ethikos: Examining ethical issues in business since 1987

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From the July/August 1987 issue of Ethikos

The Ethical Education of an MBA

“The integrity of American business has been shaken by a wave of indictments of Wall Street traders and by criminal charges against some corporate giants. We who run America ’s business schools are concerned about how people behave in business, and our responsibility to influence positive ethical behavior is considerable and urgent. We must teach not only the skills of management but also the principles of right and wrong.”—Russell E. Palmer, dean of The Wharton School, The New York Times, June 20, 1986.

For the last five or six years, Kirk Hanson has been struggling to have ethical questions raised within the core curriculum of Stanford University’s Graduate School of Business. It has been an uphill fight.

“There’s a view that it (i.e., business ethics) is not quite legitimate, not academically respectable,” says Hanson, who teaches an elective course to second year MBA candidates, “Ethical Dilemmas in Management.”

But now all that may be changing. The recent insider trading scandals on Wall Street have focused attention on what the nation’s business schools are doing to influence ethical behavior”

“There’s more concern,” observes H.J. Zoffer, dean of the Graduate School of Business at the University of Pittsburgh. “Many of the people implicated in the scandals happened to be MBAs. A question arises: Did they act like that because of their MBA training?”

“The insider trading scandals and other news have now made it easier to experiment,” notes Hanson. “Earlier, there might have been some grumbling.”

At the University of Pittsburgh, Zoffer reports they are exploring new ways to “sensitize future business executives to ethical quandaries,” by using computer software and arranging team courses with the University’s philosophy department.

At The Wharton School, they have set up teams of core faculty and students to find ways to integrate ethical issues into the core curriculum. And at Stanford, the orientation program for last falls incoming MBA class included a course on business ethics. In addition, the school has arranged for “four to six guest lectures in business ethics to be tied to the core courses,” reports Hanson.

And recently Harvard Business School received a $30 million gift to support a program on ethics. In an interview with The New York Times, John S.R. Shad, former SEC chairman, who donated most of the gift, said “I’ve been very disturbed recently with the large numbers of graduates of leading business schools who have become convicted felons.

“Some of those we’re bringing cases against are Baker Scholars, Rhodes Scholars, Phi Beta Kappas. It’s the cream of the crop, and that is what is so shocking.”

Others insist ethics are a personal affair

Still, the value of teaching ethics at the nation’s business schools remains open to question. Some faculty believe that one’s ethics are a personal matter—and business ethics should not be taught at all. “There’s a dispute whether it’s useful, and if taught, whether it will have any effect,” notes Robert Lamb, a professor at New York University’s School of Business, who has been teaching business ethics since 1976.

“It’s an interesting question: Does it make any difference what you do with someone already 22-33 years of age?” asks Alexander Horniman, who heads the Center of Applied Ethics at the University of Virginia School of Business.

Dean Zoffer agrees. “Ethical standards are set when a person is young. The best defense is what is done in the church, school and the home—long before they get anywhere near an MBA program.

Still, Zoffer and Horniman say they think business schools do share some responsibility to influence positive ethical behavior. Asked if the schools were doing enough to prepare students for the ethical problems they would face in the business world, Horniman replied: “The answer is a resounding no.

“Business schools are responding to businesses, and there is no significant pressure out there now from corporations.”

“I wouldn’t say business schools have done a bad job,” says Thomas Dunfee, a professor at The Wharton School. “But they can do still more. What we’re trying to do here is find ways to get regular faculty to raise ethical questions in the core course.”

Problems with ethics ‘electives’

Implicit in what Dunfee is saying is that a separate second-year ethics ‘elective’ is not always desirable. “It implies that ethics is somehow outside the basic business functions.” Then again, “The students behave differently in ethics courses.” They are more likely to appear conscientious—at least for the duration of the course.

How might ethics be integrated into core courses? Dunfee suggests one route may be to add a second part that raises new questions to a traditional case study. Take a mergers-and-acquisitions case in a finance class. The first day may be a question of strict financial evaluation. But the second day the professor could raise issues of conflict of interest, say. What if it is shown that some part of management will profit personally if the deal goes through? What do you do now?

