Business Education's Role In The Crisis Of Corporate Confidence

UNIVERSITY PARK, PA-Dennis Gioia, professor of organizational behavior in the Penn State Smeal College of Business, discussed the current spate of corporate scandals at a special Academy of Management "Presidential Blue Ribbon Panel" on August 11 during the Academy's 2002 Meeting in Denver, CO. The Academy of Management is a leading professional association of scholars dedicated to creating and disseminating knowledge about management and organizations. Gioia's remarks focused on higher education's role in the current corporate environment and what business schools might do to help prevent a repeat of future ethical meltdowns. Below are his remarks:

Dennis A. Gioia
Smeal College of Business Administration
Penn State University

I think one of the reasons I was asked to be on this special panel is because, in a former life, I was an insider at Ford Motor Company during the time of the Pinto Fires case, which had some rather obvious ethical overtones to it. I was the recall coordinator initially in charge of that case. As a result of that experience, I have engaged in some public reflection about the constellation of factors that might have led to a personal and corporate stance that downplayed the severity of the problem we had on our hands. In some ways that situation shares characteristics of the circumstances we now are facing in corporate America.

For our panel discussion here about the current crisis of confidence, I would again like to adopt the role of an insider -- this time, however, as an insider in the business education game, where I have been hiding for the past 20+ years. For my role on the panel, I would like to turn the lens on us as educators and identify some issues and pose some questions about our role and even our possible culpability in the present corporate scandals. In general, I have to say that up till now I have found our field to be a bit complacent and ambivalent about our witting or unwitting contribution to this mess.

Currently, I am involved as a core member of Penn State's new Executive MBA program, its in-residence MBA program, and I teach extensively in Penn State's Executive programs. Also, I have been on the design and implementation committees for these programs. I really do feel like quite the insider in educating people who go on to influential positions in corporations. On the basis of these experiences, I would like to act as "gentle provocateur" in asking some questions about us as management professors and us as possible contributors to the problems we are currently facing in the scandalization of business.

Bystanders

One general observation I have is that too many of us view ourselves simply as bystanders. What's happened around us in the last year provides us with good stories and great examples for use in our classes, but it doesn't seem to go much further than that. Critical commentary is easy in the safety of the classroom. We need to assume, however, that we have a hand to play in trying to right the wrongs perpetrated on so many innocent people who have been harmed. We should not only be critical observers of the events unfolding around us, we should be active change agents in helping to fix it. We should get mad about these things - mad enough to try to do something about it.

How Might We Be Culpable?

First, let's assume that we are culpable, by way of what we do or, perhaps, don't do in our programs and classrooms. Many of us seem to hold the assumption that we have little effect on our students' ethics -- that their ethics are essentially incorrigible by the time they show up on our doorsteps in MBA programs. Why on earth would we assume that, when we assume that we can influence so many other educational values and orientations? Why on earth would we assume that, when we also assume that so many professional people have accepted "life-long learning" as a credo? If we really believe in life-long learning, we should act as if we can change attitudes toward ethical and responsible behavior in positions of organizational leadership.

Let me read you a quote from Amatai Etzioni's recent op-ed piece in the Washington Post on Sunday, August 4. Listen to this:

"A recent Aspen Institute study of about 2000 graduates of the top 13 business schools found that B-School education not only fails to improve the moral character of the students, it actually weakens it. The study examined student attitudes three times while they were working toward their MBA's: on entering, at the end of the first year, and on graduating. Those who believed that maximizing shareholder value was the prime responsibility of the corporation increased from 68% upon entrance to 82% by the end of the first year."

I would ask you to think about that statistic, not as a meditation on morality, but instead as an example of educational influence. Clearly, we do influence people. But, is that the kind of influence we want to have? Undoubtedly, we are training and turning out a very skilled group of people from our programs. But, we shouldn't be surprised if some cynical observers conclude that we are also turning out some very skilled criminals -- armed and dangerous criminals equipped with an array of powerful financial weapons, who leave a lot of gravely wounded innocents lying around because they are bereft of socially responsible values.

Here's What We Are Up Against

I believe that too many business schools don't take ethics training seriously as part of our business curricula. For instance, scores of colleges of business are redesigning their MBA programs these days. Many are reducing the MBA core so that there is more time for specialty electives and "hard" business courses (finance, accounting, economics, and the like). Frequently there is a debate about a place for a class on ethics (or even an ethics "mini-module") in the core. Too often, ethics training is downgraded because of the "opportunity costs" of teaching it in lieu of allegedly more significant business topics. The main reason ethics sessions aren't voted out completely is because the AACSB requires it, but there is often some grumbling about the wisdom of that requirement.

The thing is, the AACSB is non-specific about just how much ethics training is required, so new programs get the minimum perceived to satisfy the mandate without raising eyebrows. In our case at Penn State, that amounts to four sessions taught by Linda Trevino - who is one of the academic leaders in this field. Fortunately, there are people on my faculty like Barbara Gray who teaches ethics in her teams course, Phil Cochran, who teaches ethics in his business and society course, and me, who teaches it in my management and leadership course. But, it's a fight. It really is a fight. The fact is that the teaching of ethics, corporate social responsibility, and other business-and-society courses has been marginalized - assumed to be a trifling requirement that students should get out of the way quickly, so they can get on with other "more important" things. Current events tell us why it should not be that way.

Here's another not-so-obvious culprit contributing to the mess: the business school rankings. We have become so concerned about the criteria that go into the rankings of business schools that that's mainly what we pay attention to. And guess what doesn't show up on these assessments of business schools: ethics training. The rankings don't measure it, so we ignore it. The rankings and their effects on what we do have become a pet peeve of mine. (If you will forgive me for putting in a plug for the Academy's new journal Academy of Management Learning and Education, Kevin Corley and I have an article in there about the effects of the rankings on what we do in business academia. I encourage you to read it). No, the rankings, when they pay any attention to curricula at all, tend to focus on other, ostensibly more vital aspects of programs.

