What lessons have we learned from the financial crisis? One unfortunate
lesson is that in a completely unfettered free market—produced, for example,
when the creation of financial instruments outpaced regulation in the
derivatives market—the norm that governed behavior was greed and narrow personal
ambition. Business schools need to accept a measure of accountability for
failing to produce leaders who were able to balance personal financial gain with
the good of their company’s stakeholders and society at large.
Business leaders must operate under the most stringent ethical standards, but
also recognize that they have a responsibility to society. They must understand
that they are working in an increasingly diverse environment: diverse in terms
of global impact, varying ethnicities and cultures, income levels, even outlook
and thought. And business leaders must recognize that they have the power to do
good in society using the business principles they were taught in school,
especially in environments that are resource-challenged.
In the recent past, we taught students that increasing shareholder value was
their main responsibility. The notion of paying attention to the impact of their
decisions on other stakeholders in the system, employees, creditors, customers,
and, of course the planet, has been downplayed. It is a viewpoint that equates
success with short-term, quarter-by-quarter profits. For most managers, the way
to succeed in their companies was to enhance their own private wealth, which was
often tied to the share price.
But more and more, the good of society and the good of businesses are
becoming aligned. It is the responsibility of business schools to help students
make this important paradigm shift.
Often, what is best for society is also profitable. Some company was the
first to offer maternity leave. At the time, this would have been a shocking
move. Maternity leave was good for business, because it helped companies attract
and retain valued female employees. But it was also good for society—better for
children and families.
Doing what is best for society is not profitable in every case, but we must
teach students that ethics, sustainability and social value are always part of
the equation when making decisions. Not everything can be quantified. There are
no metrics for decency. But it is what society expects of us, and our customers
have the ability to discover whether or not we are holding up our end of the
social contract. Consumers are interacting with each other through social
networking technologies, and they are demanding more transparency and social
responsibility from the companies to whom they give their business.
The Smith School is committed to challenging our students to place ethics and
corporate social responsibility front-and-center when they become executives
after receiving their degree from us. Being an ethical business leader is not
merely complying with the law; it should encompass a wider range of behaviors
that benefit society. We need to teach ethics from the ground up rather than
merely focus on how to follow business law or comply with regulations. At the
Smith School, we have decided to expand faculty hiring to include those who have
degrees in ethics and social value, to help us challenge our students to be
greater global citizens.
Business schools need to be aggressive in reclaiming our reputation.
Business-as-usual is not good enough. In addition to rigorous principles and
methods for managing companies, we also need to teach students that they have a
responsibility to contribute to society at large, and give them the tools to do