Are B-Schools to Blame for Bad Ethics?
According to this article written by a professor at the University of Chicago Booth School of Business, the drop in ethical standards throughout the business world can be traced back to an unsuspecting culprit: graduate schools. He cites the case of insider trading between McKinsey director Anil Kumar, who recently pleaded guilty, former hedge fund tycoon Rat Rajaratnam, and former McKinsey director Rajat Gupta.Kumar and Rajaratnam went to UPenn Wharton, and Gupta went to Harvard Business School; needless to say, both are elite institutions where business ethics classes are offered and taught by esteemed and respected professors. What gives?
According to the author, there are two reasons for this breakdown. Firstly, in most business ethics classes offered, ethical dilemmas are illustrated but a prescription is not given; the students understand the issue but are not taught the proper decision to make. The second reason is much more harmful:
Oddly, most economists see their subject as divorced from morality. They liken themselves to physicists, who teach how atoms do behave, not how they should behave. But physicists do not teach to atoms, and atoms do not have free will. If they did, physicists would and should be concerned about how the atoms being instructed could change their behavior and affect the universe. Experimental evidence suggests that the teaching of economics does have an effect on students’ behavior: It makes them more selfish and less concerned about the common good. This is not intentional. Most teachers are not aware of what they are doing.
So what is Zingales's solution? Not to teach ethics in a separate class; rather, ethics should be built-in to the core classes and stressed there. In this way, students get to learn in realtime both the principles of business and the right thing to do. So instead of taking Business Ethics, a student would have normal Accounting or corporate finance, and within the classes, anecdotes and ethical principles will be illustrated.
I think this is a fantastic idea. Everyone knows that going into a Business Ethics class, the basic idea is to do the right thing. The disconnect lies in taking these classes and practicing the ideas in real life. Stressing ethics in regular business classes lessens the disconnect, and thus enables students to make better decisions in general. I'm curious as to what you guys think about this concept.
Are greed and/or stupidity/lack of self control not at all to blame?
He's an idiot, science is amoral, not immoral. The bigger issue is firm culture, Phil Zimbardo, who did the Stanford Prison Experiment, said sometimes it's the barrel not the apple that is rotten. Also, I have to wonder can you really teach ethics, I mean either you have them or you don't.
Professor Zingales is most certainly not an idiot - he is one of the most brilliant (and provocative) professors on Booth's staff.
Feel free to disagree with his philosophies but they tend to be well researched, well thought out, and well communicated. He has a great podcast as well. Here's his book:
https://www.amazon.com/Saving-Capitalism-Capitalists-Establishment-Pros…
By the time most people are in business school, they've already formed the core of their approach to ethical situations. Correlation ≠ causation.
Agree. Ethics is not something you teach. Maybe you can make an introduction but that's about all.
Respectfully disagree. Schools are a great place to facilitate discussion about ethics. Some things are clearly wrong, people know it, and do it anyway. There's very little ethics education can do about that. But business tosses plenty of ethical gray areas at you, and the opportunity to discuss those hypothetical situations with others before you face them can be useful. Most people want to behave ethically, but sometimes it's not obvious how. I think schools can do its students a service by showing them a framework for making their own decisions rather than prescribing that which is always right and always wrong.
Blaming business schools for what is wrong with capitalism is giving business schools too much credit.
There have been plenty of bad actors in business, and it hardly has anything to do with "what is being taught" or whether they have even gone to b-school at all.
Those who "break bad" are fascinating. Because unless one is insane, no sane person believes that they are fundamentally "bad" or immoral, even as they commit egregious acts.
What happens with bad behavior is that we find ways to justify it, to compartmentalize it.
If you were to interview some of the worst actors in business - Bernie Madoff, Jeffrey Skilling, Denis Kozlowski, etc. -- and ask them "are you an immoral person?", most if not all of them will say no. They will try every which way to explain how their past behavior was justified by their jaded perception of their circumstances.
What happens is a slippery slope of cynicism: once you can justify one moment of bad behavior, it makes it that much easier to repeat that bad behavior once again if given the opportunity. And the more you repeat it, the more it becomes a habit. I mean, I doubt the young Bernie Madoff coming out of college planned to devolve into a scam artist who stole money from people; I doubt Jeffery Skilling coming out of HBS intended to build his career on fabricating and lying. I doubt Raj or Anil in their 20s decided that their version of the American Dream would end up in a mess that they're in as middle aged adults. But it starts with the small white lie, which leads to a bigger lie, which becomes a habit and before you know it... jail.
