Recent crises at University of California Davis (UCD), Syracuse University and Penn State University - from campus police using pepper spray on peaceful protesters, to sexual molestation allegations, to child sex abuse charges - raise questions about the role of risk management on campuses.

Police pepper spray demonstrators at UC Davis Nov. 18, 2011 (via YouTube)

Not surprisingly, a recent survey by the Association of Governing Boards (AGB) indicates comprehensive risk assessment - a fairly standard practice at large companies - is not an automatic function of university governance. Only about one-third of the boards surveyed had a formal process for risk assessment. AGB says further improvement is needed.

The issue isn’t just how widespread risk management is on campuses but whether the standards for effective programs are adequate to the challenges inherent in their mission. Penn State was early to the party with what was considered a comprehensive risk management function and yet it failed to protect the university’s reputation. It is a failure that impacts every aspect of the institution, the measurable and the unquantifiable. Moody’s has placed Penn State’s revenue bond rating on review for possible downgrade in the midst of its $2 billion campaign.

College leaders are facing an ever-growing list of emerging issues not in their playbook, as well as challenges posed by insular sports departments that are economic drivers in their own right. The more narrowly risk is defined, the greater the likelihood that managing it can ignore or minimize the powerful role an institution’s culture plays in preventing, creating, or escalating crises. Culture risk is organic, given texture by those in power and those being led. And in the viral world in which we live, local missteps take on global footprints in seconds.

The pepper spraying of Occupy Davis protesters November 18, 2011 was immediately captured on YouTube.  Eleven students were treated at the scene or taken to a hospital; 10 were arrested. The president of the University of California system has said he was "appalled" and will do an assessment of law enforcement procedures on all 10 UC campuses.

After seeing the video, UCD Chancellor Linda Katehi, said the use of pepper spray was “chilling” and “raises many questions about how best to handle situations like this.” She announced the creation of a task force to look into encampments. Meanwhile, the UCD Faculty Association has called for her resignation citing “a gross failure of leadership.”

Should university presidents have anticipated that the Occupy Wall Street protests would quickly move to college campuses? For that matter, should university leaders with star power football or basketball programs, TV rights, and wealthy boosters anticipate problems with transparency, fiefdoms, and where loyalty is owed? Even when the problem is anticipated, knowing how to address it to circumvent unintended consequences becomes the key.

AGB, a leading source of information for trustees and presidents, identifies four risks institutions might face: operational (fire, weather, strike, power plant accident), legal and regulatory, (compliance failures), financial, and political and reputational.

In 2007, AGB co-hosted a summit on Enterprise Risk Management (ERM) to begin to develop a sustainable ERM model with roles for presidents and others. UCD and Penn State were among the 40 leaders participating, including several people responsible for Penn State’s risk management and recently-fired President Graham Spanier. In this forum, culture was pegged to one of eight tactical components (like event identification) that should be looked at in its strategic, operational, financial, and compliance aspects.

Culture needs a much bigger focus in university risk management. That point will undoubtedly become clear in the findings of the avalanche of investigations planned at Penn State (from one led by trustees to others by the U.S. Department of Education and the National Collegiate Athletic Association).

Acting President Rodney Erickson made clear he was trying to usher in a culture change, when he announced a commitment to transparency and hiring an ethics officer to report directly to him. In the process, risk management is bound to broaden and perhaps find a new home there. Under Spanier, risk management was housed in the Privacy Office, reporting to the corporate controller, who reported to the former Sr. VP for Business and Finance, now accused of perjury in the scandal.

The more risk management is about compliance and not also about raising the difficult questions when competing values come into play (like issues of perceived safety versus right to dissent), the less a university is protected. The problem is that in juggling 100 balls, leaders often don’t have practice thinking through how their values, and those of the institution, will come into play in a variety of different potential situations.

It is the nature of universities that we expect them to figure out how to handle dissent without pepper spray, engage in dialogue, and create teachable moments that often occur outside classrooms.

What better setting than a learning environment to apply a variation of the Giving Voice to Values approach created by consultant and educator Mary Gentile for teaching business ethics to students – and to use it for administrators? (Over 100 universities from Harvard to Penn State to University of Cape Town use the approach in classrooms.) The approach is easily adapted to leaders – creating a safe environment to practice how to address “what would I say and do if I were to act on my values?”

Answering that question would have the greatest possible impact on risk management and protecting the university.

Gael O’Brien is a Business Ethics Magazine columnist. Gael is a thought leader on building leadership, trust, and reputation and writes The Week in Ethics.

Social and environmental impact is increasingly being integrated into the curricula of leading international MBA programs, according to the latest Beyond Grey Pinstripes survey by Aspen Institute’s Business and Society Program.

“The core curriculum is changing,” reports the biennial survey. “There is a striking increase in content on social, ethical and environmental issues in required courses across departments.”

Between the 2009 and 2011 survey cycles, Aspen said, there was a 38 percent increase in the number of relevant core courses in finance departments across schools, a 41 percent increase in marketing departments, a 22 percent increase in Accounting departments, 57 percent increase in Operations and Productions Management offerings, and a 22 percent increase in relevant core IT / MIS offerings.

