News at Smith

Senator Paul Sarbanes Talks Ethics with Graduating MBA Students

May 10, 2004


The Smith School's thought leaders, under the helm of Stephen Loeb, Ernst & Young Alumni Professor of Accounting and Business Ethics, just wrapped up their annual MBA experiential ethics course with a field trip to prison to meet inmates convicted of white-collar crimes. On Friday, May 7, just days after the prison visits, almost two hundred second-year MBA students listened even more intently as Senator Paul Sarbanes (D-Maryland) spoke about business ethics, corporate governance, and the progress made since the Sarbanes-Oxley Act of 2002.

Sarbanes began by commending the efforts of the Smith School to provide its students with the study of ethics beyond the classroom. He said, "This [Business Ethics Experiential Learning Module] program gives you the opportunity to move from the abstract to the concrete."

As part of the course, students participated in role-play activities that ranged from whistle blowing to harassment and allowed them to further explore the consequences of even the smallest dishonest behavior in business. Matt Pace, a graduating MBA student, said, "It reminds you that in competitive business you're sometimes asked to do things that aren't necessarily wrong, but in the gray area. And something small can be the first step down a slippery slope."

Sarbanes explained, "Enron was the canary in the mine shaft." The ramifications of the Enron scandal opened the door to serious scrutiny of business processes, checks, and balances, he said.

"Some said," Sarbanes revealed, "you need to punish the bad apples and that would be the end of it." However, Sarbanes and supporters viewed Enron as an indicator of a more widespread breakdown in corporate governance. He named inadequate disclosure provisions, lack of effective auditing, and inadequate funding of the Securities Exchange Commission (SEC) as reasons for the breakdown. The Sarbanes-Oxley Act, written by Sarbanes and Michael G. Oxley (R-Ohio), addressed these and other issues that contributed to the blurring line between tactical business maneuvers and ethical decision-making.

Sarbanes assured students that corporate America post-2002 has seen some results with an adequately funded SEC that has reclaimed its status as the "crown jewel of regulatory agencies." Other outcomes of Sarbanes-Oxley include the registration of 770 U.S.-practicing accounting firms in compliance with the Public Company Accounting Oversight Board (PCAOB), the appointment of Smith Alumnus George H. Diacont as director of registration and inspections, and the involvement of the SEC in investigating the mutual fund industry. The goal, Sarbanes said, is to create and bolster "a system that ensures that honest, transparent, and ethical practices will take place in U.S. capital markets."

The day's second guest speaker William Shepherd, assistant statewide prosecutor in Florida's Office of the Attorney General, discussed the process that takes place during white-collar criminal investigations. In his presentation, Eight Steps to Doing Time, Shepherd provided students with a candid interpretation of what happens to white collar criminals with otherwise spotless records. From being sentenced to prison, to weathering the strain on family relationships, to losing networks of esteemed friends and colleagues, the average white-collar criminal's life dramatically changes once the process begins, explained Shepherd.

However, Shepherd's recommendation was to avoid situations where integrity and ethics are challenged. MBA students as future busine

Shepherd concluded by relieving the students' anxieties about their preparedness to handle situations with uncertain ethical outcomes. He said that Smith MBA students "are very fortunate to be coming out of this school at this time, because a few years ago, the sensitivity around these issues didn't exist."ss leaders, he said, must reflect on the consequences of detrimental decisions, and take action that will separate them from those consequences. The bottom-line, he said, is "no lying, no cheating, no stealing."


About the University of Maryland's Robert H. Smith School of Business

The Robert H. Smith School of Business is an internationally recognized leader in management education and research. One of 12 colleges and schools at the University of Maryland, College Park, the Smith School offers undergraduate, full-time and part-time MBA, executive MBA, online MBA, specialty master's, PhD and executive education programs, as well as outreach services to the corporate community. The school offers its degree, custom and certification programs in learning locations in North America and Asia.

Robert H. Smith School of Business