At the University of Pittsburgh’s business school, they are experimenting with computer software to change the circumstances of a case, creating new ethical dimensions. Take gift giving. In one scenario, a salesperson pays for a client’s dinner. Now the computer changes the circumstances. Here the company offers to fly the customer to Florida in the middle of winter. “You’re changing the circumstances,” says Zoffer, “going from innocence—to something more. It’s an interesting way of showing how these issues are not black and white, but are shades of gray.”

According to NYU’s Lamb, the task is to “attune students to what they will face” on the outside world. He agrees with Hanson that much of the problem until now has been faculty resistance. “Many schools have a brief mention in courses of ethical issues; a few have an entire course on it. None has it as a requirement.”

The fact of the matter, according to Lamb, is that “the faculty don’t get any points for dealing with ethical issues. They get their promotions, their tenure, for dealing with quantitative issues.”

Who should teach courses?

“The problem all business schools face,” says Hanson, “is the faculty don’t feel competent to deal with ethical issues. The challenge is to find ways to provide guidance.” Nor is this surprising when one is dealing with such “massive issues,” Dean Zoffer notes. “Bribery is a standard business practice in some parts of the world,” for example. How does one deal with issues of ethical relativity? There simply isn’t enough time, even if the faculty had an understanding of the philosophic underpinnings” of our value system.

One solution is to have professional philosophers teach the courses. Indeed, according to Manuel Velasquez, who teaches business ethics at Santa Clara University, about 70 percent of the business ethics courses in the U.S. are now taught by faculty with philosophy backgrounds.

Of course, this may only be exchanging one problem for another. “People in philosophy normally have no background or training in business management,” Velasquez notes, “so if they approach the field without additional training, it’s often with a naiveté about business issues.”

One remedy is to require that the philosophers also take courses in business management. Velasquez, a professional philosopher, for instance, also holds an MBA degree.

A breakdown in moral training?

The task of “influencing ethical behavior” is made more difficult today—at least in the view of some faculty members—because students arrive at graduate school less well prepared—ethically speaking—than students in the past. “The training on ethical and moral issues is considerably less than was seen previously—in the church, the home and the school system,” says Horniman. “And since each has less influence, they don’t support each other. The schools are terrified to talk about moral issues such as promise-keeping, truth-telling, etc.”

There seems to be a popular view that one has to be amoral to succeed in business. Each year NYU’s Lamb presents his class with a case study of a pharmaceutical company that discovers that one of its drugs has been killing 20 people a year. He tells the class to imagine they’re on the company’s board of directors. Do they pull the drug from the market? Or try to “contain” the crisis?

“Invariably, they decide to fight the FDA and sell the drug abroad,” reports Lamb.

Lamb then asks a second question: Would you want your own doctor prescribing the drug?

“Invariably, they say no.”

The case usually “sparks” a lively discussion about ethics and corporate responsibility. Lamb, for one, believes students become “excited” by ethical issues.

Recent trends are positive

There have been some encouraging signs recently. Horniman says the Ethics Center, which has existed for some 18 years, has been increasing in influence at Virginia in the last three or four years. It is now responsible for teaching four required sessions on ethics in the first year of the MBA program.

Wharton’s Dunfee says there has been “a trend since the ‘70s to pay more attention to ethical issues.” Professional journals, such as the Harvard Business Review, are devoting more space to the area as a legitimate management concern.

Lamb notes that the amount of ethical consulting, sometimes billed as “pre-crisis planning,” is increasing, which enhances the subject’s legitimacy.

Furthermore, since 1979, some 30-40 textbooks on business ethics have been published—more than in the prior 50 years. And although only an estimated 15 percent of MBA candidates take an elective in business ethics, some 600 courses on business ethics are now taught either in business schools or philosophy departments across the nation, Hanson notes.

“In general, the universities are more interested, just as the business world is,” notes M. Cash Mathews, an assistant professor at Washington State University, who teaches business ethics within the political science department. ‘To some degree the university reflects the business world.”

Horniman observes that the vast majority of students in business schools have some sort of ethical awareness. “Our task is to reactivate that.”

— Andrew Singer