Hot air ballons over east London
On the evening of Wednesday 20 May 2015 at the invitation of the World Congress of Faiths I delivered a keynote speech ('The Value of Values to Build a World for the Common Good') at their Annual General Meeting which was held at The Alumni Theatre, London School of Economics.
It was very telling and ironic that as I was delivering my lecture, shedding light on what has gone wrong with the so-called modern economics, the values-less business education and more, the breaking news was that despite what has happened before and since the financial crash of 2008, the banks have been continuing and deepening their corrupt activities. In order to inflate their profits and increase their bonuses significantly, they have jeopardised the global economy and have endangered the livelihood and well-being of billions of people. This time the culprits were engaged in rigging the $5.3trn-a-day foreign exchange market. "If you ain’t cheating, you ain’t trying,” one Barclays’ trader is noted to have said.
It is no secret that the great majority of these people at the banks and indeed elsewhere in business have MBAs from the so-called “prestigious/top” business schools. These schools shape and perpetuate the business culture and the aspirations of their graduates.
Today we are facing the most severe economic crisis since the Great Depression. There is plenty of blame to go around. As suppliers of ideas and talent to the business community, business schools need to accept some responsibility.
As noted by many, ideas and tools—exotic financial instruments, poorly designed compensation plans, models of corporate leadership that value leaders’ charisma over substance, an uncritical embrace of laissez-faire models, and much more—were/are taught to MBA and executive-education students without considering whether these idea and tools would contribute to a firm’s long-term well being or endanger the legitimacy of the global economic system and values.
Time is now to question the way business schools are ranked: Are they ranked according to how much “dosh” their graduates make, or according to how much they have contributed to the common good, making the world a better place? These are for sure the Big Questions.
2008 financial crisis holds lessons for business schools
Business schools are failing society
A Thoughtful Reflection from a Businessman
Chandran Nair, CEO& Founder
Global Institute for Tomorrow (GIFT)
“Defending their right to pay bonuses in the recession, bankers have spoken about the need to reward the “best people”. But the reality of recent months has demonstrated that their “best” talent was quite the opposite.
Some are left wondering where, if anywhere, these executives learnt their business ethics. Much of their training comes from the cut and thrust of work. But a large proportion can be found being taught in business schools.
It now seems a fundamental failure of business school ideology has been to focus on how companies can make the most money with minimal regard to social consequence.
According to post-school recruitment data from HarvardBusinessSchool, 45% of graduates from the class of 2008 went into financial services, a slight increase over the previous year. In 1937 three Harvard graduates, or just 1% of the class, went into securities directly from business school.
Acceptance at a first rate business school is generally understood to mean a substantial salary increase on graduating. According to MBA.com, business school graduates last year received a median salary increase of 39% over pre-graduate degree salaries.
Road to riches
Today business schools are ranked according to the incremental increases in graduate salaries. The top three ranking criteria on the Business Education section of FT.com, for example, consist of weighted salary, salary percentage increase and employment percentage.
Rankings for Executive MBA courses consider return on investment by looking at pay five years after graduation minus tuition and forgone salary while in school.
Further, many students – especially in North America – believe that the biggest benefit of going to business school is the bonds forged with classmates. There is an underlying belief that members of elite cliques can help each other make more money.
Indeed, business schools often advertise themselves based on the cache of their influential alumni networks, to whom prospective students may one day gain access for business deals and/or career advancement.
The rhetoric of ethics may be in vogue in business schools, as it is in business itself, but the next generation of executives continues to be trained under an ethos of entitlement, with a disposition to exploit rather than add value to society.
Lessons in citizenship
The challenge now for business schools, as businesses in their own right and with their own social responsibilities, is in turning out graduates who contribute value to society and supporting them in dispelling archaic notions of entitlement.
Professors and mentors share the responsibility of instilling in students a greater sense of humility in a changing global environment. In order for business schools to redeem themselves and begin to add real value to society, there are a few key things schools can and should do.
First, business schools must recognise the need for greater honesty at an intellectual level in dealing with the role of business in society and within a resource-constrained planet.
These are academic institutions, after all, and must promote business thinking that is to the benefit and not the detriment to the common good. Graduates should emerge from business school with a greater acknowledgement of their professional role and responsibility in global challenges.
Second, business schools must stop glorifying professional success through the simple and exclusive metric of monetary gain.
Rather, if schools do their jobs properly, their graduates will be adding real value to society and their evaluations should be based not on short-term performance metrics but instead on measuring more intangible long-term impacts, such as improving quality of life and creating truly sustainable businesses.
Finally, in coursework and thought leadership, schools need to fundamentally integrate the reality that there are limits to growth in a consumption-driven capitalist economy.
Continued denial of this fact must be overcome if future business leaders are to confront the challenge of our times, such as climate change and water shortages, through innovation.
The new business landscape that emerges over the next two to five years as the global financial drama plays out will be very different from the old. It will require new perspectives that are still not taught in the majority of the business schools today.
