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Remaking Ethics Education
 Most business practitioners you’ll meet are honest, fair-minded and generous,
but that’s not the way business people are perceived these days. Hollywood is a
good barometer of public opinion. Conniving schemers of the Gordon Gecko, Wall
Street high-roller variety are pop culture staples, but recently even small
business owners have been tarred with the same brush. In indie film “Sunshine
Cleaning,” cleaning-company-owner Rose is surprised when her father puts a false
starting date on the side of the cleaning truck to convince customers the
company has been in business for a long time. When Rose objects to this
bold-faced lie, her father tells her cheerfully, “But it’s just a business lie,
it’s different from a life lie!”
It’s revealing of the way society views business leaders: more than willing
to shade purple prose into white lies if it will gain them a bit of advantage.
Whether or not this view is justified, there’s a deep distrust of all business
leaders, a conviction that anyone in a position of corporate responsibility has
to be coerced into honest and upright behavior. More and more, an MBA is not
being viewed as a badge of honor, demonstrating knowledge and competence;
instead it’s an early warning sign of pernicious greed, corruption and
self-aggrandizing ambition.
It is frustrating for anyone who holds a business degree to see the MBA being
cast in such a negative light. We hear the same frustration from many
hard-working, ethical Smith alumni, who now see their profession tarnished and
worry that talented young people will be turned off from pursuing a business
career.
It is painful to see the scathing indictments of corporate misdeeds that are
now common fodder in every publication and on every TV news show. Business
schools have also come in for criticism—after all, every MBA has a proud degree
from somewhere. Have business schools failed somehow to convey basic ethics to
their students? What have they been teaching all these years? These questions
are now being asked by many of the faculty and leaders in business schools
themselves.
As a result of this self-examination, many business school deans are
beginning to acknowledge that students need a more thorough, more holistic
ethics education—one which takes into account wider issues of social value,
sustainability and stewardship. What are the best business schools going to
teach about business ethics and corporate social responsibility?
It’s an excellent question. But first another question: what is business
ethics?
Business Ethics Redefined
Is it merely compliance—a checklist that ensures the business practitioner
stays out of jail? Under this definition, business ethics exist to provide a
boundary for corporate behavior determined on the basis of law. Many consulting
companies define ethics this way. Their ethics arms serve as compliance
advisories, helping companies meet their legal responsibilities.
But thinking of ethics as a checklist of legal responsibilities is no longer
adequate in the post-meltdown business world. Shrevardavan Lele, Ralph J. Tyser
Distinguished Teaching Fellow of decision sciences, is convinced that business
schools need to broaden their understanding of the term ethics to encompass a
wider range of behaviors that benefit society. “We do our students a great
disservice when we confuse ethics and compliance in their minds,” says Lele.
“Compliance with Sarbanes-Oxley is not about ethics, it is about legalities. It
is about how not to fall afoul of the law. Good law needs to have an ethical
component, but for the most part our MBAs aren’t designing laws.”
Phil Livingston ’79, CFO of Touchtunes Music Corp., actually did help design
the Sarbanes-Oxley legislation as part of his work with Financial Executives
International, a professional association of CFOs, controllers and treasurers.
Livingston feels strongly that compliance is an important baseline for any
discussion of ethics. In his role as CFO of a major corporation, Livingston
found himself in the unenviable position of having to blow the whistle on a vice
president who was clearly in violation of both the law and company policy. It
was a deeply uncomfortable time for Livingston, as the VP was friends with the
company’s CEO; hostility toward Livingston became so acute that he ended up
leaving the company shortly thereafter. The law was a powerful tool that guided
his decision-making.
“Everyone will be asked or pressured to do something that falls into a gray
area,” says Livingston. “If you do get caught, everybody knows and you’re no
longer hireable. People need to study the rules and think about what happens to
people’s careers when they break the rules.”
But it’s clear that when he faced an ethical challenge, legal issues weren’t
the only thing on Livingston’s mind—his conscience was also at work. Donta
Wilson, MBA’05, Battlefield Regional President of BB&T, also described an
ethical challenge where his conscience was his guide. Early in his career he won
a trip because of his high sales performance. In reviewing the data he found
that his sales had been miscalculated, so he informed a supervisor and lost the
trip.
“Doing that very early on in my career built trust with the team I was
working with, and with my manager. That trust created future opportunities for
me, ones I might not otherwise have gotten as such a young person,” says Wilson.
Everyone who works in the business world expects to face these kinds of
issues, and they are relatively simple to navigate. It may not be easy to act as
conscience demands—simple is not the same thing as easy—but most people
understand the right thing to do.
That is the bare minimum of ethical education a student should take out of
business school: don’t break the law. But what about when an action is legal?
Subprime mortgages were legal to sell and legal to buy, and the buying and
selling went on merrily for several years before the weight of all that bad debt
collapsed the economy. But many people now believe that lenders and sellers may
have been acting unethically, even if their actions were legal. Certainly, there
is no disputing that many people made money by providing mortgages that they
knew were not going to perform.