This tendency only reflects the rise of the economic perspective that has become so dominant in B-School curricula. For all the good that economic perspectives do, they nonetheless emphasize a view of the world in dollars, profits, returns, etc., which de-emphasizes other ways we might conceptualize the responsibilities of business.

Let's face it, the call of the share price and shareholder return, as assessed by Wall Street, is very strong. So, the prime directive of corporations has been to demonstrate these kinds of returns. And if returns are not substantively there, then at least the appearance of returns has become a corollary imperative. That imperative has led people to lie, to cheat, to steal, to hide information, and to behave in patently unethical ways, not only for the benefit of the companies they work for, but also for themselves.

The possibility of making one's company look good, not to mention the possibility of amassing great personal wealth is awfully seductive. Conceiving of these activities in criminal terms has not been part of the vocabulary of those subject to the temptations. Conceiving of these activities in terms of the harm caused to other people (employees, unsuspecting investors, etc.) has not been part of the picture. Now they are.

"Perp walks" - the police practice of inviting the media to telecast the arrest of corporate criminal perpetrators - will do that for you. Perp walks are the modern-day equivalent of public hangings, but I hope it also has the effect of heightening awareness of ethical decision making in business. If it does, it will make our job teaching ethics a little easier.

What Can We Do?

In the end, the recent scandals might be (you should forgive the phrase) "a good thing." They are our wake-up call - but only if we assume that we need to be awakened to the responsibility for having a role in helping to cure this disease. And we do.

There should be little question that the pendulum has again swung in the direction of freelance unethical behavior that generates personal and sometimes corporate benefit at the expense of wider societal values and wider business responsibilities. It should be clear that the teaching of practical ethics, especially in MBA programs, needs pronounced emphasis. And not just in stand-alone ethics classes. They seem like afterthoughts that way. Ethical business behavior needs to be a dimension of finance, accounting, and marketing courses, too. Maybe it is not too much to suggest that faculty members should experience a little refresher course on practical business ethics, too.

And, one more time, we need to be teaching that share price and shareholder value are not the only (or, heaven help me, even the main) values that matter. I swear I thought we learned our lesson about the pitfalls of teaching a focus on the short-term returns in the '80's. But we seem to have fallen back into that trap. I thought reading Collins' and Porras' Built to Last showed us much of what we needed to know about the values that make for long term corporate and societal well-being.

Some might doubt that we can have much effect where ethics and social responsibility are at issue. We are so accustomed to thinking in terms of one bad actor contaminating the principles of a group ("a bad apple can spoil the whole barrel") that we lose sight of the much more common and powerful phenomenon that, socially- and organizationally-speaking, a principled group can exert immense pressure on an individual to behave in the best interest of a society. Organizational identities and cultures that internalize ethical principles are much more effective in curbing the wayward tendencies of any given bad actor than classroom preachings will ever be. I am not a preacher; I don't teach Kantian morals and categorical imperatives. Few people find that stuff practicable. I teach practical ethics and I believe I can convince a class that ethical practice is good practice - convince them enough to have them carry it with them into the future.

True, we probably cannot dissuade a corrupt individual bent on financial mayhem by jawboning ethics with him. Where we in academia make the biggest difference is in persuading the overwhelming majority of our graduates to accept the idea that ethical practice is the overriding practice. If that idea takes on a life of its own in a company, employees at all levels create a governing context where misbehavior is so discouraged that it becomes the rare exception. That's what we should be after in our programs, educating the 99% who "get it," not the 1% who seem to believe that anything goes.

Finis

We are a capitalist society that is very much built on a business model (and much of the rest of the world is becoming a capitalist society in the American image). Each of us knows that any business model is at risk if it is perceived to be founded on corruption. I recognize that only a small percentage of corporate leaders and managers are likely to be crooks, but many of us associated with business are being painted with this ugly brush.

Do I believe that we in business higher education are directly responsible for this mess? No, actually I don't.

Do I believe we have played some perhaps unwitting role in it? Yes, I do, so we should not shirk our responsibilities in dealing with it.

Do I believe we can fix it? No, not alone. Legal, media, and political partners, among others, will need to join us.

But, do I believe we have a role to play in helping to fix it? Yep, without question. We need to acknowledge our tacit role in helping to create the mess and in helping to redress it.

I do not, however, believe that role should focus on pronouncements from our deans, our colleges, our universities or even the Academy of Management. Those really have little effect. What is more likely to work is a commitment on the part of individual programs and instructors (that's you and me) to make corporate social responsibility and ethical practice a deeper part of our teaching. We do influence students in their learning about business. We need to work more at influencing their learning about business ethics and responsibility, too.

The starting point for that process is a belief that we can make a difference. If we believe we can't make a difference, you can be quite certain that we won't.

NOTE: A former recall coordinator at Ford Motor Company, Gioia is a member of the MBA core faculty, and has served as a faculty leader in many other executive development programs for both private and public organizations. He also is actively engaged in basic and applied research in organizations. His work has appeared in such journals as the Academy of Management Executive, Academy of Management Journal, Academy of Management Review, Administrative Science Quarterly, , Journal of Business Ethics, Journal of Management, , Organizational Dynamics, Organization Science, , Sloan Management Review, Strategic Management Journal and many other journals, as well as in many book chapters and the proceedings of numerous professional meetings. He also has co-edited two books of original contributions, The Thinking Organization and Creative Action in Organizations .

Editors: Dennis Gioia is at 814-865-6370 or dag4@psu.edu .