05/20/2010 02:33 pm ET | Updated May 25, 2011

A Turning Point for Business Schools

It is graduation time for the class of 2010. This month hundreds of thousands of students around the world will earn their MBA degrees. For many graduates, it is a time of excitement as they launch into new careers. Yet the MBA, the world's most popular graduate degree, is facing an identity crisis, with its legitimacy called into question by the worldwide recession. What will become of business schools in the future?

The history of business education is marked by three major turning points -- the founding of graduate business schools at the turn of the twentieth century, the reformation of business schools after the Second World War, and the emphasis on shareholder value in the 1970s and 1980s.

Graduate business schools are a fairly new idea. The first schools were founded within the first decade of the twentieth century. In response to the rise of the modern, publicly-traded corporation, a group of business leaders, academics, and institutional entrepreneurs set out to create a new kind of professional graduate school. Business schools would train leaders to manage increasingly complex corporations in the interest of a variety of stakeholders - shareholders, customers, employees and society. The hope was to make management a profession, similar to law or medicine, complete with its own professional degree, code of ethics, and standardized body of knowledge.

However, business schools failed to make good on this mission. By and large, the education students received was neither rigorous nor especially effective. So after World War Two, the Ford Foundation and others began the second turning point in business education. They spent tens of millions of dollars to reform business schools to focus curriculums along traditional academic lines such as statistics and economics. Professors became more specialized and more academic, teaching within their narrow disciplines rather than from the perspective of a general manager.

The third turning point came in the 1970s and 1980s as Milton Friedman's ideas ascended. Friedman, an economist at the University of Chicago, drove a stake through the heart of the idea that management should be a profession. The social responsibility of business, Friedman argued, is to maximize profit. Friedman's theories gained widespread adoption and business schools became active proponents.

Then, in 2008, the Great Recession happened.

The worst financial crisis in eighty years is making many reconsider their previous assumptions on the purpose of both business and business education. Millions have lost their jobs. Many more have lost their savings. Polls show that trust in business leaders has never been lower. It is only natural to pause at this moment and reconsider our assumptions about how business should work. We believe a fourth turning point has begun, one that will restore the original emphasis business schools placed on professionalism, ethics, and creating value for society.

First, consider the growing popularity of the social enterprise movement among MBAs. Corporate social responsibility (CSR) is not without controversy. But love it or hate it, the fact is that many current MBA students want to "do good while doing well." Net Impact, a national social enterprise organization for MBAs, has chapters on hundreds of campuses and holds an annual conference attended by more than a thousand students and business leaders.

Second, consider the rapid growth and adoption of the MBA Oath, a "Hippocratic Oath" for managers we launched last year. To date, 3,000 MBAs, representing nearly 300 business schools, have signed the oath, committing to integrity, transparency, and following both the letter and the spirit of the law.

Third, consider how business schools themselves are changing through new leadership. This month Harvard Business School selected Nitin Nohria as its new dean. He will be the first non-American to lead the school, a reflection of the increasingly globalized business world. Importantly, he is an academic best known for his contributions to the fields of leadership and business ethics. It is hard to overstate the symbolic import of Harvard Business School, often called the West Point of Capitalism, choosing as its new leader a man who has called for reforming business education to emphasize values based leadership.

Nohria will not be alone. A number of the world's top business schools will begin classes next year with new deans. Northwestern's Kellogg School and the Yale School of Management have already selected new leaders. The Haas School at Berkeley announced a new curriculum initiative that will focus on innovative leadership development. The Ross School at Michigan will soon be announcing new leadership. These leaders will have a mandate to make changes to the MBA degree and perhaps return it to its roots as a training ground for professionals. These professionals will take their duties to society as seriously as they take their duty to the bottom line.

The MBA class of 2010 has witnessed a dramatic altering to the business landscape. For them, and for business schools, the world has changed but the future is exciting. This moment marks another turning point. It couldn't come at a better time.