The survey also ranked the top 100 MBA programs for their focus on environmental and social impact.  Here’s the top 10:

1.    Stanford Graduate School of Business

2.    York University, Schulich School of Business (Canada)

3.    IE University (Spain)

4.    Notre Dame, Mendoza College of Business

5.    Yale School of Management

6.    Northwestern, Kellogg School of Management

7.    University of Michigan, Ross School of Business

8.    Cornell University, Johnson

9.    University of North Carolina, Kenan-Flagler

10.  UC Berkeley, Haas School of Business

Aspen said its rankings were based on “blind” ratings by a team of Ph.D. candidates who examined data submitted by 149 schools regarding courses, faculty research and institutional support. Nearly 600 schools were invited to participate in the survey.

Among other findings, Aspen noted an increase in the percentage of schools requiring students to take a course “dedicated to business & society issues.” The percent of schools surveyed requiring students to take a course on business & society issues: 34% in 2001, 63% in 2007, 69% in 2009, 79% in 2011

Courses on social entrepreneurship are also gaining far greater prominence across MBA programs, the survey found. “Importantly, most of these courses focus NOT on non-profit, mission based organizations BUT on how business models can be adapted in ways that produce companies that intentionally strive to achieve positive financial, social and environmental results,” Aspen said.  “Between 2007 and 2011, we saw 60% more schools in the survey offering courses being on social entrepreneurship.”

Photo by Yanec, via Flickr

In a Gallup poll released last week, 64 percent of Americans surveyed expressed a great deal/quite a lot of confidence in small business compared to 19 percent who felt the same about big business. This isn’t new information – small business has consistently inspired more trust than corporations.

In increasingly uncertain times globally, how serial entrepreneurs (those who are continually putting ideas in action) think and act offers models for navigating the unknown as well as handling potential ethical conflicts.

Emerging extreme weather patterns, erupting political unrest and global financial market volatility are some of the issues that are forcing business leaders to operate against the backdrop of the unknowable, where using the past to help predict the future is increasingly inadequate. This is far less of an issue for serial entrepreneurs.

Take for example an article in the latest Harvard Business Review offering adaptability as the new competitive advantage for big business in an era of risk and instability. It advocates experimentation, as a way around the current limits of forecasting, and embracing failure’s lessons.

These are concepts that are part of serial entrepreneurs’ DNA. The inevitability that these approaches may be seen as increasingly valuable within large companies – and how that will impact more traditional cultures – offers corporations, not already doing so, the opportunity to approach challenges differently.

The extensive research and writing about how serial entrepreneurs think and solve problems done by Saras Sarasvathy shifted focus away from the story of highly individualistic founders and the companies they created to common aspects of their thought process. This invites the question of whether the process that works for serial entrepreneurs can apply to the rest of us.

When Leonard Schlesinger became president of Babson College in 2008, he invited Sarasvathy, who teaches at the Darden School of Business, to campus to meet with him and faculty members as part of the ongoing conversations Babson began on what entrepreneurial thought and action can mean at the institution.

There have been many byproducts of this focus, including a book due out this fall by several faculty, The New Entrepreneurial Leader, which captures entrepreneurial thought as a method.

Another outcome is a book Schlesinger has been writing. His process actually mirrors entrepreneurial thought in action: in the face of the unknown, take a small step forward, pause to see what is learned, determine what you can afford/want to pay to play, bring others along, incorporate that learning into the next step, and build off the unexpected. The bottom line: Act, Learn and Build.

For example, Schlesinger and his co-authors Charles Keifer and Paul Brown tested their ideas, language, and listened to stories in a series of free two-day courses taken by 300 entrepreneurs. Armed with that information, the three men collaborated on a book that was written in seven weeks which they called, Action Trumps Everything: Creating What You Want in an Uncertain World. It was made available as a free PDF on the website and readers were encouraged to leave feedback.

In December 2010, they published a limited edition of the book for Babson alumni and friends, again encouraging feedback on the website. They have coined the expression CreAction -- acting your way into the future you desire by taking small, smart steps. Expanding and revising the book, this year, they’ve added input from another 200 course participants. They will turn the manuscript over to Harvard Business Review Press next month and the book will be published in February under a new title.

In an interview with Schlesinger this month, I asked if there was anything different about how the first 300 men and women, who were course participants, responded to ideas or provided insights on how men and women entrepreneurs might lead differently.

He indicated it was a lot easier for the women to extend the ideas to all aspects of their life. Whereas the men were more focused on using the ideas either for their current venture or a transitional venture, wanting to know exactly how those ideas would help them.

“As we got into the conversations,” Schlesinger said, “women found much more in the way of natural linkages of action not only to their ventures, but to their friendships, relationships, to their families; and really enriched the conversation in meaningful ways that quite honestly got me to the point of thinking quite seriously about my presidency, about my own role, that what we are talking about is a way to live, not a way to work.”

I asked Schlesinger how ethics impacts entrepreneurial thought and action. While there are many answers, something that cuts across curriculum and life is a program, Giving Voice to Values,  he brought to Babson two years ago when he recruited Mary Gentile.  The curriculum is being taught in universities on six continents.

Embedded in Action Trumps Everything, and Giving Voice to Values, Schlesinger said, is the notion that practice makes better.  In addition to advancing what is going on in ethics education, he indicated, Gentile’s work builds a practiced-base methodology that goes alongside the discussion method; it increases the likelihood that when people confront a real situation, they will have had enough practiced-based scenarios that they’ve worked through from their own experience and reflected on that natural behavior comes more easily.