People can disagree on what ethical behavior in these situations would entail
precisely because there is no legal boundary. In the presence of a regulation,
there is no ethical question about what is right to do: the ethical path is to
obey the law. But when there is no legal boundary, how do you decide what is
right?
First, Do No Harm?
There is no formal consensus on what ethical business practices look like.
Professions like law and medicine have a basic code of ethics by which all
practitioners swear to abide, and doctors and lawyers risk losing their licenses
if they transgress that code. But business leaders don’t have any set ethical
code on which all practitioners agree. Social responsibility is not usually high
up in the minds of corporate leaders when they make business decisions. You
can’t lose your MBA even if you’ve made your fortune by swindling everyone you
know.
Ethics classes also don’t get a lot of respect from students—that’s another
barrier to teaching the subject effectively. “The field of ethics is not really
viewed as a legitimate course of study by business students. It has been seen as
something that belongs in the social sciences or humanities department. Students
believe that people can be perfectly functional business managers without any
formal training in ethics,” says Lele. “So it hasn’t been viewed in the same
way, or considered as important, as courses in marketing or strategy or
finance.”
The Smith School, like many other business schools, is convinced that ethics
education must change to be effective. So we are feeling our way toward a new
approach.
Teaching Ethics: Smith History
If you took an ethics course while at Smith, it was probably through the
accounting and information assurance (AIA) department. Ethics is a natural fit
with accounting, where compliance issues are a key part of the accountant’s
professional life. Business law professors in the Logistics, Business and Public
Policy department also offered a business ethics course at the undergraduate
level: Business, Ethics and Society, which was open to all students but was not
required for anyone but general business majors. In recent years ethics courses
were enriched with role plays and co-curricular activities, and in the last two
years the Freshman Fellows program has offered ethics-related speaker events.
For alumni of a certain generation, Charles Edelson, a professor of
accounting through the ‘60s and ‘70s, is the person they think of in connection
with ethics. Edelson’s commitment to ethics and his reputation for ethical
behavior was so well known that one student reported, “When I have a moral
dilemma I think to myself ‘What would Professor Edelson do?’”
For more recent alumni, ethics at the Smith School is associated with Stephen
Loeb, Ernst & Young Alumni Professor of Accounting and Business Ethics, who has
been at the school for 39 years, longer than any other professor. He first
taught ethics as part of his accounting courses, and later as a stand-alone
elective; it is now required. Under Dean William E. Mayer’s tenure, Loeb helped
develop the ethics experiential learning module (ELM) as part of the MBA
curriculum, a signature aspect of which was a visit to prison.
But the world has become more complex—bigger, faster, stranger. And in the
new information economy, the ethical issues at hand are far more complicated.
Here’s an example: studies by behavioral economist Dan Ariely have shown that
people who wouldn’t think of stealing a dollar bill from a drawer don’t cavil at
taking a Coke from a fridge. It is easier for humans to be honest with money
than with the material things that also cost money. And in an information
economy, most transactions are symbolic. So it was easier for Wall Street CEOs
to rationalize fraudulent behavior, like back-dating stock options, because they
were dealing with symbolic money rather than cold hard cash.
It is vital that future business leaders learn to think their way through
this kind of ethical complexity. And business schools must give them the tools
to do it effectively.
“Past studies have shown that while in school students’ beliefs, and to some
extent their values, move closer to those of their professors, while after
graduation they shift closer to those of significant others in the work place,”
says Susan Taylor, senior associate dean and associate dean of faculty. “That’s
why it is important that our ethics courses provide students with structured
frameworks and multiple exercises to explore their own values, see the impact of
different managerial actions on a variety of constituencies, and debate with
others the appropriate actions in the face of difficult situations.”
Given the changing role of government in business, being sensitive to the
social responsibility born by corporations is more important than ever, says
Gerald Suarez, associate dean of external strategy and Ralph J. Tyser Teaching
Fellow. “In an era of hyper-skepticism, where people are questioning both the
role of government and the purpose of the enterprise, learning how to lead
cannot be separated from learning how to do the right thing. Our focus on
teaching the methods distanced students from the purpose of learning the
methods—to discover how the methods can be used to give back value to society,”
says Suarez.
And the notion of what ethics education encompasses will continue to change,
says Robert Krapfel, associate dean of MBA/MS programs. “What is truly
forward-looking is the notion of sustainability—including the planet as a
stakeholder. We need a conceptual framework that encompasses sustainability, and
that is an arena where academic research is going to be important. We are
redefining what constitutes value to include social value. This is a reflection
of hard business realities—sustainable technologies are where the money is going
to be,” says Krapfel.
