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Tuesday, June 29, 2010

Business Schools

Can They Restore Ethical Leadership

A king can easily cross the oceans of the world with kingly duties as his boat, urged on by the breeze of gifts, with the scriptures as the tackle, intelligence as its helmsman and kept afloat by the power of righteousness.                                                          – The Mahabharata.

“It is probably true that business corrupts everything it touches”, said Eric Hoffer, an American social writer. Does it mean that no one should touch business? The answer is: an unequivocal “No”, for that is not what it means. All that it says is: Don’t get corrupted by business. Now, the natural fallout of this is another question: Who should not get corrupted? Obviously: the leader, for it is the leader who heads a business – the organization created to carry out whatever business it undertakes – and steers it through for success.

It otherwise means that business leaders must be conscious not to get corrupted, for it drives away ‘trust’ from businesses. Secondly, “Our market system depends critically on trust.”  Trust is the bedrock of business organizations – all transactions ultimately rest on personal, emotional, and social trust. Which is why, it is often said that it is not desirable to carry out business in an atmosphere of ‘no trust’. It is indeed said that in the absence of trust and cooperation between businessmen, the state would collapse soon. Yet, human beings, as Roderick Kramer observed, are naturally predisposed to trust. This propensity to trust indeed makes each one of us vulnerable to: all pervasive abuse.  

That’s indeed what has happened …

Eroding trust means a great challenge to the wit of nations. That is what indeed happened in 2008 – when businessmen lost trust in Lehman Brothers; the very financial architecture of the US collapsed, pushing it into one of the worst recessions since the Great Depression of 1929. With it, the global economy was derailed, the woes from which it is still struggling to come out.

Business is, after all, an ethical activity – ethics directs businessmen to abide by a code of conduct that facilitates public confidence in their products and services. With globalization, the need for ethics in business has only become imperative, that too, increasingly. But this simple truth does not appear to have had any bearing on the conduct of business leaders. At least, that is what one infers from the current Congressional hearings on Goldman Sachs: lawmakers accused Goldman Sachs of betting against investments they had sold to customers. Nor did the happenings at the JP Morgan Chase have any comfort to offer to the common man about the businesses and businessmen’s conduct. Bernard Madoff, by depriving his clients’ of their hard-earned savings of around $50 bn in a decade-long fraud, has further intensified the aversion of the public for financial professionals.
We are today in such a mood where nations have lost confidence in economic institutions: no longer does one trust investment banks, rating agencies, central banks, including regulatory bodies. Indeed people are more disturbed by the fact that the current mess in the global financial markets is created by leaders who are no less than the alumni of Ivy League business schools – for instance, Henry Paulson, the former CEO of Goldman Sachs and the US Treasury Secretary and James Dimon, Chairman of the Board and Chief Executive Officer of JPMorgan Chase, are the alumni of Harvard Business School. Many wonder if it is the management education – that has focused more on imparting tools to maximize shareholders’ wealth while relegating “value-based leadership and ethics” to sidelines – that is responsible for the current global economic crisis. The general mood of the nations at the mess created in the global financial markets by the business leaders was well captured by Nitin Nohria, the newly appointed Dean of the Century-old Harvard Business School, when he said: “Throughout history, there has been this notion of the honorable business person. Business people have taken pride that they can do business on a handshake. I don’t know where we lost that …” Similar feelings were echoed by Drew G. Faust, University President, when she said: HBS students are “very concerned about the image of business and its place in American life and the world in general.” 

What does it all mean …

Today, business education is being faulted on two counts: one, the leaders turned out by it are  grappling to cope with the problems – blurring of traditional boundaries of businesses and the resulting spillover challenges, hazy business goals, no known  and clear pathways for achieving goals, diverse demands from politicized stakeholders, and no one knowing who is in charge of what –that have emanated from globalized economy; two, leaders turned out by it have “lost legitimacy”, particularly,  in the past decade.

To come out of its current predicament, B-schools have to rejig their education – they have to get it dramatically better; should learn to value what society values most and provide its students a broader range of tools and a broader range of ethical perspectives.  Encouragingly, B-schools appear to be aware of the current public mood, and what they need to do as is reflected in what Nitin Nohria got to say: “With business education at an inflection point, we must strive to equip future leaders with the competence and character to address emerging global business and social challenges.” He is hopeful that the missing leadership bond with employees and public, as is revealed by the recent multiplication of business scandals, can be reestablished and suggests: “What we have to do as a school is usher in what I think of as a new century of innovation, to really remake business education,” so that businesses can have leaders “with the competence and character to fulfill their positions of power and privilege.”