“I don’t think 25,000 more hours of teaching people the difference between right and wrong is going to make much progress,” Schlesinger said. “Most of these people actually do know at the core the difference between right or wrong and they know what to do with it. They know how to intellectualize what they would do with it. They just don’t know how to deal with it in real time in a real place. When confronted by a situation and no experience and no practice, they default to places where they have never been. That is where you find people cutting corners, taking short cuts, and doing stupid things.”

Referring to Malcolm Gladwell’s pronouncement in Outliers that greatness in any profession comes from 10,000 hours of practice, Schlesinger added, “there is a certain truth there and that truth is embedded in Mary’s program and its adaptability for use across different platforms.”

Serial entrepreneurs have a thought methodology that is available to any of us that can be used in the face of an increasingly unknowable future. The process of taking small steps to act, learn and build from essentially thwarts paralysis, being overwhelmed or being stopped by obstacles – three circumstances where good decisions are not likely to be made.

The key is that action provides evidence, and with the evidence of experience, as well as a practiced-based approach in curriculum and in how one approaches one’s life, there is greater clarity around self-knowledge, purpose, trade-offs, and one’s boundaries. With the clarity, greater transparency is possible, which can lead to a greater capacity to earn others’ trust.

Evidence allows the road ahead to seem more knowable.

Entrepreneurial thought and action -- becoming a way to live, not just a way to work.

Gael O’Brien is a Business Ethics Magazine columnist. Gael is a thought leader on building leadership, trust, and reputation and writes The Week in Ethics.

By Mary C. Gentile

Reviewed by Michael Connor

A senior business journalist whom I know – a veteran of reporting and editing stories about some of the biggest corporate scandals of the last few decades – has a simple theory of how business people and companies often get themselves into trouble with the law.

“Most people don’t wake up in the morning and say to themselves, ‘I think I will commit a felony today,’” he explains. “Instead, they cross what seems like a small ethical line one day, then another line a few days later, and so on. Before they know it, they’ve done something seriously wrong.”

That’s not to say that outright liars and thieves don’t exist in the business world.  Bernard Madoff’s multi-billion dollar Ponzi scheme – in which he stole even from friends and charitable organizations - is an example of sociopathic criminality at a high level.   But more often than not, the battle over ethics and values is fought on a daily basis, by average people, in face-to-face confrontations involving routine business issues.

And when things go wrong in that day-to-day world – as they have recently, at firms like BP and Goldman Sachs - an implied assumption is that individuals have lost their sense of right and wrong, driven by expedience or greed. The theory is that no one speaks up because their moral compass has gone haywire.

Babson College business professor and consultant Mary C. Gentile thinks it’s a lot more complicated than that.  In an insightful solution-oriented new book, Giving Voice to Values: Speaking Your Mind When You Know What’s Right, she argues that most people do indeed want to do the right thing.

They just don’t know how.

The unfortunate reality is that, in almost any workplace in history, advocating for a particular strategy or course of action based on principle has always been a challenge.  An argument for “doing the right thing” can seem high-handed, judgmental, holier-than-thou and out-of-touch with the profit-making imperatives of business – even when doing the right thing might actually improve long-term profitability, boost employee morale and minimize legal and financial risk.

“Most of us want to find ways to voice and act on our values in the workplace, and to do so effectively,” Gentile writes.  “The focus here is on those times and situations when we believe we know what is right and want to do it, but we experience external pressures – from our boss, our colleagues, our customers – to do otherwise.”

Ethical theory and the study of high-level strategic dilemmas are important, according to Gentile, but “they don’t help future managers and leaders figure out what to do next – when a boss wants to alter the financial report, or their sales team applies pressure to misrepresent the capabilities of their product, or they witness discrimination against a peer.”

The solution, she suggests, is helping workers at all levels, from clerk to CEO, learn how to anticipate and counter predictable patterns of misbehavior.  She likens the process to an individual learning a new physical skill or a sport. The more one performs practices drills, the more instinctive the response when the game is really being played.   Expressing values openly and frequently, Gentile says, builds muscle for when it’s really needed in the marketplace.

“If enough of us felt empowered – and were skillful and practiced enough – to voice and act on our values effectively on those occasions when our best selves were in the driver’s seat, business would be a different place,” she writes.

Giving Voice to Values incorporates personal and organizational dynamics to help business people develop an “action” plan to deal with commonly heard “reasons and rationalizations” for questionable practices.  Introducing new information and data into an argument might be one tactic.  Another would be recruiting allies on behalf of your argument.  Gentile recommends actually developing and practicing “scripts” to deal with anticipated issues.

In fact, Giving Voice to Values has been developed into a broad problem-solving educational curriculum.  Launched at the Aspen Institute with founding partner Yale School of Management, the approach has already been piloted at over 100 institutions worldwide, including leading schools such as MIT, INSEAD, Columbia and Harvard Business School.

The ultimate goal is to make voicing values “a habit, a default position.”  Given the human condition, that’s no simple task.  Giving Voice to Values provides valuable straight talk and straightforward processes that can open up the corporate decision-making dynamic to new possibilities.  It’s a challenge, really, for management and workers at all levels – to prove that speaking up for values does indeed make for better business.

With apologies for the double negative, the rest of this piece will be a more straightforward argument for why Corporate Social Responsibility (CSR) is not only a good idea but – like breathing – somewhat necessary.

