Rule #1 of business school: Q: What is the #1 responsibility of management?
A: To maximize shareholder wealth.
I remember hearing this from one of my professors for the very first time; fresh-faced and ready to change the world through my new business education, I was immediately thrown back: surely this can't be the only goal of management, I thought. What about concerns for customers, for employees, or for the environment or society?
As it turns out, if you ask any MBA student at any MBA program, you're bound to get the same answer to this question. And while it may not be 100% true (even the most straight-laced finance concentrators would agree that this idea is oversimplified), the theme of maximizing returns to shareholders is recurring and prevalent. And it raises a second, important follow-up question:
What does it say about MBA students if this is the most important question they learn to answer during their two years of school?
Over the last few months, as news of corporate scandal, greed, and bankruptcies continues to make headlines, my business school class discussions have taken somewhat of an ethical turn. Through conversations about Enron and greed, McDonald's and nutrition, and Google and online privacy, it's clear that my professors want us to think about how we would handle real-life decisions where the line between right and wrong is blurred. But in my opinion, none of them have quite gotten there yet. Yes, we need to be discussing these issues, but to say that a few isolated classes are sufficient to ensure my classmates and I have strong, ethical compasses is surely a stretch.
I've been thinking and reading a lot about this recently, and it appears that others have been too. Harvard Business Review has been hosting an especially interesting online debate featuring a series of posts on "How to Fix Business Schools". One of my favorite posts in this series is from Angel Cabrera, the president of the Thunderbird School of Global Management, called "Let's Professionalize Management". In his article, Cabrera advocates the institution of a business version of the Hippocratic Oath, a basic do-no-harm for management. And here's the kicker:
A professional ideology of service to the greater good is not at odds with the principle of shareholder value creation. It actually grounds shareholder value morally and it integrates it in a richer multidisciplinary context. It reaffirms the importance of shareholder value as both a source of societal prosperity in itself as well as an indicator of other forms of value. But it acknowledges that businesses create multiple forms of value and it attributes to managers responsibilities that go beyond profit maximization.
I just love this paragraph. The idea of grounding shareholder value in a moral context just resonates with me. As a "conscious consumer", I support companies like Target because I have witnessed the kind of commitment they make to the community; while I may not own Target stock, I would like to believe that its shareholders feel proud to own a part of a company that's doing good things. And that last sentence about "multiple forms of value" in measuring business success is so true.
So it seems that others are recognizing the inherent flaws in this oversimplified question and answer set. But where do we go from here? One of the steps I'm most excited about is my own school's entry into the U.N. Initiative Principles for Responsible Management. Boston University School of Management now joins over 200 other schools committed to "responsible management education, research and thought leadership globally".
In the current academic environment, corporate responsibility and sustainability have entered but not yet become embedded in the mainstream of business-related education. The PRME are therefore a timely global call for business schools and universities worldwide to gradually adapt their curricula, research, teaching methodologies and institutional strategies to the new business challenges and opportunities.
Certification is a great start, but I'll be curious to see what the next steps look like. In the meantime, I wonder: how are other business schools approaching and integrating the topic of ethical leadership ? What success stories can you share from your own classroom experiences? What have you seen that hasn't worked? And how much do you hate that stupid shareholder wealth question?! I certainly do.
A few more interesting resources on Ethics and MBAs: