The financial meltdown of 2008 will be remembered as a crisis not only of regulation, but of values; a painful reminder that good markets run on trust, and not only self-interest. Even Adam Smith's butcher understood that selling unsafe meat, no matter how profitably, was a terribly bad idea, both for his clients and himself.
In "The Road from Ruin," Matthew Bishop and Michael Green argue that business leaders need to put values at the heart of capitalism and suggest that asking managers to commit to a professional code of conduct may be a good start.
The medical and legal professions have long adopted codes of conduct that explicitly recognize a commitment to serving the greater good and doing no harm. Admittedly, the codes have not eliminated abuses, but they have helped shape the attitudes and values of those who practice these professions and have increased the trust of those who use their services. Most of us, for example, trust that our physician will not intentionally prolong our ailments to charge more fees.
Managers, on the contrary, have remained reluctant to put their values in writing and pledge compliance. And business schools have done little to encourage them to do otherwise.
Instead, they have helped future managers cling to ethical gray zones that allow latitude when confronting real-world issues such as bribery, corruption, child labor and climate change. And they have fed the erroneous dogma that satisfying the interests of shareholders is the only real professional responsibility of the manager of a corporation.
Fallout from this global economic catastrophe demonstrates the enormous responsibility that business leaders hold, not only in their companies, but in society at large. By supposedly trying to maximize shareholder value, managers of many illustrious firms helped destroy millions of jobs, passed on trillions in tax liabilities to their fellow citizens, and, ironically, wiped out billions of dollars in shareholders' equity.
As true professionals, business leaders must accept their responsibility to create real, sustainable value. They must work to provide competitive returns to investors by delivering real value to their customers, creating opportunities for employees and suppliers and acting as honest citizens and stewards in their communities.
Many business leaders already have recognized this responsibility and have taken the first step by supporting an oath of honor that is gaining momentum around the world (theoathproject.org). The oath declares boldly that the purpose of management is to bring people and resources together to create value for society that no single individual can create alone and that managers must not advance their personal interests at the expense of their enterprise or society.
Managers must not participate in corruption. They must honor the law, respect human rights, utilize natural resources responsibly and report risks and performance accurately and honestly.
The oath does not inhibit managers from making money for shareholders or themselves. On the contrary, good managers must strive to reward investors and other stakeholders for the risks they assume, and they have the same right as anyone else to receive fair and competitive compensation for the services they provide, as long as it does not compromise their fiduciary duties to the enterprise and society.
MBA students at Thunderbird have taken an oath since 2005, and this has helped transform our own views of our responsibilities as educators.
In 2009, hundreds of MBA students at other schools joined a grassroots movement initiated at Harvard by voluntarily taking an oath upon graduation (MBAOath.org). In 2010 the Young Global Leaders of the World Economic Forum (a group I participate in) announced in Davos the Global Business Oath (globalbusinessoath.org), a professional declaration that is open to any business leaders around the world.
This year a group of Harvard professors and I -- with the support of the Young Global Leaders, the MBA Oath, the United Nations Global Compact, Net Impact and the Aspen Institute -- launched The Oath Project, a foundation dedicated to establishing a universal professional code of conduct for managers.
Some argue that such an oath will do little to stop the type of behavior that fueled the 2008 meltdown. Medical and legal professionals have licenses to lose when they misbehave; managers do not.
This is true. But an oath will help establish criteria for management malpractice and will put business professionals on the hook for shareholder and peer scrutiny.
In the future the oath may become part of a professional certification or licensing system, but there is no reason to avoid action until then. Even as a voluntary public statement, the oath will give managers the courage to consider ethical dilemmas and make decisions about values at the start of their careers -- before they find themselves surrounded by temptations to cheat, cut corners or look the other way while others violate shared standards of conduct.
Bishop and Green are right to include the idea of the oath as part of their charted road from ruin. The time has come for managers to join the ranks of true professionals. Making a pledge to work for a better world is a good place to start.
To learn more about the Oath Project, visit www.theoathproject.org.