Last week Dr. Aneel Karnani published an Op Ed in The Wall Street Journal titled “The Case Against Corporate Social Responsibility.” It is somewhat ironic that the author represents the Ross School of Management at the University of Michigan which is hosting this year’s Net Impact conference – an annual gathering of more than 2500 business students, educators and business leaders focused on CSR.  Dr. Karnani’s article seems almost deliberately provocative, generating more than 250 comments and this response from Liz Maw, Net Impact’s Executive Director.

While it is hard to add anything new to the maelstrom of criticism Dr. Karnani received for his opinion, I will share three short observations on why I believe CSR has taken root from business schools to board rooms and is growing faster than even China’s GDP.

More and more companies are winning with CSR.

Tim Mohin, AMD

Dr. Karnani asserts that CSR only makes sense when the business’ interest and the public’s interest line up. So why are so many companies jumping on the CSR bandwagon?  Sure it could be external pressure from watchdog groups or the herd mentality of businesses trying to keep up with the competition.  But these are weak reasons for the magnitude of this trend. More than 85 percent of the Fortune 50 companies are now publishing corporate citizenship and/or sustainability reports in some format.   A more likely answer is that smart managers see potential for profit.  They look at megatrends in the world and ask themselves – “how can we apply our core competencies to win in the future?”  This is business 101 – find the need and fill it…  It so happens that the many of today’s trends point to CSR issues – resource scarcity, poverty, pollution, etc.

While a litany of doom for some, these issues can also look like opportunities for a wise business manager.  (See my blog on “less is more obvious”).  General Electric CEO Jeff Immelt – a speaker at last year’s Net Impact conference - would likely say that this alignment doesn’t just happen; wise managers develop strategies and position their companies for success in a resource constrained world.  General Electric’s eco imagination line topped more than $18B in revenues in 2009 and is a growing profit center.

Smart Companies Take the Long View

Dr. Karnani warns that CSR may be dangerous because, by doing the right thing voluntarily, companies may obscure the need for government regulation.  One is left to conclude that a better path is for companies to ignore CSR in the quest for short-term profit, and in so doing help increase the size and power of government.  Gosh, wouldn’t this be a great outcome!

With no evidence or examples, this notion rests on the shaky ground of conjecture.  What is not conjecture is the flood of companies exploiting lower cost locations – which often translates to weaker environment and labor laws and/or enforcement.  Rather than obstruct the role of government, responsible companies have actually been propping up the role of government around the world.  For example, electronics companies sourcing from China have tangibly improved labor, safety and environmental conditions in supplier factories.  Why would they do this when the government does not?  The answer lies in taking a longer view.

Sure it may be more work and some initial investment to responsibly manage a business, but when left unchecked, poor conditions can go awry costing many thousands of times more.  Perhaps if BP had placed more of its focus on safety and contingency measures, it might have saved itself billions in hard costs, irreparable damage to its corporate brand and prevented the epic harm caused to the Gulf region.

While failures like BP are obvious, successes tend to go unnoticed. A great example of long-term thinking is management of hazardous waste.  Many developing countries have yet to implement laws to deal with the scourge of toxic waste.  Following the logic of the Op Ed, companies operating in these locations should save money and just dump their toxic materials out the back door or into the local river.  Well, it turns out that many of these companies are US owned and have tried this before.  Then came Superfund.  The Superfund law said that it did not matter whether dumping was legal at them time; if you did it, you had to pay for the cleanup.  And, oh by the way, you might also have to pay to clean up everyone else’s waste in the same dump if they could not afford the bill.  Smarter companies learned a hard lesson this way - better to manage toxics responsibly now than get stuck with a bill later – and these companies manage this way whether they are in Chicago or China.

Companies know CSR Impacts Brand Value and investment

Last but not least – CSR is a vital component of brand value. Often listed as the largest intangible asset on the balance sheet, brand reputation can make or break a business.    The Reputation Institute and others estimate that about 40% of brand reputation is manifest through CSR.  Hmmm, 40% of one of the larger items on the balance sheet…CSR is starting to sound a bit more important to even the most self interested shareholder.   And, if that is not enough business value, the latest estimates of socially screened investment assets are closing in on $3 trillion in the US, making it tougher still to ignore the business implications of CSR.

Rather than struggling with definitions and rationales for CSR, it seems that most companies intrinsically understand their duty to account for their impact and, if possible, lend a hand to make things better. This change did not happen because CEOs woke up one day with a desire to save the planet. I believe the trend toward sustainability stems from a common realization of scarcity and the instinctive imperative to husband our resources.

Perhaps it is the “Tragedy of the Commons” on a global scale. Increasingly, the public consciousness is demanding accountability and action not only to protect, but to enhance our common good and our shared resources.  It is encouraging that the thousands of young MBA students who sign up for Net Impact know this.

The trade-offs inherent in this debate are difficult. Balancing the needs of people, impact on the planet and making a profit is not easy. Perhaps I am an optimist, but I believe that as companies are increasingly held accountable for their impacts and their behavior — both negative and positive — there will be a steady stream of innovation leading us toward sustainability. If the past is prologue, the private sector will be the engine of change by actively selecting and deselecting winners and losers in the new paradigm.

While it may not have been his intent, Dr. Karnani’s provocative opinion may have done more to promote CSR than to slow it.  Having stirred up legions of impassioned objectors, he has added momentum to the movement.  Hopefully, Dr. Karnani will have a chance to share his views with the Net Impact audience at his campus this October…I volunteer to moderate the panel!

