In B-schools and Beyond, Ethics Matter, but the 'Bottom Line' Trumps

A better question is the following: What is the dominant value taught -- and learned -- in business schools?
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From insider trading to systemic malfeasance with other people's money, we are awash in stories of bad dealings in financial markets, the latest example being the "Libor" interest rate manipulation scandal in London. So an age old question is turning up again: Can ethics be taught? A better question is the following: What is the dominant value taught -- and learned -- in business schools?

Whether we are talking about a few executives actually serving time, or those who commit no crime but contribute to the belief that the system is rigged -- many spend time in b-school. This is no surprise -- one in four post graduate degrees delivered in the U.S. are MBAs, and business is the most highly sought after undergraduate degree, even at liberal arts colleges. Business schools are the proving ground for Wall Street jobs and also figure into the recruitment plans for Main Street. It is where the language of business, the generally accepted models for decision making and the principles of leadership are taught.

Research conducted by the Aspen Institute suggests that ethics IS taught in business schools, and, increasingly, with an eye to making it stick by embedding it in orientation programs, "learning journeys," core course work and hands-on experience. Business ethics goes by many names and the vast majority of schools in the Institute's ranking of business schools require ethics or something that goes by the name of "social responsibility," "social enterprise," "social impact" or "leadership and values."

Well-regarded schools from Harvard to New York University to Columbia have used teachable moments such as the market meltdown to dive deeply into core questions about business and its purpose. Students are asked to consider why they have chosen business education, and what is expected of a business professional. So what is the problem? If ethics is taught, and in many places, is taught well, why doesn't it stick?

One clue comes from the inside. Luigi Zingales, a titan of the academy of finance who teaches at the University of Chicago, argues that business education across the disciplines needs to move from a stance of "values neutrality" to one where students are exposed to the moral decisions that permeate the core of business. Zingales suggests we deliver "ethics" in accounting and finance rather than a course labeled Ethics, which is bound to turn off motivated students looking to get ahead.

Seems like a good idea -- let's sneak the discussion of morals and values into the courses that matter the most in the MBA hierarchy of needs. But wait! Are accounting and finance really value-free zones?

To the contrary -- research also suggests that the big take away from b-school is the same one that permeates board rooms. Ethics are important, but earnings-per-share is the guiding principle. Remember the ethics handbook distributed to each employee at Enron? The more compelling and well compensated message went something like this: We exist to make money. "Profits," aka "shareholder value," is the most important metric. We all benefit when the stock price goes up -- and employees who make it happen will receive the most. Damn the torpedoes; full speed ahead. EPS is the main meal. "Ethics" is dessert.

The scores of examples piling up in my inbox are living proof that Wall Street didn't learn all that much from Enron. No surprise that business schools, which exist to serve business and markets, are tortured by the the same basic conflict. What trumps when private incentives and the public good are misaligned? The proverbial "bottom line." The result is playing out in real time.

The questions we need to ask in business education as well as board rooms are more nuanced. Of course profit matters -- it's like oxygen -- how can it not? But for business to live up to our aspirations for free enterprise requires complex judgments and alignment of the incentives with the values to which we aspire.

Let's start with these questions: First, and foremost, what is our purpose? What would it take for our stated values to be embedded in our decision rules? What compensation system and protocols would take outside factors like social and environmental impact of decisions into account without developing the business equivalent of clogged arteries? How do we avoid group think and make it safe for common sense questions to be heard in the hurry to make money? What are we measuring most of the time, and what message do we send to our clients, our suppliers, our investors about the metrics of business health?

If we are thoughtful about answering these questions, in business schools and the business world, then what we teach, and what students of business actually learn, might converge.

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