While there is agreement among Smith School faculty that it is time to give
students a strong intellectual framework in ethics and corporate social
responsibility, there isn’t consensus on how to achieve that goal. How can the
content be made relevant? How do we challenge students’ thinking without
dictating what they should believe, or what they should value?
The answers will differ for each program.
Undergrads
A committee of faculty members reviewed the undergraduate curriculum last year
and recommended that the school require an ethics course for every undergraduate
student. “We begin an exploration of ethics through a required course early in
the Freshman Fellows curriculum, and are discussing how to extend that to all of
our undergraduate students,” says Patricia Cleveland, associate dean of
undergraduate programs. “We are challenged to find more ways to actively involve
students in the learning process and provide them with avenues for reflection
and collaboration, as a key aspect of their intellectual and professional
development.”
Ethics-related co-curricular activities last year included several ethics
speakers, including BB&T Chairman and immediate past CEO John Allison, and a
well-attended Symposium on Social Entrepreneurship sponsored by the Smith
School’s new Center for Social Value Creation.
MBA
Three years ago, the school began to require an ethics course as part of the
core curriculum. “Content-rich” was the watchword. “Lots of classes, lots of
content, lots of deliverables,” says Lele.
The course consists of 14 sessions. Students first develop a framework for
moral reasoning, followed by 10 weeks of case studies that considered different
stakeholder groups—not just investors and customers, but also employees,
communities, the environment, the international community, and more.
While this core course is rooted in traditional corporate social
responsibility, Rachelle Sampson, assistant professor of logistics, business and
public policy, teaches an MBA elective that is even more
forward-looking—challenging students to consider issues of sustainability and
re-think what constitutes value. “In the context of sustainability, to achieve
change it’s not enough to tell people to do the right thing; we have to make a
business case for doing the right thing,” says Sampson. She believes re-thinking
business models can provide a potent financial incentive for companies to
support sustainability and stewardship. “There are real benefits to companies in
terms of profits. But it can also have a positive effect on a company’s
workforce—greater productivity, lower turnover—when employees feel that their
work has social value or that their company is socially responsible.”
Executive MBA (EMBA)
The Smith School EMBA curriculum is geared around a systems perspective, and
executives learn that all stakeholders are part of the system. Ethical
considerations are addressed throughout the program during mastery sessions,
which take place between regular courses.
Executives appreciate hearing from other executives, so the program brings in
speakers such as former Southwest Airline Chairman and immediate past CEO Jim
Parker, author of “Do The Right Thing.” Parker spoke to a large group of EMBA,
MBA and undergraduate students last spring about the importance of principled
leadership and how that has worked for Southwest.
“Southwest does right by its people, and that is the right thing to do but it
also the smart thing to do. It’s smart for their business,” says Robert M.
Sheehan, Jr., academic director of the executive MBA program
PhD
For PhD students, says Debra Shapiro, Clarice Smith Professor of Management and
Organization and director of the doctoral program, academic integrity matters
more than anything else. Every piece of research a student publishes must be
above reproach.
“Nothing will kill a career faster than misreporting or inflating data,” says
Shapiro. “There’s no coming back from that.” Because the relationships between
students and faculty advisors is so close, most discussions of ethics and
integrity take place in the context of one-on-one mentoring relationships.
Vision for Ethics Education at Smith
However they will be teaching the content, Smith faculty share a common hope:
that students will learn to approach ethics and corporate social responsibility
not from a negative filter but from a positive one. Rather than just trying to
figure out how to stay out of jail, Smith students will choose to use their
prodigious talents for the betterment of society, in their own backyard and
across the globe.
“Why are we here? The Smith School doesn’t exist to teach people how to make
money,” says Sheehan. “It exists to teach people how to create value—for
customers, communities, employees—for all stakeholders, in a way that is
profitable and sustainable over the long term.”
Doing that effectively will require a different, more demanding form of
leadership, says Wilson: “This wasn’t really part of business curriculum in the
past. If you want to reshape the way people see ethics, you need to reshape the
way you teach leadership—to focus on a bigger call and a bigger purpose. You
have to make a profit, but that can’t be the reason why you do what you’re
doing.”
And that is part of what must change about business education, says Dean
Anand. Business schools need to develop a philosophy about their role in
society, a sense of purpose and identity that goes beyond “making money” to
“making a better world.”
It is time for a new paradigm for ethics education, and the Smith School
can’t afford to be behind the curve. Because unlike many other disciplines,
business schools graduate people who have an immediate, profound, lasting effect
on other people’s jobs—and thus their lives. Business school alumni have the
power to use their training, their skills and their ambition to create a better
world. If they leave the Smith School determined only to create a better world
for themselves, we have failed in our responsibility to inspire and equip them.
At its best, the Smith School’s ethics programs will function as an
articulation of our shared ideals, and challenge students to think seriously
about some important questions: What kind of world do we want to live in? What
kinds of companies do we want to do business with? And what kind of people do we
want to be?
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