Tim Mohin is Director of Corporate Responsibility at AMD and a board member of Net Impact. His postings are his own opinions and may not represent AMD’s positions, strategies or opinions. Links to third party sites are provided for convenience and unless explicitly stated, AMD is not responsible for the contents of such links sites and no endorsement is implied.

We've been following allegations of enrollment abuses and bogus marketing schemes at for-profit schools for some time now, and a report released by the Government Accountability Office this week further highlights some of the questionable recruiting tactics of several for-profit colleges across the country.

Undercover investigators posing as prospective students found that four of 15 for-profit colleges "were encouraged by college personnel to falsify their financial aid forms to qualify for federal aid."

From the report:

A financial aid officer at a privately owned college in Texas told our undercover applicant not to report $250,000 in savings, stating that it was not the government's business how much money the undercover applicant had in a bank account.

...An admissions representative at another college told our undercover applicant that changing the FAFSA to indicate that he supported three dependents instead of being a single-person household might drop his income enough to qualify for a Pell Grant.

All 15 schools made "deceptive or otherwise questionable statements" to the undercover applicants. The schools aren't identified, but they're located in six states and Washington, D.C., and were among those "that the Department of Education reported received 89 percent or more of their revenue from federal student aid." (Read the full report in our document viewer.)

The deceptive statements ranged from students2019 potential salaries after graduation to the school2019s accreditation to the duration or costs of the program, according to the report. Two of the GAO's fictitious prospective students each received around 180 phone calls from for-profit recruiters within a month of filling out forms on websites that purport to match prospective students with colleges offering relevant programs. Our ProPublica Reporting Network volunteers reported having similar experiences on such websites.

An earlier GAO report [PDF] found that students at for-profit colleges were more likely to default on their federal student loans than students at public or private non-profit schools. These defaults leave the government and taxpayers to take care of the costs and 201Cassume nearly all the risk,201D the latest report explained.

It seems the hedge funds that have been betting against the for-profit higher education industry have just been given another point bolstering their criticism of the industry2019s ills. Barron's pointed out yesterday that since news of the report first leaked, for-profit college shares have taken a tumble.

ProPublica is an independent, non-profit newsroom that produces investigative journalism in the public interest.   This article is republished with permission under a Creative Commons license.

Criticisms of business seeing value creation only in terms of achieving short-term, unsustainable results and how business schools prepare future leaders predate the financial meltdown. Warren Bennis and Jim O’Toole talked about the need to reform business education several years ago. The crisis simply made it more obvious that business as usual isn’t working, either in the classroom or boardroom.

The piece of management education reform that involves the role of ethics has added importance not only because trust in business has fallen so far, but also because it is tied to how leaders behave and the impact that has on a company culture as well as society.

When students return to campus in coming weeks, dialogue and debate on the purpose of management education and how ethics is handled will continue, impacted by initiatives that seek to help reinforce high ethical standards. Some examples are the MBA Oath project, and programs giving students experience practicing values and integrating ethics into other organizational risk considerations.

While well-regarded companies that have recently suffered reputation meltdown are real-world examples for the classroom, even more important is learning about other models for doing business, like Pepsico, a company that is intentionally setting high ethical standards for itself while still making significant profit.

For many companies ethics has a walk-on part—not much focus beyond the compliance function and website rhetoric about how a company describes its values. If integrating ethical considerations into strategic business decisions was the norm, we wouldn’t keep enduring debilitating crises where consequences of actions apparently aren’t clear to leaders until a regulator shows up or media headlines send stock prices lower.

Performance with Purpose

The reality is that crises at Toyota, Goldman Sachs and BP – to name a few -- involved ethical failures as potent as the business miscalculations and addiction to gaining ever-higher quarterly profits, where choices and shortcuts harmed stakeholders. Just as the ethical debacle of Enron was a wake up call met by additional regulation and beefed up ethics focus in companies, the corporate crises so far this year offer another kind of wake up call that companies and management education would do well to heed. How many more examples do we need of value creation only being about profit at the expense of society?

Indra Nooyi, Pepsico’s chairman and CEO, told students at Yale’s School of Management in May 2010 that “performance with purpose is how we run the company.”  She explained that “Performance with purpose is about how you can intimately link what a company can do with what the needs of society are and together deliver great performance.”

“Pepsico wants to be the model of the good company,’ she continued, “an example of how business should be done in the 21^st century.” This sets the bar very high at Pepsico. The business model requires integrating ethical considerations into the mix of business considerations, aligning decisions with purpose, and acting in a manner that inspires employees to do their best work. The result, if made a reality, establishes trust with stakeholders.

It is the inconsistencies that often trip a company up. Simon Webley, Research Director at the Institute of Business Ethics in London, makes a distinction between doing ethical things (like philanthropy and environmental activities) and doing things ethically. Doing the former is no substitute for doing things ethically, he says, mentioning a company in the U.K. known for the wonderful things it does for the community, but yet it doesn’t pay its suppliers on time. “It is easier to do CSR (corporate social reposnibility) than to integrate high ethical standards throughout the organization.”

Adhering to high ethical standards is at the heart of the Oath Project started at Harvard Business School last year as a grassroots movement of students and faculty. The voluntary pledge to “create value responsibly and ethically” seeks to create a community of MBAs (signers are from more than 250 schools) who share a high standard for ethical and professional behavior. Nitin Nohria, who became Dean of Harvard Business School this month, has been a strong supporter of the project.

