Sunday, May 31, 2009

MBAs and Ethics

Yesterday's New York Times had an article on the graduating Harvard MBA class. About 20% of the class have signed off on an ethics oath, which you can find here:
http://mbaoath.org/
If you follow the lead, you will find the list of what these students have promised to do:
  • I will act with utmost integrity and pursue my work in an ethical manner.
  • I will safeguard the interests of my shareholders, co-workers, customers, and the society in which we operate.
  • I will manage my enterprise in good faith, guarding against decisions and behavior that advance my own narrow ambitions but harm the enterprise and the societies it serves.
  • I will understand and uphold, both in letter and in spirit, the laws and contracts governing my own conduct and that of my enterprise.
  • I will take responsibility for my actions, and I will represent the performance and risks of my enterprise accurately and honestly.
  • I will develop both myself and other managers under my supervision so that the profession continues to grow and contribute to the well-being of society.
  • I will strive to create sustainable economic, social, and environmental prosperity worldwide.
  • I will be accountable to my peers and they will be accountable to me for living by this oath.
It sounds awfully good and I should probably rejoice at this rebirth of ethics in business, but I am not particularly moved for the following reasons:

1. Life is about making choices: From the sounds of this oath, these students plan to keep everyone happy for the rest of their lives. I wish them well, but the real questions will come up when the interests of stakeholders clash (stockholders versus co-workers, stockholders versus society). They will have to make hard choices and someone will be unhappy, oath or no oath. This sounds about as good as stakeholder wealth maximization and about as useless.

2. Self interest is not a bad thing: Embedded in this oath is the view that self interest is a bad thing and that we should be serving broader interests, but whose interests are those? Ultimately, the most productive societies have been built around individuals acting in their own self interest. I think the bigger challenge is to set up processes where what we do in our own self interest works to further the collective interest. It suggests to me that we need to expand reading lists in MBA programs to include a little more Adam Smith and Milton Friedman... and a little less of whatever is on the list right now.

3. Watch out for those who are holier than thou: I don't know the people who signed this oath and I am sure that many of them are well intentioned, good people but I do remain suspicious of people who sign oaths like these. My experience is that the people who indulge in breast beating about honor, ethics and honesty are often the least dependable in the face of an ethical challenge.

Finally,the article finds the obligatory ethics professor to quote. Not surprisingly, she proclaims the beginning of a new age of ethics in business. That's baloney. After every crisis, this type of talk abounds, in conjunction with business schools flaunting their newest ethics offerings. Notice how frequently they have to make these classes required courses rather than electives. Tells you something about how much of it is window dressing... Human beings are human beings, and by the time we get them in MBA programs, their ethics are already well formed. It takes incredible conceit to think that we can put grown ups through an ethics class and change their definitions of good and bad...

9 comments:

tenalirama said...

:) could not agree more

Kfnr2003 said...

Seems to me at least this particular Ethics Oath would be more accurately described as an Altruism Oath. I wonder if Microsoft, Walmart, Apple, Amazon, etc. would exist today as world class wealth creating companies if their respective founders upheld such an oath both in "word and spirit" when establishing their companies. I suspect not.

What is "environmental prosperity" by the way? Assuming it can be defined how would one measure it? On a positive note, evidently Atlas Shrugged is flying off the shelves....

piyush said...

Dear prof., wats ur birth no. ?

birth no is the toatl of birthdate
like mine 3(12th may= 1+2) ...
plzzzz plzzz plzzz ... u hv to tell me...
:)
thanks a lot

Nirupam @ searching life said...

Agreed sir, mbaoath initiative in itself seems not so great, and yes the fact is true that B schools have to convert elective courses aimed at business ethics into structured ones. At the MBA level, the ethical ego is almost formed; one wants to use his elective courses for specializing, hardly would anyone volunteer to learn it, but then what's the most apt way to go about some real good ethics training to MBA's?

randomizer said...

CFA ethics are good enough for me :)

Mahesh Sethuraman said...

What is Ethics anyway? The only definition which I think makes sense is "Knowing better and doing worse". This is taught in class 2 as part of moral science - if u dint learn it then there's little chance that u'll learn it better at a later stage in life.

And by the way this kinda "baloney" also presumes bad intentions are the causes of most trouble in the world but I am not so sure about that hypothesis in the first place!

bhavin said...

Sir, I would also like to know your birth no. plzzz. I presume it to be 6. But still if you could confirm it plzzz!!!

Aswath Damodaran said...

September 23...

Alpesh said...

Agree with the poster that said that this sounds a like an altruism oath. There is a difference between being a responsible business person and an altruistic "do-gooder". The former will do a lot more for the society than the latter, good intentions of the latter notwithstanding.