‘Have Business Schools Failed Society? How and why?’

Enron, Arthur Andersen, Sotheby's and Christie's, Martha Stewart and, most recently, the Bank of America, Goldman Sachs, Lehman Brothers and Merrill Lynch are most known examples of ethical lapses. Some academics, such as Ghoshal (2005), Giacalone and Thompson (2006), Mitroff (2004) and Pfeffer (2005) make most responsible for the recent scandals the influence of the theoretical underpinnings of business education on managers, teaching a profits-first perspective. Others affirm that MBA programs are irrelevant to the needs of practicing managers (Mintzberg 2004; Pfeffer & Fong 2002 as cited in Slater & Dixon-Fowler 2010). However, are these critics justified? Have business schools failed society? I answer: ‘Certainly’. The aim of this essay is to provide a critical analysis of the ideas I explored through my readings of academic literature about the responsibility of business schools in the past corporate scandals. To do so, I identify how business schools have contributed to perpetuate the wrongness of our society. Nevertheless, I finally depict some improvements encountered in current and for future practices.

Statement of claim

MBA graduates who have achieved positions of power and influence have made decisions with disastrous consequences on society. So what is going on here? Should business schools be more accountable? Yes. Indeed, they have propagated institutionalized and amoral economic theories valorizing economy over social concerns, have denigrated the usefulness of ethics studies to focus on ‘hard skills’ and have accepted corporations to dictate to them the orientation of their teaching.

What is wrong with our society?

Yes, what is wrong with our society? and not only with the modern society, witness of multiple corporate scandals. Our past and modern societies have accepted and allowed different aspects of slavery, dictatorship, disrespect of human rights, endemic poverty, and corruption. Why is it so? The problem is deep, thus the causes are complex, but here is an attempted response through a reflection on our modern society.

The first main problem relies on the neoclassical perspective of economics propagated by some corporations and scholars that ‘contains a significant ideological bias including:

[neutral conception of economic], very limited treatment of environmental and ecological problems, […] of income and wealth inequality, acceptance of current institutional structures as given, misrepresentation of these institutional structures as being consistent with models of perfect competition, ignoring concentrations of economic power, and acceptance of increased consumption as the primary measure of wellbeing’ (S Grob 2010, pers. comm., 2010).
Moreover, our society is based on an ‘ethic of personal advantage [in which] the centrality of business leads to a short-term viewpoint […], ultimately deemphasizing the community and societal perspectives. (Mitchell & Scott 1990 as cited in Giacalone & Thompson 2006, p. 267). Therefore, society focuses on ends rather than means, be it dumping of toxic and electronic wastes in Africa to get rid of dangerous products cheaply, labour abuses to supply the market with low cost products or failures in terms of security resulting in injuries and mortalities of workers to reduce operations’ cost. At a micro level, people tend to act on their own interest, encouraged by a neoclassical perspective on wellbeing, in which money, status and power define their degree of achievement and success.

Neoclassical economic models have also transformed characteristics of cultures around the globe. Indeed, most industrialized and powerful countries, especially United States and United Kingdom who have advocated neo-liberalism, possess a high individualistic dimension (Itim International 2009). Therefore, individuals tend to place their personal ambitions before collective goals as they value individual welfare over that of the group and ‘use personal characteristics and achievements to define themselves’ (Adler & Jelinek 1986, p. 79). As a consequence, some executives have been found, for example, having ‘used secret partnerships to hide debt, inflate profits, and enrich themselves at others' expense’ (Bartunek 2002, p. 138).

Finally, individual moral philosophies embedded in our society concerned me. Forsyth (1992) explains that many ‘personal moral philosophies’ can be contrasted in terms of relativism and idealism. Encouraged by a neutral conception of economics, highly relativistic individuals ‘generally feel that moral actions depend upon the nature of the situation and the individuals involved, and when judging others they weigh the circumstances more than the ethical principle that was violated’ (Forsyth 1992, p. 462), while those who have low idealism ‘assume that harm will sometimes be necessary to produce good’ (Forsyth 1992, p. 462).