Role of Values

Will signing a piece of paper change anything? It depends. We should consider how change occurs; it starts with a personal act of intention, followed by action, gaining reality through repetition and reinforcement until it becomes how things are done by an individual, and a collection of individuals. It is too soon to know the success of the movement or its influence on the companies graduates join. However, it is a start. The Oath Project is supported by many organizations, including Aspen Institute’s Business and Society Program (BSP).

Part of expressing high ethical standards is the ability to speak up in support of those values. Over 100 business schools globally are participating in an innovative, cross-disciplinary business curriculum called Giving Voice to Values (GVV) created by Mary Gentile. The program raises different kinds of questions than the case study approach: “Rather than asking ‘what is the right thing to do?’ she says, “we ask ‘how can I get the ‘right thing’ done?’” In GVV, students go on to answer other questions raised including: “What do I say to whom, what will they say back, and then what do I say? What data do I need? What allies do I need, etc.”

In GVV, Gentile says, “we ask students to create and practice literal scripts and action plans so that the program goes beyond awareness building and analysis to action.” The relatively new program was incubated at the Aspen’s BSP and also sponsored by Yale School of Management before moving to Babson College last year.

To help students practice integrating ethics into the decision-making mix, Loyola Marymount University (LMU) has developed an invitational intercollegiate business ethics case competition which attracts international participation. It is also sponsored by the Ethics and Compliance Officer Association, a professional group for corporate compliance officers, whose members serve as judges. MBA and undergraduate teams make presentations showing their understanding of the legal, ethical and financial dimensions of problems.

“Every decision you make in business generally occurs when you are under pressure, without all the information or time you’d like, and in the midst of competing factors – usually financial, legal or ethical issues,” says Thomas White, professor and director of the Center for Ethics and Business, who created the competition. “There needs to be more emphasis on ethics education in MBA programs (however it is done) because individuals need more technical ability in recognizing and resolving ethical issues, which are as sophisticated and complex as any financial problem, and getting more so.”

The success of business education reform has many champions, and is coming up again at a time when there is crisis fatigue as well as examples of successful companies with a value proposition that puts a priority on social good. Will current business leaders support training new leaders in skills and competencies that support new models of business or will we need to endure more business as usual?

Gael O’Brien is a Business Ethics Magazine columnist. Gael is a thought leader on building leadership, trust, and reputation and writes The Week in Ethics, a weekly column at http://theweekinethics.wordpr

After being laid off from her job as a high school teacher in Dayton, Ohio, Nicole Massey decided to go back to college. For months, she scoured the Web for ways to fund her tuition, while supporting her 10-year-old son, Tyler. So when ads turned up in Massey's inbox claiming that President Barack Obama had created special college grants and scholarships for single mothers, her hopes soared.

"You see his picture," Massey said, "so I clicked on it." The link took her to a new window, where she was asked to enter her name, age and other information about the degree she wanted. The site then produced a list of schools that lined up with Massey's choices.

Almost immediately, recruiters from for-profit colleges, including the University of Phoenix, Kaplan University, Grand Canyon University and a couple of local schools, bombarded Massey with e-mails and calls.

"That's when I would bring up the thing, 'What about the Obama loans? What about the money for the single moms in the stimulus?'" she said. "And they would say, 'Well, we'll call you back with more information about that.'"

They never did -- and little wonder: "There is no such thing as an Obama grant for moms," said Robert Shireman, who until early this month was deputy undersecretary at the U.S. Department of Education. "Moms are eligible for federal financial aid generally -- Pell Grants, student loans and other aid -- but nothing specific to moms or single moms." Nevertheless, the Obama mom ads have become "ubiquitous," he said.

For-profit universities and career colleges are flourishing in the down economy, thanks in part to a gusher of taxpayer money flowing into the federal government's Pell Grant program for economically needy students. Hundreds of thousands of Americans have already enrolled in for-profit colleges, which are fiercely competing for new recruits.

The grant windfall has fueled another boom: for online marketers that gather contact information from prospective students and sell it to schools. Just a few years ago, these firms, known as lead generators, fed the subprime mortgage machine. Now they are earning more than $1 billion a year for finding prospective students, according to one industry estimate.

Consumer advocates say they are alarmed by parallels between the subprime mortgage industry and for-profit schools, which also have come under fire for targeting low-income groups and signing up students for loans that can leave them buried in debt. Some schools earn nearly 90 percent of their revenue from federal student aid programs.

Single moms, the critics say, are especially vulnerable.

"In comparison with an 18-year-old traditional college student, a single mom faces unique, often unsurpassable obstacles to getting an education," said Greg C. Frazier of Community Connections of Jacksonville, a group that works with disadvantaged women in Florida. "Frequently she will be lured by the promises of low-cost, easy online courses that in reality do not deliver."

Harris Miller, president of the Career College Association, said the 1,400 for-profit colleges, universities and trade schools his organization represents object to using misleading or false advertising to recruit students. But Miller said lead generators often are subcontractors a couple of steps removed from a school's recruiting operation, making them hard to police.

Shireman, while denouncing the ads, said the Education Department lacks authority to crack down on subcontractors. A spokeswoman for the Federal Trade Commission, which does have such power, called the ads misleading but declined to say whether the agency is investigating them.

