A respected dean of a top business school in Europe addressing the MBA Alumna Association said most top B school graduates are being blamed for the global financial meltdown of 2008 and for the resurgent protectionism, bank bail outs and poorly targeted national level stimulus packages that are distorting competition and incentives to the detriment of developing countries.
This criticism perhaps is justified when people like George W Bush who is partly blamed for the banking crisis, Andy Hornby, former CEO of the failed UK Bank HBOS, Rick Wagoner, CEO of nearly bankrupt General Motors and Jeff Skilling, disgraced CEO of Enron, later convicted of fraud had earned a MBA from Harvard Business School.
In addition, Allan Mullay CEO of the Ford Company who was severely criticized for his $21 million compensation package holds an MBA from MIT. Interestingly, many of the top executives in the world who are blamed for the banking crisis and the crisis on Wall Street – are graduates from some of the leading Business Schools in the world. They have in effect demonstrated excessive self-interest and self-preservation, with no sense of limit or shame in pursuit of excessive gains. The career choice of recent years for top MBAs was a lucrative post in private equity on Wall Street or in London. Consequent to the financial crisis many top business schools that charge in excess of $200,000 are having to face up to the fact that they helped to create the mindset and the business mindset that led to this unprecedented crisis in the financial markets.
A torrent of letters from around the world has pointed the finger at many MBA degree holders and to the B schools that have produced them. Harvard Business Schools gets about 8600 applications each year for 900 places, despite the estimated cost exceeding $200,000. Until the recent global crisis holding a MBA from an exclusive most expensive B School conferred a Midas touch to every decision the MBA holder made and many of them got way with many excesses and extravagances because many boards felt a top MBA graduate could do no wrong.
However, with many people beginning to criticize the top B Schools for turning out unscrupulous graduates, the likes of Hornby and Skilling many B Schools are admitting that fundamental change is needed to the way the course is conducted and taught. In fact, the Harvard Business School dean admitted to these misgivings, saying the challenge now is to work out how to develop leaders who are better next time round. In fact, to mitigate the criticism some business schools have already introduced a business school equivalent of the medical profession’s Hippocratic Oath.
Perhaps the biggest problem many business schools have is that the course is competed in 12 to 24 months and there is very little time to inculcate values or the traditions of some of the top B schools. While many B schools teach a wide range of managerial skills to use in all kinds of organizations, many of them do not teach a set of values that promote good business or corporate citizenship.
Society is very unlikely to tolerate business excesses of recent years or the narrow political or economic agenda that supported business expansion. Business schools will therefore have to introduce courses in professional ethics, corporate social responsibility and sustainability and these courses will have to become mandatory in any MBA course. Most business schools will also have to take a lead role to redefine what good business is and identify the business practices that promotes good business.
Then the economic philosophy that defines/underpins courses in financial management/ROI needs to debated and redefined to prevent self-preservation and to put a stop to the problem of limit pursuit of abnormal profits. MBA courses should also teach graduates how to manage and balance stakeholder interest. Therefore, the time has come for B schools to promote moral and spiritual awakening among their faculty members so that they can get ready to prepare the next generation of business leaders who will reinvent capital markets and create a new bread of capitalism.
B Schools also need to ensure their students have a sense of history. In fact, in the US, Corporate Social Responsibility had its roots in the protestant ethic and the Quaker heritage as seen in the contributions of James and George Wilson and the Clark family of 19 th Century Europe. Later to be followed by the Cadbury brothers in the UK. In the US in the early 1900s Andrew Carnegie and John D Rockefeller led the way for the establishment benevolent foundations for the distribution of private wealth for public benefit. Also Henry Ford the father of the world auto industry led the way by saying that a business that makes nothing but money is a poor kind of business.
Today many civic organizations have challenged the way people in business and government nurture and harness businesses the world over and have responded in a very hostile way to the many perverse incentive schemes businesses have had that encouraged businesses to act in a shortsighted way and engage in excessive risk taking. This challenge has led to various attempts to develop ways to make businesses more responsible and responsive to society.
The theories and practices underlying the creation of responsible businesses have numerous localized historical and cultural roots. The current CSR agenda builds on these histories and recognizes Individuals working in companies, NGOs, Trade Unions and other organizations such as trade chambers with different levels of power, commitment and scope need to ‘Promote Social, Environmental and Ethical Business. B Schools therefore need to urgently reinvent themselves and take a number of initiatives to redefine the DNA in the MBA with asp ects of business ethics and humanities.
If the B schools do not address these fundamental problems, they will not be able to win the confidence of society and the world will not have the intellectual capacity to restore the global economy to sustainable and robust economic growth again. We should be happy that business gurus like Professor Dave Ulrich through his leadership code and some others have begun to address some of these critical fundamental issues.