The following depicts the business schools’ accountability in perpetuating these problems.
Responsibility of business schools  

The Association of Business Schools Professionals (2009) have, indeed, recognised that numerous MBA graduates work in Financial Services and that the companies who were suspected of fraud were perhaps managed by graduands from the 1980s and 1990s. Obviously, not all criminals or immoral characters have a business degree in their hands: Jack Abramoff earned a Juris Doctor, Muammar al-Gaddafi attended a military academy, and Bernard Madoff did, as I did, a bachelors in political science. However, regarding the extent of corporate scandals in the recent years is worthwhile to wonder what could have been done by business schools to improve how corporations are handled, especially because a lot of people of power and influence have an MBA in their hand.

Business schools have to accept responsibility because of their influence in shaping students’ thinking.

Business schools, marionette with neoclassical perspectives’ voices
Business schools have contributed to spread economic theories that favour immoral capitalism – in reference to the comment made by Professor Rosabeth Kanter of the Harvard Business School of a need for ‘moral capitalism’ (Stern 2010).
Ghoshal (2005), Giacalone and Thompson (2006), Mitroff (2004) and Pfeffer (2005) argue that business schools have actively freed their students from any sense of moral responsibility propagating ideologically inspired amoral theories. Business schools have taught students, on the basis of neoclassical perspectives, utilitarian theories of scholars who stipulate that the corporations are left without responsibility for citizen’s welfare and have as their only goal to make profit (Secchi 2007). Milton Friedman, who is the main scholar representing the utilitarian theorists, separates business from society, enabling this approach to deny the concept of corporate social responsibility (CSR) (Clarkson 1995) to focus exclusively on profits, dollars, and returns. The first directive of corporations has been to demonstrate these kinds of returns for the benefits of managers and their organizations (Gioia 2002). Business schools have been responsible to take for granted view of "greed is good"; but while is only good for shareholders, is bad for other stakeholders’ who voices are ignored.

Of course, corporations are necessary, as they provide goods and services, employment and economic growth. However, the illusion of growth is also underpinned by the worldview we have been dominated and how GNP and GDP are measured. Voices presented in this essay – and others - have started to dispute dominant views in our world. What has been institutionalized started to be questioned by scholars, but business schools have not stopped replicating the same old economic templates. They have, so far, taught to future business leaders that financial gains are the primary objectives (Giacalone & Thompson 2006).We don’t need no ‘soft skills’
There is a ‘crisis in business ethics’ (Simola 2010, p. 7) and business schools carry the blame on various aspects.

Mitroff (2004) argues that business schools are responsible for their ‘narrow, outdated, and repudiated notion of ethics’ and even for their ‘mean-spirited and distorted view of human nature’ (p. 185). Therefore, they have been incapable to prepare students for ethical decision-making in the workplace (Simola 2010).
On the other hand, other academics (Neubaum et al. 2009) have not found correlation between business educations and negative ethical decision-making from students. They argue that people dictated by inappropriate personal moral philosophies make immoral decisions, no matter their education. Indeed, they are cases as seen previously – Abramoff, al-Gaddafi and Madoff, among others. However, the question is more about what could business schools have done better to prevent immoral actions. It has been demonstrated, education has an influence in defining students’ values. The not-for-profit organization Aspen Institute’s Initiative for Social Innovation through Business (ISIB) asked what a company's top priorities should be through the survey of 1,978 MBA students who graduated in 2001 from 13 leading B-schools (Schneider 2002).

‘Some 75% cited maximizing value for shareholders, 71% said satisfying customers, and 33% put a high priority on producing high-quality goods and services. Only 5% thought the top goals should include improving the environment, and just 25% said creating value for their local communities. Two years earlier, when these students started B-school, 68% had opted for shareholder value, 75% cited customer satisfaction, and 43% voted for producing quality goods and services’. (Schneider 2002)
So few adherents to the necessity to improve environment and to create value for local communities suggests that business schools have not considered these aspects as being high priorities. Business schools are responsible for not providing ‘an alternative worldview and tools to explore the systemic repercussion of [students’] decisions, [they] free them to act morally, immorally, or amorally’ (Giacalone & Thompson 2006, p. 273) without teaching the students a clear understanding of their decision-making consequences. Therefore, business schools cannot be reassured that, faced with immoral acts, students have acted because they chose to do so or they have failed to understand.