Vital Market for Career Schools

Mothers are an important market for the for-profit schools. Women account for 65 percent of their students, and more than half have dependent children, according to the Career College Association. In many instances, returning to school could provide mothers with a step up to a better job and improved circumstances for their children.

But women who've responded to the ads told ProPublica they felt "targeted," "victimized" and "insulted" once they discovered the Obama grants do not exist.

When banner ads and pop-ups appeared in her Facebook profile and on the Web site Blackplanet.com, Lisa Jackson, a single mom from Washington, D.C., clicked on the links.

Jackson lost her job as a project manager in a furniture dealership last year and spent a lot of time online looking for ways to escape unemployment. She realized there were no Obama grants for single moms after receiving e-mails from several for-profit schools.

"I feel it's an insult to my intelligence to some degree," she said.

The use of President Obama's name also troubled Jackson, who is African-American.

"Some of these advertisers are playing on the sense that we have our first African-American president," she said, noting that Obama's image and name have been used to promote mortgage refinancing in minority neighborhoods. "It's sad. They've used it for the wrong reasons."

Priya Raghubir, a marketing professor at New York University's Stern School of Business, said it's not a coincidence that marketers are recycling techniques from the subprime mortgage boom. Obama has strong appeal among younger people, minority groups and lower-income households, she said. The same people were disproportionately targeted for subprime loans, according to research by the Department of Housing and Urban Development.

"For these groups particularly, he is a figure, a celebrity, who is highly liked and also signals something they would like to associate with -- the way he has used education to break a number of barriers and get to where he has at such a young age," Raghubir said.

Watchdog groups, Congress, the Education Department and some investors have voiced concerns (PDF) about recruitment and at for-profits schools. A recent report (PDF) by the College Board found that more than half of the students at for-profits graduate with $30,500 or more in debt -- compared with about a quarter of private college grads and 12 percent from public schools.

Middlemen in the Recruiting Game

Last year's economic stimulus bill added $17 billion for the government's need-based Pell Grant program, and an expansion signed earlier this year by Obama is expected to provide around 820,000 additional grant awards over a decade, according to an Education Department spokesman. The money began rolling in during the fiscal year that ended in June, and while public, private and for-profit schools all saw big gains in Pell Grant revenue, the overall increase to for-profits was highest -- 70 percent over the prior year.

The University of Phoenix -- the largest for-profit school -- took in more than $1 billion from some 300,000 Pell Grants alone in 2009-2010, Education Department data show. That's about what Phoenix's parent company, the Apollo Group, spent on "selling and promotional" activities in 2009, according to company financial filings.

For-profits spend heavily on lead generation, typically some 20 to 30 percent of their ad and marketing budget, according to Ampush Media, a San Francisco lead generation firm. An Ampush research report prepared in February estimated that higher-education leads were a $1 billion market and said that market was "expanding rapidly" while mortgage leads had only "muted growth."

Experian PLC, a company that provides consumer credit reports and advice, also operates lead-generation businesses. The company once used a video of a woman dancing energetically in front of her computer to funnel people to one of its websites -- LowerMyBills.com.

The site was a major source of leads for subprime lenders during the housing boom, according to Sam Rogers, mortgage industry analyst at the Center for Responsible Lending, a nonprofit that monitors lending practices. (The Sandler Foundation, the principal funder of ProPublica, also provides significant financial support to the center.)

Experian used the same video at another of its websites, ClassesUSA.com, which collects information to sell to colleges. Another ad for LowerMyBills.com features a buxom blonde dancing suggestively under the text, "New Housing Bill Passed! $133,000 Mortgage for Under $529/Month!" That same dancing blonde sometimes also linked to ClassesUSA.com.

A third Experian ad is an animation of two young women walking side by side, with a banner saying, "Obama Asks Moms to Return to School."

Steve Krenzer, president of Experian Interactive Media, declined to comment on why Experian used the ads to target both subprime mortgage borrowers and students.

"Here's an example of an icon of the American financial sector luring unwitting consumers into prohibitively expensive borrowing that they can't afford and that the taxpayers will have to make good," said Barmak Nassirian, spokesman for the American Association of Collegiate Registrars and Admissions Officers, an industry group whose members include some for-profit schools.

ProPublica asked the two other major consumer credit reporting companies, Equifax and TransUnion, whether they had any such ads. TransUnion said it does not engage in direct-to-consumer lead generation. Equifax did not comment.

The most common ads are pop-ups that show up onscreen automatically. ProPublica also found examples of websites that referred to Obama mom grants or loans and provided links to lead generators.

"Barack Obama has made the pledge to help moms go back to school while the government pays for it," said one. "Unemployed mothers can snatch a college diploma at the comforts of their own home without spending a dime for baby-sitting (sic)," read another.

Schools pay anywhere from a few dollars up to $85 per lead, said Daniel Kim, president of a small New Jersey-based lead generation company called MyCS Network. Although some nonprofit schools use lead generators, the biggest clients for higher-education leads are for-profit universities, according to Kim, who has worked in the industry since 2004.

ProPublica contacted several lead generators linked to the Obama mom ads, but all either declined to comment or did not return calls or e-mails. To determine which schools were buying those leads, we asked volunteers from the ProPublica Reporting Network to click on the links, fill out the online forms and report back.

Hana Shepherd, of New York City, received 10 calls and nine e-mails from recruiters within a day of filling out a form. Susan Sawyers, also of New York City, received pages of e-mails.

