Are Business Schools to Blame for the Financial Crisis?
by Jo Mackness
Executive Director of the Center for Responsible Business
Haas School of Business at the University of California, Berkeley
When I was a practitioner leading “CSR Integration” at a Big 4 accounting firm, we frequently asked the question, “had our Andersen colleagues applied a CSR perspective to their day jobs would we have remained the Big 5?” Today, within a business school context, I’m being asked a similar question: If business schools did a better job of graduating responsible business leaders, might we have avoided the financial meltdown?
The similarities between my corporate role and academic role are considerable. As a CSR professional, despite being quoted in The Wall Street Journal as having landed my “dream job,” I was committed to making it go away. My goal was to so fully integrate social and environmental responsibility into the way the business was run that my job would become obsolete.
Now, within a business school setting, I face the same challenge. I envision a day when CSR will not be handled by separate centers of excellence focused on business responsibility and sustainability but instead will be integrated throughout the curriculum and research programs.
Modifying the Framework
In short, what I argued for in a corporate setting is what I’m still advocating for today’s business schools: Integration.
Sounds easy enough, but in fact, integration of social and environmental factors into business represents a fundamental shift in the way companies are run and what students are taught. Neither companies nor MBA courses focus on long-run value of the firm; strategy and finance courses assume the goal is to maximize shareholder value and companies get rewarded for quarterly performance.
So I ask: is it fair to expect MBAs to create this change without company executives and business school faculty modifying the framework from which they respectively lead and teach? Similarly, is it realistic to think that a small group of CSR professionals sitting in “corporate headquarters” can really change the way employees think and business gets done?
Today’s students are already instigating changes. Indeed, almost 40% of incoming full-time MBAs indicate that they chose to attend Haas based at least in part upon its focus on “social impact.” And for this group we offer our student the opportunity to engage with leading companies that are making the fundamental shift toward integration. We want our students to experience what it feels like firsthand, to be a part of that change, so that they can go do it in their own companies upon graduation.
Here at the Center, we’re adamant that they not become Chief Sustainability Officers or CSR managers, but instead integrate sustainable thinking and action into their day jobs as consultants, product managers, financial analysts, etc. This semester, our MBAs have helped WalMart determine the ROI on its employee sustainability program, worked with eBay to identify business opportunities to reduce the shipping and packaging impacts of the millions of eBay transaction each day, and pitched to Gap Inc. how it might extend its successful social media presence to encompass its leadership in CSR. Not to be outdone, our undergrads are helping Disney Consumer Products understand how to reduce the environmental impact of the division's paper usage.
Graduating Conscientious Leaders
But to fully realize the goal of integrating CSR we must reach the other 60%, connecting with them on their own (non-CSR-related) turf. In the last three years the Center has successfully engaged some of the future financial and software “wizards” of Wall Street to become principals in a $1.3 million investment fund managed with an eye to both financial and social returns. In fact, applications to become managers of the fund—the only one of its kind run by a top business school—were up 50% this year.
Our Dean Rich Lyons emphasizes that we “prepare leaders who define what’s next for our markets and our societies,” and through our courses and corporate engagement, the Center for Responsible Business is helping our students do just that. But undoubtedly there is more to be done. We continue to work with faculty throughout Haas to integrate a broader stakeholder perspective into teaching and research. I am heartened by the willingness of faculty members whose research is often grounded in maximizing shareholder value and market fundamentalism, to engage in debate on the role of business in society. Together we are committed to finding a common framework where we teach and research what we want our students to care about most.
The financial meltdown, acceleration of climate change and global inequity of social welfare compel us to reconsider how our corporate actions impact the people and world around us. Graduating fully informed and conscientious leaders in every business discipline is the first step in changing the way business gets done and creating a more sustainable world.
Jo Mackness is Executive Director of the Center for Responsible Business at the Haas School of Business at the University of California, Berkeley
Campus Photo: yanec, courtesy of Flickr
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Think about this. In response to the financial crises and compensation scandals, many deans and educators want to cover over the problems of greed and entitlement associated with a curriculum that teaches MBA to see employees as a commodity and corporate life as a Darwinian struggle. How are they going to solve this problem? By offering oaths. We will see B-Schools jumping on the oath bandwagon, in 2010 Harvard named as dean of its Business School Nitin Nohria, who made a name for himself , not by going after CEO’s who terminate American employees to benefit stockholders, but by pushing for the “MBA Oath.”
Consider the Thunderbird School of Global Management’s oath of honor;
I will strive to act with honesty and integrity. I will respect the rights and dignity of all people. I will strive to create sustainable prosperity worldwide. I will oppose all forms of corruption and exploitation. And I will take responsibility for my actions. As I hold true to these principles, it is my hope that I enjoy an honorable reputation and peace of conscience.
Here are the problems with this; first, it is an easy cover for the underlying problems with MBA programs and the ideology found in textbooks, the curriculum and among professors that support the attainment of wealth for the MBA and corporate stockholders. B-school professors have spoken against these oaths like Theo Vermaelen of INSEAD who sees oath’s as stupid and at odds with the fiduciary duty of business managers towards shareholders. These professors maintain that the manager’s job is the maximization shareholder wealth no matter what. Second, what one says in B-school and what ones does when they get into the executive corporate world many years later has little or no relationship. And, finally if one really wants to be clear about what one must do to oppose corruption and exploitation, this oath should include the following; “When I see corruption or exploitation I will blow the whistle and willingly take the risk that I will spend years in court, become financially ruined, and increase the likelihood that I will be forever unemployable.”
I think Czander's wrong on several things, and right on one big thing.
First, I don't know any b-school prof--certainly not Dean Nohria--who claims that taking an oath is a sufficient condition for changing behavior. By itself it's not a fix. But that hardly suggests it's a bad thing. On the contrary, to get people to publicly put their honor on the line in a certain direction is a very positive thing.
You find fewer and fewer people these days taking the hard-line, Friedman-Rand-Hayek viewpoint that somehow a corporation's sole purpose is to earn a profit. It's a political statement only: it is certainly not a sociological statement because it's demonstrably false--companies behave all the time as if they have different goals. It's not a legal statement, because courts have consistently held that boards of directors have the legal right to take steps not in the obvious immediate financial interest of shareholders. This notion of maximizing shareholder value has come to be not much more than a political slogan for right wing libertarians who desire the minimization of government; it's not a sensible, viable guide to management in a world that is more and more interdependent.
As to Czander's final suggestion: that's where I think he gets it right. That's a very aggressive statement, but directionally it's right. People have to be willing to stand up to crap and call it what it is. The more who are willing to do it, the better.
In the meantime, progress is progress; the fact that it's short of perfection is no reason not to pursue it.