Moreover, despite the recent corporate scandals, faculties of business marginalize the teaching of business-and society courses. ‘Many business schools do not take ethics training seriously’ and have considered ‘soft skills’ as an insignificant requirement easy to learn (Gioia 2002, p. 143). Even nowadays, MBA programs are redesigned to reduce MBA core to spend more time in specialty electives and ‘hard’ business subjects, such as finance, economics and accounting. Henle (2006) suggests integrating ethics to these ‘hard’ business subjects rather than having some courses on the topic disconnected from the rest. One ‘stand-alone course on ethics, although important, is not enough, as students may get the impression that ethics is not related to the rest of their business education’ (Henle 2006, p. 354). Carlson (1995) adds: ‘if professors truly teach business ethics, they would need to teach students to critically evaluate what they hear and to question the moral acceptability of basic business activity [, such as marketing, management, finance, and so forth,] or to question the credibility of sources that affirm the worldview (as cited in Giacalone & Thompson 2006, p. 268).
Finally, Hindo (2002) identifies that business schools have not considered putting emphasis on ‘soft skills’ because they do not attract recruiters. Why soft skills do not attract recruiters? Corporations have also their responsibilities in the message disseminated by business schools.

In collaboration with corporations
         Business schools and corporations together carry a large blame.

         Business schools are accountable for not intervening when corporate investment is directed to support scholars in universities whose views are compatible with the corporate view and becoming think tanks of right-wing causes. Beder (2000) mentions how corporations spent millions to influence the teaching of business and economics, promoting neo-liberalism concepts, such as free market and government regulation. In this sense, Joseph Stiglitz mentions: ‘Economics as taught in America's graduate schools bears testimony to a triumph of ideology over science’ (S Grob 2010, pers. comm., 2010).

         Moreover, corporations have not taken their responsibilities in being clear about ethical guidelines. In this sense, Henle (2006) interviewed the former president and chief executive officer of Royal & Sun Alliance USA, Terry Broderick, who identifies that it can be difficult for business schools to demand adherence from students to ethical principles or guidelines if corporations do not seem to cherish them. Therefore, companies and educational institutions should work in partnership to promote high levels of ethical conduct among current and future employees, managers and boards of directors. Many new employees are at the mercy of their employers, therefore, business and education’s leaderships are the ones accountable to change their behaviours.

         However, so far most companies believe that they cannot afford to be ethical. Examples abound. For instance, BP considered that investing in safety was not a priority in its urge to increase profitability and improve its image to shareholders. And happened the Texas City Refinery explosion in 2005 causing 15 deaths and injuring 180 people, and the Deepwater Horizon explosion in 2010, causing the death of 11 people, besides the environmental consequences. While business schools have to teach that ethics and social responsibilities are the core of business, corporations need to admit that, yes this worldview may be more costly, but this is what is morally correct to do. In this context, academic research has motives in exploring the link between ethical and socially responsible behaviours and being financially successful.
         Indeed, what if research and business cases were updated to demonstrate that companies that have a higher ethical standard or value basis in their organization perform better than others? There are certainly empirical evidences that could illustrate that socially irresponsible and illegal behaviour may have an impact on ‘profit’. That consideration for ‘people’ and ‘planet’ – from the terms borrowed from Elkington (1997) - reduces financial risk and increases shareholder wealth. MBA courses should point out to future business leaders this connection between the three bottom lines (Henle 2006). Within a sustainability framework, the ‘profit’ aspect needs to be seen as the economy enjoyed by the host society. Shareholder wealth is no longer the only element to evaluate companies’ performance: business’ social performance now also counts (Carroll & Buchholtz 2009) and business schools ‘must train doctoral students to understand and incorporate values and ethics in their thinking, their research, and their practice’ (Giacalone & Thompson 2006, p. 273).
         Towards some improvements
We are not the first to realize that something is going wrong. As Gioia (2002, p. 142) affirms: ‘we (MBA, executive, and executive MBA programs) should act as if we can change attitudes toward ethical and responsible behaviour in positions of organizational leadership’.