The root of behaving badly is losing faith that doing good is of any use, and in the process not holding yourself to a higher standard (and instead stooping to the level of how you perceive others to behave). If you believe that everyone else is stealing, it makes it that much easier to justify to yourself that stealing is permissible.
This is G.O.L.D
Nothing to see here, move along
Correlation does not imply causation. A disproportionate number of ethical breaches in the US corporate world seem to have been committed by US citizens. Could the passport be to blame? Quick, let's only hire internationals for management positions!
I like Clayton Christensen's theory in his latest book (as also described above): that it is a slippery slope that starts when you one day are faced with two equal NPV options with returns frontloaded in one, but ethically questionable, and the "right choice" taking more effort, time and with lower payoff. Once you go 1% you rapidly continue down that route, not necessarily because it is easier, but because you need to (e.g. Leeson at Barings who discovered the hard way why good trading skills are so valued in the marketplace - all he wanted initially was to not get screamed at for a minor error).
Is there really even an "ethics problem"? For every layoff, price hike, service reduction, etc. there is a CEO doing his job. The corporation exists for the benefit of its shareholders. An executive would be derelict if he did not take every step to maximize shareholder value.
There are certainly real criminals, but Madoff-esque people have always existed. I don't think Charles Ponzi had a MBA. 2 years in business school does not turn somebody into a criminal. But you certainly get people with criminal tendencies who enroll in business school.
For every graduate of Wharton making money off of something sleazy, there are probably 2 or 3 non-target grads making money off of something sleazy. Here are just a few off the top of my head (some of whom were already mentioned): Allen Stanford, Bernie Madoff, Ivan Boesky, Dick Scrushy, Dennis Kozlowski, Bernie Ebbers...
I think we can solve this conundrum with simple logic. Bad ethics existed long before business schools, therefore bad ethics are not caused by business schools.
In the mid-2010s, as I think the concept of ethics was just creeping into business school consciousness, I took a course at Booth focusing on management decisions with one class focusing on ethics. I’d been frustrated with how the grad school administration instinctively approached the students as children who needed to be yolked, instead of as (obviously very) serious adults who are way past counseling on right and wrong. The professor eventually opened the floor for thoughts from us students regarding the idea of emphasizing ethics more in the curriculum.
This was one of the rare instances that I was confident in my stance and that others agreed with me even if they didn’t pipe up - which I totally understood. Implicit moral intimidation is rife across our country (even back then), especially in academia. I basically kept pushing back on the notion that ethics had any place in business school. I asked who could teach morality, as if they’re the arbiter of right and wrong? The professor claimed that if bad actors in news headlines are called out for being prestigious business school alums, it’d reflect poorly on those institutions. He thought that if they could point to an institutional emphasis in “ethics” that they’d have an out. Though I wasn’t sharp enough to point it out in real time, I realized that he was showing his true motivation with that comment.
Basically, it’s preemptive genuflecting to the outrage mob to just cover the institution’s butt, not to provide the students with the most effective education in business. Plain and simple. Could anyone claim, with any seriousness, that taking people 25+yo with years in the real world effectively change the bad ones to good? If it’s a course, is there any doubt that it’d just be a GPA booster? I agree with an earlier poster that this is giving business schools wayyyyyy to much credit for forming people. And this was at UChicago - a top institution that I think is much less susceptible to the vagaries of cultural fads than most others.
Good post. I'll play devil's advocate here.
No one expects ethics education to change "bad people to good people." The idea is to make good people pause and think before they do bad things, and maybe prevent them from doing those bad things. The indirect consequences of one's actions in business can be very difficult to understand, and reasonable minds can differ about what practices are and are not ethical. A good ethics curriculum would make you think about your own moral framework, hear how your classmates have constructed their moral framework, potentially refine your beliefs, and then ask yourself what business practices are consistent with your ethics and what practices are not. This exercise can prepare you for that moment when your boss tells you to do something that you're not quite comfortable with... if you've given business ethics some thought, you may be better equipped to make a stand when one is needed.
This isn't to say that b-schools are in any way responsible for bad ethical behavior, and we can absolutely be cynical about their motives. But I think there is such a thing as a good ethics curriculum, and many students actually want it.
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