Responsible management education, parts I and II

Responsible management education (October 7 & 14, 2008)

By Ben Teehankee

“Managing for Society” column, The Manila Times

Some observers believe that the corporate social responsibility movement is making progress. Others are more cynical and think that CSR is nothing but an elaborate PR mechanism for big business. The recent string of setbacks among large mortgage and banking firms in the US does not present a reassuring picture. Analysts trace the current financial mess to imprudent, though initially lucrative, investments in low-quality (sub-prime) mortgages made by large and well-established companies who should have known better. The cost of this in jobs and economic stability around the world, including the Philippines, is still impossible to calculate.

One may argue that promoting business ethics is an impossible proposition because greed and self-interest is the dominant motivation for business activity. The sub-prime crisis of today and the Enron crisis of a decade ago are just highly visible manifestations of a broad belief in the business world that greed is good and the ethics of self-interest is the only reasonable norm for business leadership.

I disagree. Professional values of technical competence, service and concern for the public interest are also viable complements to self-interest. If business managers can be trained in the way that doctors are trained to care for the health of their patients, over and above any pecuniary consideration, ethically responsible behavior can be a more common norm.

Rakesh Khurana, in his book “From Higher Aims to Hired Hands”, explains that the belief in providing a sound professional education to business managers was the basis for the founding of the first university-based business school in the United States – the Wharton School of the University of Pennsylvania founded in 1881. Simon Patten, director of the Wharton School, believed that there could be “no full discussion of economic problems without bringing political moral principles into relation with the economic.” What Patten and the other leaders of the early business schools, such as Harvard Business School, wanted was to deploy a cadre of highly trained individuals who would master the technical demands of even the largest business operations but always with an overriding consideration of the social impacts of business decisions -- in short professional business leaders. The modern master of business administration degree, or the MBA, is descended from the programs of these early b-schools.

The reasoning behind professional business education is straightforward. Just as doctors wield awesome power over the well-being of individuals and society through their ability to prescribe medicines and to use a scalpel, business managers wield similarly broad powers (some would say even much more than doctors) over the well-being of many people and society as a whole. Think about it: Who decide whether or not to produce and market a milk product, chemically tainted or not? Who decide whether or not to use women wearing almost nothing in highway billboards to push the sales of, ironically, clothing? Who decide whether or not to boost company profits by depriving workers of benefits and security tenure? Who decide to chase revenue targets by investing in low-quality loans? Business managers. Therefore, it is prudent for society to prepare business leaders who have the competence and character to make such decisions wisely for the common good as well as the good of the company.

While the intent of the founding fathers of business schools was wonderful in theory, the actual challenge of producing such MBAs is formidable. In fact, a number of the most ethically notorious corporations, including Enron, were known to be top MBA recruiters. Enron’s former CEO and CFO, both intimately involved in engineering the fatally flawed financial strategy of the energy company, were MBAs from top schools.

Part 2

The involvement of graduates from prominent business schools in high-profile business malpractice is now quite ordinary. There seems little reason to believe that the b-school’s founding principles focused on professional management education can be anything but a distant memory. A cynical writer has gone as far as saying that MBA actually stands for “moral bankruptcy assured”.

What could be happening here? Some have argued that the profit-maximization mantra in MBA programs is to blame. A worrisome finding came out of a study by US-based Aspen Institute on the social responsibility attitudes of MBA students: the students' sense of social responsibility decreased as they progressed through the MBA program. For example, at the start of their program, more than 40% of the students said that one of the primary responsibilities of a company is to produce useful, high-quality goods and services. This dropped to just over 30% at the end of the MBA program. Relating this to current events, would it be too much to expect MBAs to stand in the way of producing milk with melamine or betting an organization’s growth on low-quality mortgages if these actions would boost the bottom-line?

Others argue that the “greed is good” doctrine portrayed in the Michael Douglas movie Wall Street is just so powerful in the business world that even well-intentioned b-schools can barely hope to make a dent. Is it the curriculum or the business environment? Who can really tell? The cause may even be the kind of students that MBA programs attract. Last June, a number of students taking the Graduate Management Aptitude Test (GMAT) posted questions in a web site for other applicants to see. The GMAT is a required examination for MBA admission in the US and some other countries. More than 150 GMAT takers from around the world, some from prominent schools, who were linked to the incident had their scores cancelled and were banned from taking the examination for three years.

Is professional management education a lost cause? Should b-schools just surrender their original noble mission? Not by any means. Reform has been underway in a number of business schools. At the Ramon V. del Rosario Sr. Graduate School of Business of De La Salle University, for example, a course on business ethics has been required for MBAs since 1998 under the deanship of Dr. Lydia Echauz (now president of Far Eastern University). Dean Philip Juico, who succeeded Dr. Echauz, upped the responsibility content of the curriculum by championing a course on social responsibility, human rights and sustainable development. The course is required for MBA students entering this school year.

Furthermore, the concern for responsible management education has grown into a global movement. The United Nations has enabled more than 150 b-schools from around the world to band together under the international body’s Principles for Responsible Management Education (PRME) program. B-schools who sign to support the PRME commit to, among others, “develop the capabilities of students to be future generators of sustainable value for business and society at large and to work for an inclusive and sustainable global economy” and to “incorporate into …academic activities and curricula the values of global social responsibility”.

These reforms are not without their critics. Some faculty members and students have complained that the MBA curriculum is beginning to focus more on social work than business per se. Apparently, they still believe that business decisions made by managers are mainly a private matter for the corporation’s interest and should not be curtailed by social concerns. I hope that the social pain that all countries are now facing because of the bad business decisions made by so-called “private” managers will finally put this fallacy to rest. Meanwhile, b-schools will have to work harder to pursue responsible management education and reclaim the original purpose for creating such schools.