The schools included Walden University, Kaplan University, Ashford University, American InterContinental University, Capella University, Colorado Technical University and the University of Phoenix -- all for-profit institutions.

Volunteers also received e-mails from two private, non-profit universities: Golden Gate University and the University of Southern California Rossier School of Education. Jennifer Hanlon, director of marketing at 2tor, the company that manages the Rossier School's online advertising, said she was surprised and disappointed to hear about the ad.

Part of the problem, said Hanlon, is that lead generators frequently farm out work to subcontractors. "It's frustrating being an advertiser because you contract with one person and they have a group of affiliates they work with," she said. "You just have to be a diligent advertiser and find out where you're being seen, and if you see anything on the shady side, you have to do your due diligence."

A spokesman for Capella said school officials also "periodically review messaging" used by lead generators, and that they had terminated Capella's "involvement" with several ad campaigns earlier this year after discovering they were "paraphrasing President Obama." A spokeswoman for Golden Gate University said the school would "immediately" ask any of its lead generators to stop should they find the marketers using Obama mom ads. The other schools did not comment.

At our request, volunteers asked the lead generators and college recruiters about Obama grants or scholarships for moms. While no recruiter claimed the grants actually existed, they generally did not dispute that they did. More often, said Shepherd, "I was told that a financial aid person could assist me later when I asked about the Obama grants."

A Regulatory Vacuum

At a round-table meeting in Northern Virginia this winter, Education Secretary Arne Duncan was surprised by a question from one of the attendees.

"One of the students participating in a discussion actually asked: 'Is there an Obama scholarship for moms? Because I've seen ads about it,'" said Shireman, who was Duncan's deputy.

Duncan had never heard of the ads, let alone an "Obama" scholarship for moms. But Shireman had. "I've seen the ad myself on my personal e-mail," he said, describing it as "misleading." Yet the department lacks authority to stop the advertisements, Shireman said.

"We're not a general regulatory agency around issues of marketing," he said. "The Department of Education doesn't have any direct authority over third-party entities, unless those third-party entities are working for the schools."

The department recently released draft regulations that would strengthen its ability to crack down on misleading ads, Shireman said. But the new rules apply only to the schools or companies that work for them directly -- not to subcontractors.

The Federal Trade Commission does have jurisdiction over fraudulent marketing, and is "actively looking at scams that use news about the economic stimulus package to falsely claim that the package includes money for government grants, home repair, to pay off debts, scholarships," said Lois Greisman, director of the agency's Marketing Division.

But Greisman said she could not comment on whether the FTC is looking at any specific entity and could not point to any previous enforcement action involving the Obama mom ads. Blackplanet.com did not respond to our request for comment and Yahoo! declined to comment about ads on its sites.

Miller, the Career College Association president, said for-profit schools have objected to the tactics used by some lead generators. In one instance, he said, schools were stunned to discover that a lead generator was using the promise of free food or housing to attract people to enter their data. "No one thought this was OK," he said.

Schools often work with a primary lead generator and may require that company to sign a contract giving the school oversight of ad copy. Miller said his group is encouraging schools to hire their own "mystery shoppers" to police lead generators.

But Kim, of the lead generator MyCS Network, said all misleading techniques make the industry "look bad." They persist, he said, for a simple reason -- they work.

"It's tough because there are these large companies doing it," Kim said, "and they're getting these leads to the schools, and the schools think these leads are good."

Correction (7/24): An earlier version of this story incorrectly described the University of Southern California Rossier School of Education as a public school; USC is a private, non-profit university.

Correction (7/25): An earlier version of this story also incorrectly described Golden Gate University as a for-profit school; Golden Gate University is a private, non-profit school.

ProPublica's Joe Kokenge contributed to this report.

Several ProPublica readers belonging to its Reporting Network assisted reporter Sharona Coutts with identifying schools buying leads. If you'd like to help ProPublica with its reporting, join its Reporting Network.

ProPublica is an independent, non-profit newsroom that produces investigative journalism in the public interest.   This article is republished with permission under a Creative Commons license.

Nitin Nohria, a member of the Harvard faculty since 1988, succeeds Jay Light, who will retire at the end of this academic year.

Nohria has been a faculty leader of the movement to adopt an MBA Oath, a voluntary pledge for graduating and current MBAs to “create value responsibly and ethically.”  The Oath now involves a coalition of MBA students, graduates and advisors, representing over 250 schools from around the world, and partnerships with the Aspen Institute and the World Economic Forum.

“Society's trust in business has certainly been shaken” Nohria said following the announcement of his appointment.  “My hope at Harvard Business School is to restore that trust in business and business education.”

Of the recent raft of business scandals, Nohria added: “There's something about the way that we began to run business that made the pursuit of short-term profit maximization more important than creating long-term sustainable businesses.”

Nohria has co-written or co-edited 16 books, and is author of more than 50 articles and dozens of teaching cases and notes.  He is past head of Harvard Business School’s required first-year "Leadership and Organizational Behavior" course, and he co-directed a team that designed a required first-year course on "Leadership and Corporate Accountability."

An Indian-born American citizen, Nohria is expected to also bring more global perspective to the Harvard program.  He recently taught in such executive education programs as "Building a Global Enterprise in India" and the "New CEO Workshop." Earlier this year, he was one of four instructors from Harvard Schools who co-designed and taught a January term workshop on "Faith and Leadership in a Fragmented World."