The Business of Business (Schools)

This summer’s business scandals have focused much attention on how American corporations are managed and led, but little has been said about how those who do the managing are trained in the first place. Over the last few decades, university education in business has grown from a fringe collegiate pursuit for the vocationally motivated into a major academic industry. The number of MBA degrees awarded annually in the U.S., under 20,000 in the late 1960s and representing only 10 percent of all master’s degrees, topped 100,000 in the late 1990s—by then almost a quarter of all master’s degrees.

Many who have been linked to ongoing scandals have business school degrees adorning their résumés. So should we count colleges of business among the parties responsible for expanding revelations of corporate malfeasance? (As one who makes his living on the faculty of Vanderbilt’s management school, my interest in this question is something more than casual.) In his conspicuous Wall Street speech on corporate integrity a few weeks ago, George W. Bush implied that the answer might be yes. Buried in his text was this: “Our schools of business must be principled teachers of right and wrong and not surrender to moral confusion and relativism.”

Mr. Bush is right to suspect that business schools are complicit, but the problem is not one of moral confusion. Business schools are, if anything, paragons of moral clarity—their foundation being devotion to the morality of free market capitalism and deregulation. The nation’s MBA programs are beholden to the corporations who hire their graduates to such an extent that the measures of a school’s success are more likely to be job placements and starting salaries than intellectual development or educational achievement.

Rather than providing an education about the social institution of commerce, business schools put most of their energy into socializing their students to be members of the club: ambitious, well-paid employees who worship markets and play the game. With few exceptions, MBA students learn how to manipulate consumer choices, but not about the ethics of psychological exploitation. They learn to price derivative financial instruments, but not to assess their economic and social consequences. They learn how to construct lavish compensation packages, but not how to evaluate the impact of wealth and income inequality on macroeconomic stability and social progress.

Many of the corporate knaves who now find themselves publicly branded as rapacious, self-centered and blind to the brutal effects of executive-suite greed on ordinary workers, were applying the prevailing ethos of too many business school classrooms—that deregulated markets are the highest form of social good; that wealth and power properly accrue to those with the know-how to exploit market forces for their own benefit; and that people disadvantaged by political and economic inequality have mostly themselves to blame for their lack of industry and ambition.

There is some speculation that the current climate of scandal will inject a new focus on ethics into business school classrooms. On its face, that might not be a bad thing, and it’s long overdue. MBA programs sell professional credentials, but unlike their graduate professional counterparts in higher education—law and medicine, most notably—they generally don’t insist that their students study professional ethics. Of the nation’s top 15 full-time MBA programs (from Business Week’s most recent rankings), more than two-thirds have no formal course requirement in ethics or professional responsibility. Less than a handful require an actual for-credit course; a few more include a small piece on ethics within ungraded pre-program workshops. (Vanderbilt’s MBA program has no ethics requirement, but somewhere between a quarter and a third of its students voluntarily take an ethics elective before they graduate.)

On all but a couple of these business schools’ Web sites, where their public images are principally constructed, there is no hint that the profession they serve is under an avalanche of scandal and corruption. One is about as likely to find cynicism about corporate integrity on WorldCom’s Web site as on that of a top b-school.

Trade schools have their place, and we shouldn’t be surprised that tuition-paying students prefer the existence rather than the absence of job prospects following a professional degree program. To keep their students happy and ensure their own economic viability (which admittedly includes paying my salary), business schools blithely peddle to corporate patrons not only the future labor of their students, but also endowed professorships, classrooms, building wings and even the very names of their schools. As political momentum builds to do something about the largely rigged casino that is modern corporate finance and investment analysis (and remember, the house always wins), business schools find themselves on the outside looking in.

Sure, some b-school professors are out there penning didactic op-eds tinged with moral outrage (what am I, chopped liver?), but at the end of the day, their deans are asking CEOs for donations, not reform. With their minimal focus on the social dimensions of commerce, these schools are generally ill-equipped to rehabilitate the values of modern American capitalism. It is unsettling that the nation’s premier research-oriented universities, devoted as they are to intellectual inquiry for its own sake, are so graciously willing to accommodate in their midst the inveterate vocational ideology of the contemporary b-school. Contrary to President Bush’s view, a little moral confusion is exactly what business schools could use right now.