specifically equating the MBA oath with the Hypocratic oath – is only the latest example of a century-old quest.
Despite periodic disparagement, the legitimacy project would have to be judged a success if measured in terms of wealth creation or influence. The list of prominent individuals with MBA degrees, especially from elite institutions, is astounding in both the private and public sectors. Simultaneously, the academic nature of the institution has been transformed as business schools have morphed into a commodity. Students have become customers – just as citizens have become consumers. A diploma from an elite business school has obtained the status of a market signal. When students are surveyed, Khurana reports the two primary reasons for attending business school are access to high-paying, non-managerial jobs and access to powerful alumni networks to provide entrée to those jobs. This statement is supported by the fact that approximately 40% of graduates have obtained jobs in the financial industry in recent years. Harvard reports higher percentages for their students – 44% of 2007 graduates and 45% of 2008 graduates.
As reflected in the operations of business schools, the culture of business, especially in the last few decades, has also changed and so has the definition of success. During the 1950’s, at a time when the distribution of income and wealth was much less concentrated, businessmen aimed to create jobs, support their community and ultimately build a legacy. The current perspective on success is typified by the goal of many to “retire by 40.” Thus, the pursuit of finance jobs. Concurrently, business schools have played a role in redefining success. Given the emerging perspective of students as customers, business schools now compete to attract students with amenities, rankings based on non-academic criteria and – most significantly – this ability to leverage relationships with alumni and corporations to enable students to secure high-paying jobs. This really means the ability to sanctions students with the market signal required to secure such jobs. The value of a business school education is now judged by metrics like post-graduate salary and salary differential between entering business school and graduation – rather than academic achievement and the attainment of knowledge. Business schools are notoriously difficult to get into, but relatively easy to graduate. This combination of factors has coalesced to create a barrier to entry – in the form of the world’s most prominent business schools – to the most powerful positions in the private and public sectors. Most troubling, this barrier is based not on academic aptitude but on access – access to the elite business schools upon application and access to their alumni networks and corporate partners upon graduation. Another disturbing factor is the increasingly cozy relationships between business schools and outside corporations. Business school administrators need to maintain these relationships to secure endowment money and student recruitment yet the more intertwined these relationships become, the easier it is to question the academic credentials.
The mutually reinforcing relationships between business schools and corporations contribute to the periodic questioning of business schools and their curriculum in response to each successive round of corporate scandals. And each round of criticism garners somewhat predictable responses. Over the past few decades, we’ve witnessed the introduction of ethics classes, the introduction of leadership training and – more recently – the introduction of sustainability-focused classes. While these efforts should be commended for their ability to introduce new perspectives into the standard curriculum, the historical record is available to judge their effectiveness. Classes based on ethics or leadership are sometimes required, but are often electives. These classes are isolated from the rest of the coursework, meaning they’re often taught as a single class rather than in an applied manner. And, anecdotally, the courses are often viewed by students as easy grades. The knee-jerk nature of these efforts limits their effectiveness – and limits how seriously students view this type of coursework. Teaching applied ethics in combination with other, standard business school topics such as finance or accounting would both raise the status of such teachings and more effectively convey the information. After all, isn’t that the basis of the case study method of teaching – to provide real-world examples? By extension, given the persistent ethical problems in our business culture and the increasingly relevant business case for sustainability, business schools that fully integrate ethics and sustainability coursework into their standard curriculum will graduate students more prepared to assist corporations in a rapidly changing marketplace increasingly concerned with these issues.
Another response to recent criticism, specifically regarding the role of MBAs in the financial crisis, has been a renewed focus on teaching risk management strategies in response to the overly complex financial instruments that business schools helped popularize. While it’s certainly true this issue played a significant role in the financial crisis, it’s a symptomatic cure that lacks a holistic perspective and ignores many of the other contributing factors prevalent in our business culture. Additionally, the “few bad apples” defense has been deployed blaming individual greed while ignoring any role business school education may have played in the financial crisis. This excuse is shortsighted and does a disservice to the future of business schools by ignoring an opportunity to utilize the crisis to initiate reform.
Of course, it’s not fair to blame the financial crisis solely on MBAs. Other factors such as the lowering of reserves requirements, the associated embrace of debt, the relaxed regulatory environment and well-documented macro-economic issues concerning falling house prices and the sub-prime mortgage market all led to our current, financial circumstance. It’s also not accurate to blame business schools for every corporate scandal with an MBA executive at the center. But it is fair to identify and discuss systematic and historical trends. Instead of placing blame – which, historically, has only lead to mild revisions in curriculum – we should lobby for a holistic review of the goals and methods of graduate business school education.
The opportunity for authentic reform in business schools, and by extension the greater business community, is with regard to value systems. Business schools are often criticized for not teaching values, yet this is false. Values are a central part of a business school education – the values of agency theory and self-interest, the need to maximize shareholder value, the belief in growth at all costs, the reliance on the efficient market hypothesis. According to a recent survey of business school students conducted by the Aspen Institute in 2007, the number of respondents with a goal of “having a positive impact on society” decreases as students advance towards their degrees. This survey contends that students enter business school with one set of values and graduate with a different set of values.
The periodic corporate scandals, and associated criticism of business schools, will continue until we find a way to maintain the humanistic values business students enter their programs with. Ethical concerns and sustainability issues will haunt us until we can find a way to adjust the cultural values that inform corporate behavior and dominate business school education. The Presidio School of Management is attempting to address this problem by integrating environmental, social and ethical concerns into the whole of their program. The opportunity is really to finally resolve the question that has pursued business schools since their founding. By redefining the goal of a business school education from the attainment of riches to the development of solutions to the world’s most intractable problems, business schools will finally be able to state, unequivocally, that they’ve found their identity. The good news is students are already helping to lead this reform. The same Aspen Institute study found an increasing number of students are requesting the addition of ethics and sustainability related components to their curriculum. Ironically, a positive outcome of the student-as-customer movement is that schools are responding to these demands. But symptomatic reactions aren’t enough when we need to revolutionize the experience of business school education. Yet, the opportunity is dramatic. By leveraging the legitimacy bestowed upon business schools by virtue of their relationship with society’s most powerful institutions, reshaping business school education has the power to reshape society.
Besides, those high-paying financial jobs aren’t going to be so easy to land these days. And what does a retired 40-year old ex-financial guru do after their working days are over anyway…? A better question might be what do they contribute?
Matthew Madden is currently writing a book tentatively titled Status Quo Values. The purpose of this project is to explore status quo value systems – economic, political and social values – and discuss the role these values play in our society’s aversion to change. The goal of the work is to define status quo values, discuss the historical roots of our institutional embrace of status quo values, examine the role our institutions play in promoting these values to individuals and investigate examples of institutions and individuals adhering to alternative value systems.
He is also pursuing an MBA from the Presidio School of Management – one of the first graduate institutions to integrate sustainability into all facets of the curriculum. He lives in San Francisco and can be reached at firstname.lastname@example.org.