EDUCATION
Economist

Is the MBA responsible for moral turpitude at the top?





SEVERAL of the corporate scandals that took place in the early years of this decade are currently being replayed in courtrooms from New York to Alabama. The trials of top executives at HealthSouth, Tyco International and WorldCom are reminding the public how unethical was the behaviour of some of the nation's top managers only a few short years ago.

The finger of blame for this behaviour is sometimes pointed at the MBA, the degree offered by business schools from Harvard to Hawaii. Perhaps this is not as odd as it sounds. After all, MBAs lay as thick on the ground at Enron as managerial hubris, and disinterested outsiders are not alone in asking whether there might have been some connection.


In an extraordinary mea culpa, Sumantra Ghoshal, a respected business academic who died last year, argued in a paper to be published shortly that the way MBA students are taught has freed them “from any sense of moral responsibility” for what they subsequently do in their business lives. This, he believed (and other respected academics, such as Jeffrey Pfeffer of Stanford, are carrying his argument forward), is because management studies have been hi-jacked intellectually by the dismal science of economics.

A stout defence of the virtues of economics from a publication called The Economist would hardly be a surprise. But, in fact, this is not necessary to refute the claim that business schools are responsible for moral turpitude at the top of corporate America. As it happens, most of the erstwhile corporate leaders currently appearing in the dock never went near one (see article), whereas many acknowledged champions of business ethics, such as Lou Gerstner at IBM, did.

What's more, many of the top business schools have taken steps to offset any ethically desensitising influence there may have been in their MBA coursework. They have greatly expanded their teaching of business ethics—some by introducing special courses, others in more memorable ways. Tuck School of Business, for example, persuades an ex-convict to come every year to tell its MBA students of his regrets.

The dubious claim that business schools are responsible for the moral failures of their graduates decades after graduation does, however, highlight one widespread misunderstanding about the role and purpose of an MBA.

Mr Ghoshal and his supporters are right that top business schools strive for academic respectability, and that this has led them to rely heavily on economic theory. But they are wrong to criticise this. As long as schools are teaching academic degrees (and, after all, the letters MBA stand for Master of Business Administration), they have to teach the most compelling business theories around. It may be a pity that these are mostly to be found in economics. But that is the fault of other disciplines for not coming up with ideas to rival, for example, agency theory or the maximisation of shareholder value.

The real problem arises when students, or their new employers, believe that an MBA is, somehow, a qualification for business leadership. It is not, nor could any academic degree provide this. Law or medical degrees are necessary but not sufficient for the making of outstanding lawyers or doctors. In a similar way, a good MBA degree can help provide a student with analytical skills and theoretical knowledge useful to a business career. But becoming a successful leader of men and women in a turbulent business world requires maturity and wisdom. Happily, there is no degree programme for those.