Paul Danos is dean of the Tuck School of Business at Dartmouth.
There have been innumerable references to ethical lapses among MBA degree holders during the financial crisis of the last few years and understandably so. I believe that what irks many people in retrospect is the fact that the rewards and punishments of the major players did not seem to be commensurate with their roles in the fiasco. Some attribute the disaster to unbridled greed run amok among the financiers, and others put the responsibility on flawed public policy or inadequate regulatory oversight.
No matter who is ultimately to blame, lessons for anyone who purports to be educating leaders abound, and because so many of the bankers involved had MBA degrees, business schools must analyze the whole series of causes and effects, and try to draw conclusions about appropriate modifications to their own programs.
In light of the financial meltdown, I believe that MBA programs would better prepare their students if they could answer "yes" to the following three questions:
- Are students exposed to the fundamentals of ethics and to cases of ethics violations from the real world? I would guess that most top schools give such exposure, and many schools have made ethics and social responsibility required coverage. This approach would address some of the issues around the appropriateness of reward structures and the morality issues related to the growing disparity in compensation within and across major organizations.
- Do students fully understand the responsibilities they take on in leadership positions? Here, schools have much work to do, because the full breadth of fiduciary and moral responsibilities is not well understood by students. This direction would require each leader to approach new assignments with a desire to understand what every constituent expects of him or her, to say nothing about the complex legal and fiduciary responsibilities entailed in top positions.
- Do students have a critical analysis mindset that can guide them in questioning the claims made about models and procedures? Certainly accepting faulty models of risk and market adjustments led many CEOs and regulators astray. Most schools could do much more to give their students the knowledge and courage to evaluate and challenge proposed models. Because the amount of knowledge in the world is growing at exponential rates and can never be mastered, leaders need to be well-grounded in fundamental ways of thinking and making wise decisions.
Of course, business schools cannot control what their graduates do 30 years after graduation, but I believe that we would cut down the probability of collapse in good judgment if all leaders refreshed their knowledge and acceptance of basic ethical precepts; if they fully understood their responsibilities to their constituencies; and if they continually sharpened their critical analysis skills. Therefore, business schools should create continuing education opportunities for executive along these lines, and they should make sure that all freshly minted MBA's have been thoroughly exposed to these principles.