Business schools are failing society

By Chandran Nair
Ethical Corporation

The financial crisis shows up the shortcomings of a traditional business school education, argues Chandran Nair.

Defending their right to pay bonuses in the recession, bankers have spoken about the need to reward the “best people”. But the reality of recent months has demonstrated that their “best” talent was quite the opposite.

Some are left wondering where, if anywhere, these executives learnt their business ethics. Much of their training comes from the cut and thrust of work. But a large proportion can be found being taught in business schools.

It now seems a fundamental failure of business school ideology has been to focus on how companies can make the most money with minimal regard to social consequence.

According to post-school recruitment data from Harvard Business School, 45% of graduates from the class of 2008 went into financial services, a slight increase over the previous year. In 1937 three Harvard graduates, or just 1% of the class, went into securities directly from business school.

Acceptance at a first rate business school is generally understood to mean a substantial salary increase on graduating. According to MBA.com, business school graduates last year received a median salary increase of 39% over pre-graduate degree salaries.

Road to riches

Today business schools are ranked according to the incremental increases in graduate salaries. The top three ranking criteria on the Business Education section of FT.com, for example, consist of weighted salary, salary percentage increase and employment percentage.

Rankings for Executive MBA courses consider return on investment by looking at pay five years after graduation minus tuition and forgone salary while in school.

Further, many students – especially in North America – believe that the biggest benefit of going to business school is the bonds forged with classmates. There is an underlying belief that members of elite cliques can help each other make more money.

Indeed, business schools often advertise themselves based on the cache of their influential alumni networks, to whom prospective students may one day gain access for business deals and/or career advancement.

The rhetoric of ethics may be in vogue in business schools, as it is in business itself, but the next generation of executives continues to be trained under an ethos of entitlement, with a disposition to exploit rather than add value to society.

Lessons in citizenship

The challenge now for business schools, as businesses in their own right and with their own social responsibilities, is in turning out graduates who contribute value to society and supporting them in dispelling archaic notions of entitlement.

Professors and mentors share the responsibility of instilling in students a greater sense of humility in a changing global environment. In order for business schools to redeem themselves and begin to add real value to society, there are a few key things schools can and should do.

First, business schools must recognise the need for greater honesty at an intellectual level in dealing with the role of business in society and within a resource-constrained planet.

These are academic institutions, after all, and must promote business thinking that is to the benefit and not the detriment to the common good. Graduates should emerge from business school with a greater acknowledgement of their professional role and responsibility in global challenges.

Second, business schools must stop glorifying professional success through the simple and exclusive metric of monetary gain.

Rather, if schools do their jobs properly, their graduates will be adding real value to society and their evaluations should be based not on short-term performance metrics but instead on measuring more intangible long-term impacts, such as improving quality of life and creating truly sustainable businesses.

Mainstreaming ethics

Finally, in coursework and thought leadership, schools need to fundamentally integrate the reality that there are limits to growth in a consumption-driven capitalist economy.

Continued denial of this fact must be overcome if future business leaders are to confront the challenge of our times, such as climate change and water shortages, through innovation.

The new business landscape that emerges over the next two to five years as the global financial drama plays out will be very different from the old. It will require new perspectives that are still not taught in the majority of the business schools today.

Business education in the future will need to address and prioritise a far wider range of perspectives to counterbalance the current prevalence of ideas about money making.

Schools that get it right will recognise that there are substantial rewards awaiting those who actually contribute to society rather than simply training young leaders to exploit it.

Chandran Nair is the founder and CEO of the Global Institute For Tomorrow.