Business education in the future will need to address and prioritise a far wider range of perspectives to counterbalance the current prevalence of ideas about money making.
Schools that get it right will recognise that there are substantial rewards awaiting those who actually contribute to society rather than simply training young leaders to exploit it.”
Giving Voice to Values: Now is the Time for an “MBA Educators’ Oath”
A Reflection by Prof. Kamran Mofid
In the post- financial and economic crises and meltdown, the issue of ethics and corporate social responsibility has taken on greater urgency and relevance. Business schools have an important part to play in this domain. Ethics is fundamental to coping with many of the challenges that will face corporate executives in the future, not least the impact of globalisation, which will throw up a number of leadership dilemmas. However, based on current evidence, the record of the business schools by and large is not a good one. Thus, the big question is: What can be done about it?
I firmly believe that, this will not come about, so long as we do not have a “Hippocratic Oath” for those teaching at the business schools. Ethics, morality, spirituality, and their incorporation into teaching, is too important to be left to a system not accountable to certain checks and balances, as well as points of reference and accountability.
As we all know, today, business education is much more scientific than it was in its early years. It has been made more rigorous by the rising influence of statistics, mathematics, IT and economics. I believe in analytics. Most organizations need more analytics. That goes without saying.
But, and indeed, as the current and persisting crises clearly demonstrate, it is a folly to pretend that analytics are a substitute for values and vision. Indeed, an over-reliance on analytics leaves managers poorly prepared to lead in moments when statistics obscure the full human dimensions of a choice.
The issue is not that MBA programmes haven't taught leadership and ethics and corporate social responsibility. They indeed have. But most do it poorly. As it has been noted by many observers, it seems that leadership courses tend to emphasize such things as social influence and public speaking, while ethics courses often focus on legal aspects. The moral, philosophical, spiritual, cultural, religious and civilisational aspects of ethics are by and large ignored. This leaves the connection between values, leadership and action much underdeveloped, least understood and most confusing to the students. Leadership entails thinking beyond the day's crises to focus on the longer term, the bigger picture, grasping the impact of decisions on broader constituencies, and sensing a responsibility that goes far beyond the immediate result of a decision, a responsibility far beyond profit maximisation, cost minimisation and the highest returns to the shareholders, for example. True leadership involves not merely grasping the larger ramifications of business decisions and merely considering the greater good of society, but of possessing values whereby the common good is seminal and truly cared about.
MBA students are toooften unaware of the essence of ethical leadership, too unaware of the cultural and spiritual dimensions of ethics, too unappreciative of the role of institutionsand structures which govern, manage, and enable markets. For example, in workshops at a leading business school, students were asked to list the qualities that a successful business leader should possess. While vision and business acumen are invariably among the first qualities listed, honesty and responsibility for others emerge only after considerable discussion. Meanwhile, when asked about the characteristics they most value in human beings, compassion, generosity, kindness, sympathy, empathy, integrity, responsibility and the common good always appear at the bottom of the list. Likewise in leading business schools students are unable to trace the connection between ethics and culture, between well functioning markets and the larger social-political system.
In addition, an MBA education needs to be grounded in a realistic view of when markets work well and when they do not. Standard economics teaches that markets fail to be efficient in the cases of externalities, public goods, asymmetrical information, and a lack of competition. Even when efficient, markets are not able to provide an adequate social safety net nor are they able to provide for social or economic justice. Markets can not work except in a legal, political, social, and ethical context.
In order to deal with the cases of market failure as well as issues of social and economic injustice, institutions and structures are created at the local, national, and global levels, to govern, manage, and enable the market, without which not only could markets not hope to work well, they likely could not even exist. What it means to be human, to live a good life, to find happiness, are not questions that can be answered by the market alone, or even by economics or business alone. MBA education must be infused with the values and sensibilities of human culture, philosophical and moral principles, as well as with a keen appreciation for the role of government and civil society.
We need to better prepare our students for a values-led leadership. This requires creating a deeper understanding of the difficult decisions they will face, often under enormous pressure. We must make them aware that these decisions will challenge their values, and that, consequently, they need to clarify the values they stand for. We need to make sure they engage in a continuing dialogue with their peers, faculty and alumni, and learn to hold themselves and their group accountable for the commitments, as well as the decisions they make.
In the final analysis, the solution to ethical challenges in business must be a shared responsibility between the students and the faculty. The students have shown us the way: they have presented us with their oath. It is high time we declare to them our own oath also. As educators we must assume more responsibility by providing better, not less, leadership development. Only then might our graduates take an oath they can actually live up to. Below is my own offering on what our oath might look like.
The links below are examples of what an” MBA Educators’ Oath” might look like or could entail:
Kamran Mofid and Steve Szeghi, Economics and Economists Engulfed By Crises: What Do We Tell the Students?
Chandran Nair, Business schools are failing society | Ethical Corporation
Ruth Spellman OBE, A values-led approach ACCA Careers - Career Centre