         Therefore, a group of Class of 2009 Graduates of Harvard Business School (HBS) started the ‘MBA Oath – Responsible Value Creation’ (2009) to which have joined a broader group of MBA students, graduates and advisors. They want their ‘degree to mean something more than it currently does’ (MBA Oath – Responsible Value Creation 2009) and therefore to transform to the long-term the field of management into a true profession, one in which MBAs are respected for their integrity, professionalism, and leadership. In parallel with this action, the HBS has named in 2010 a new dean, Nitin Nohria, who focuses on business ethics (Middleton 2010).

         Moreover, critical management studies (CMS) offer a relatively new perspective, often dated from the publication of Alvesson and Wilmott in 1992 (as cited in Grey 2004). CMS aims to challenge taken for granted wisdom about management and addresses what is researched and taught within the business schools (T Pitsis 2010, pers. comm., 2011). Critical management education (CME) is a body of educational practice arising from CMS. CME challenges the prevailing mid-sets and ‘questions the positionality of the critical educator; the potential fragmentation of student subjectivities; and the contradictions between management practice and critical teachings’ (Fenwick 2005, pp. 32-3). Therefore, CME presents arguments and recommendations to change management education and future generation of management educators, such as teaching fact rather than value, and finding alternatives to morally neutral management techniques grounded on scientific knowledge (Grey 2004).

However, because business schools can, with difficulty, act alone, it is reassuring to notice that some corporations have started to honestly consider their hefty responsibility in regard to society, having a considerable influence in societal matters (Secchi 2007), and acting according to ‘altruistic’ behaviour and integrating ethical variables, as proposed by Freeman and Liedtka (1991 as cited in Secchi 2007). However, with a more pessimistic view, it can be argued that many companies have promoted CSR as part of their business strategy following the principles dictates by the managerial group theories (Secchi 2007) or the strategic management theory (Lee 2008). Indeed, industries have certainly recognised the advantages of demonstrating a sensitive image of its concern for sustainability and the consideration of an engagement between the internal and external stakeholders to improve companies’ performance (Lee 2008). Again considering the example of BP, in 2000, the company changed its brand with a green, white and yellow logo, ‘in an attempt to win over environmentally aware customer’ (BBC News 2000). However, with BP environmental disasters along the 2000’s decade, BP’s actions may be interpreted as solely pretending to consider CSR. Not a really good example for business students and future leaders.

Finally, and most important, the neoclassical model is now challenged by others perspectives, one of the most important being the ecological economics. This latest aims to articulate alternatives towards a socially responsible capitalism. Indeed, this economic current is conscious that current levels of material inequity are immoral and do not support human dignity, and that a continuing and unlimited economic growth is not sustainable anymore. Considering that the neoclassical model has existed since the industrial revolution, a change of paradigm would be unprecedented (S Grob 2010, pers. comm., 2010). Change would engender an impression of chaos because of the sudden listening to voices that we were not used to hear.

Conclusion and implication for the future  
                     
         This critical essay examined the responsibilities of academy members, professors and business school deans for past and current immoral acts spread in our society, such as putting the interests of money before people.

This was explained in part because ‘the worldview we teach is flawed and no longer functional, for it fails to serve humanity in ways that are sustainable and generative’ (McAdams & de St. Aubin, 1992 as cited in Giacalone & Thompson 2006). Is this worrying? Well, certainly, because business schools are one of the main social institutions influencing individuals’ judgement and values and they have advocated neoclassical perspectives and have ignored to teach business ethics.

As Giacalone and Thompson (2006, p. 270) mentions: ‘If a critical change in management education must occur, it must be framed in a worldview that is not metaphorically Ptolemaic—a worldview where neither profitability nor business are the centre of the universe’. As per the world economic model, the change has to occur within business schools education. Some groups and individuals are listened to more keenly than others, such as the group of Class of 2009 Graduates of Harvard Business School. They may trigger a change that ‘would be radical because it represents the breaking of the mold defined by an interpretive scheme’ (Greenwood & Hinings 1996, p. 1026).
Finally, even though business schools and corporations have an important responsibility on past and current social problems, external influences, such as governments, may be large drivers of change through implementation of policies that might encourage better practices.  

- Julie Thériault, 2011 -