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Learning to do the right thing - and swear to it

David Matthews asks if MBA programmes are instilling ethics in their students

八月 2, 2012



Credit: Getty
Tarnished Dick Fuld, who presided over Lehman Brothers’ collapse, is one of several high-profile business school graduates to have cast a shadow over their alma maters


Since the financial crisis of 2008, the alumni of illustrious US business schools have had plenty of publicity.

Dick Fuld (a graduate of New York University's Stern School of Business) presided over the collapse of investment bank Lehman Brothers; Rajat Gupta (Harvard Business School), the former head of consulting firm McKinsey, faces up to 25 years in prison for insider trading; and Bob Diamond (University of Connecticut Business School) was in charge of Barclays' investment wing when traders working for the bank rigged the Libor (London Interbank Offered Rate) in a bid to manipulate the UK's money markets.

Many of the key figures in the corporate failures of the past four years have never set foot inside a business school, of course. Still, the question of whether students can be taught to act ethically is one that has inspired numerous course changes, pledges and media articles on both sides of the Atlantic.

So, four years on from the summer when the global financial system began to tip into full-scale catastrophe, what has worked, what has failed, and what can the UK learn from the US?

One much-heralded initiative, which began at Harvard Business School in 2009, is the MBA Oath. At the time of writing, 7,142 students from business schools across the world have pledged - among other things - not to put their own interests ahead of society, not to violate the spirit of laws and contracts and not to accept bribes.

Many overly risky or downright corrupt business decisions are down to groupthink and peer pressure, contends Sharon Bamford, chief executive of the Association of MBAs (AMBA), a professional membership association for MBA students and graduates, business schools and MBA employers.

An oath turns this peer pressure on its head by making those in business fear the judgement of their peers if they break, rather than uphold, ethical standards, Bamford says.

MBA Oath-swearers a minority

But the surge of interest in the MBA Oath appears to be on the wane already. Of MBA students graduating in 2010, 2,095 took the oath, the initiative's website shows, but only 1,651 of the class of 2011 have signed up. To put these numbers into perspective, in 2009-10, 177,684 people completed master's degrees in business in the US alone, according to the National Center for Education Statistics.

Oath-taking seems to have aroused more interest in the US than it has in Britain. Only four schools in the UK - those at Strathclyde University and the University of Oxford, and London Business School and Cass Business School - are listed as significant participants in the MBA Oath project.

The MBA Oath can be taken by any MBA student at any institution worldwide, but does this universality dilute the peer pressure needed to hold graduates to their promises? At the Thunderbird School of Global Management in Arizona, students have been taking an "oath of honor" since 2006, pledging to "oppose all forms of corruption and exploitation" and to "strive to create sustainable prosperity worldwide".

With Thunderbird's more exclusive vow, "you create a cadre of peers who share the mission of conducting themselves in an ethical way", argues Barbara Barrett, interim president of the institution.

Combined with Thunderbird's strong alumni network, the vow creates a strong incentive "not to let colleagues down". If one alumnus were involved in a major corporate scandal it would tarnish the rest, Barrett argues. "Reputational impact is huge," she says.

The oath filters out those students who are interested only in making money, she adds. "Those who are not interested in signing it would self-select to go to some other business school."

Underlying the oath model is an assumption that boardroom skulduggery is caused by a weak ethical backbone. But this is too narrow a view of the problem, believes Dan Smith, dean of the Kelley School of Business at Indiana University.

While there will always be a tiny fraction of flagrantly immoral Bernie Madoffs, "most people get up every morning and want to do the right thing", Smith argues.

Financial tools of mass destruction

Of those in business who end up causing problems for society, "99 per cent" do so not because of evil intentions but "because they don't appreciate the indirect consequences of their decisions".

He points to the opaque - and ultimately worthless and destructive - financial products that triggered the financial crisis, many of which were created by physicists and mathematicians who had little idea of the havoc they would eventually wreak.

The creation of the toxic derivatives was analogous to "splitting the atom" - financial scientists made a breakthrough without realising that it "could create weapons of mass destruction", Smith says.

Business schools need to respond by teaching more critical thinking so that students can contemplate the potential indirect consequences of their actions, he adds.

MBAs teach people to pursue new lines of business, says Paul Danos, dean of the Tuck School of Business at Dartmouth College. "But it's got to be balanced with a certain amount of scepticism."

As a result, businesspeople often lack the courage to air their worries or uncertainties in the boardroom, Danos believes. "I'm not sure that too many people are going to say 'I don't understand'," at a high-powered meeting, he says.

"When you're sitting in a board meeting ... the board member should say: let's take a week to study this because I don't understand."

Too much scholarly caution, however, and you will be thought of as "a wet blanket" with the result that "the boss doesn't like you", Danos suggests.

To counter this, MBA students at Durham Business School are subjected to a boardroom simulation, where senior company figures play non-executive directors and chair the meeting.

Students have to discuss the "broader implications of current and future proposed strategies ... with the risk that their proposals are rejected by the board if they (do) not," explains Rob Dixon, dean of the school.

Curricula change, bottom line remains

In the US, curricula have undoubtedly changed in recent years. In 2007, 63 per cent of schools required MBA students to take a course on business and society, according to a survey of largely American institutions by the Aspen Institute's "Beyond Gray Pinstripes" initiative.

By 2011, this proportion had increased to 79 per cent. However, in March this year, the institute announced that it was suspending its annual survey, which ranks MBA programmes by environmental and social impact, to "pursue new ways to influence business education".

Accrediting bodies can help to push through changes of curricula and culture. To win AMBA's seal of approval, Bamford notes, business schools must integrate ethics into their core curriculum, rather than bolt it on as an extra module.

Although "not all business schools have been successful in integrating it (ethics) all the way through", Bamford says she has yet to find "a business school that hasn't taken this seriously".

Courses have changed as business has realised the "profitability of social investment", she says. Research suggests that, on average, companies with ethical strategies are more profitable that those than lack them, she adds.

But if ethics are taught because they are good for the bottom line, rather than for their own sake, will they not be discarded as soon as they become unprofitable?

"That (the bottom line) is what business is all about," Bamford acknowledges. "You can be full of group hugs, but if you can't pay your employees, how ethical is that?"

MBA courses in the UK have also changed to include a focus on ethics, according to Julie Davies, head of research and executive development at the Association of Business Schools. But, she says, the shift has occurred because of corporate concern over "brand and reputation", rather than morality for its own sake.

She questions whether there is evidence to support the claim that teaching ethics makes a difference to behaviour. "I don't know if there are any young people who have left" companies over ethical concerns, she says.

"We're doing it," Davies says of business schools' new ethical drive. "We now need to measure it."

david.matthews@tsleducation.com.

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