That aside, it must be remembered that leadership is a complex issue, for it needs to be evaluated beyond its ‘utilitarian’ outcomes. To create a more sustainable world, B-schools have to obviously aim at turning out graduates as fully informed and conscientious leaders in every business discipline. For it to happen, B-schools have to give voice to values, without of course, undermining the importance of building stronger analytical skills. Giving voice to virtue involves: designing a new ethics curriculum that is based on both qualitative research and neuropsychological studies, followed by the prescription of Joel M. Podolny – teaching of ‘hard’ and ‘soft’ disciplines simultaneously, and teaching such courses which reflect a mix of academic disciplines, linking analytics to values. Students must be sensitized about value-based leadership by repeated practice so that they tend to take right action when the situation demands.
B-schools must shun their crazy competition for rankings, fee-structures, and quantitative research and focus more on qualitative enquiries. In addition, as  Nitin Nohria suggested in an article co-written with Khurana in 2008, management professionals may be asked to commit themselves to a “code of ethics” like the Hippocratic oath, for it might “create and sustain a feeling of community and mutual obligation that members have toward each other and toward the profession.” Simultaneously, they may even explore withdrawing degrees for violating codes of conduct. Such pressure, it is hoped, would “turn managers into agents of society’s interest in thriving economic enterprises.”

Now, the big question is …

Can ethics be taught? Encouragingly, Plato and Aristotle say: “Yes.” As Aine Donovan believes, most of the students coming to business schools do “come with good intentions and their values fairly intact.” But once they are into the mechanics of business, as Stanely Milgram observed,  they tend to “compromise their values, or overlook the bad behavior of their peers or bosses with a wink and nod.”  But with an education in ethics – multi-coherence theory of ethics and the complex psychological process of reaching ethical conclusions – and  “with an honor code that instills and reinforces a healthy sense of right and wrong”, it is hoped that this can be averted.

After all, an individual’s character is not something that he was born with. It constantly evolves through repeated actions. Aristotle avers that just as to become a musician one needs to practice music repeatedly, of course, with the necessary skill, to be ethical one needs to practice ethics, i.e., repeatedly do ethical deeds. Thankfully, learning is a natural pleasure of mankind – it is inborn.  Learning “extends our lives into new dimensions”, which incidentally,  acts as a greate incentive for learning.  It all means that ethics can be taught in a systematic style by B-schools.


“Capacity for the nobler feelings”, as John Stuart Mill said, “is in most natures a very tender plant, easily killed, not only by hostile influences, but by mere want of sustenance; and in the majority of young persons it speedily dies away if the occupations to which their position in life has devoted them, and the society into which it has thrown them, are not favorable to keeping that higher capacity in exercise.” He also says that no one who has remained equally susceptible to both the classes of pleasures – higher and lower level pleasures – has ever “knowingly and calmly preferred the lower; though many, in all ages, have broken down in an ineffectual attempt to combine both.” In this regard, he blames the “present wretched education and wretched social arrangements” as “the only real hindrance to its [nobler pleasures] being attainable by almost all.”

That being the reality, it pays for leaders to bear in mind three things: one, ‘personality’, that magnetic and mysterious something which one’s followers easily notice and be excited if its is relatable, can only be acquired from within – education or no education, training or no training – it is to be released from within, nothing more or, nothing less to it; two, ‘peace’ – peace of mind, peace of soul… throughout the ages  …great minds and simple ones, all have acquired it by eschewing “fear, guilt, envy, malice, and anger”; and three, the evil associated with these words often attracts, of course,  the weak leaders by its promise of a sense of power – power to accomplish, of course, short-term gains.  And changing attitudes mean changed leadership – ethics would then become its own motive.

We become ethical by being ethical...

History reveals that social improvement is a mere series of transitions by which one practice replaces the other as a universally accepted custom, and there is no reason why it will not continue into future. In which case, all is not lost: societies can hope to overcome the present greed-driven crisis in the markets, and businesses can become honest vocations. But act the leaders must, of course, collectively and constantly, towards nurturing higher pleasures, values, for it is nevertheless a “tender” plant that can wither at the slightest threat.

In the ultimate analysis… 

“A human being is not one thing among others; things determine each other, but man is ultimately self-determining”, asserts Victor Frankel. According to him, what a man becomes is what he has made out of himself. He has both the potentialities within himself – which one is actualized depends on decisions but not on conditions.

Interestingly, Indian ethos insists that man is responsible for his actions – ethics or no ethics is his choice. Upanishadic ethics – that are not only teleological but also hedonistic – preach that man better cultivate an attitude of ‘non-duality’, for it would have a revolutionary impact on his/her conduct: senses are controlled, mind is tranquil, intellect is purified, and one experiences union with all beings, which means there is no opposition, no conflict – either from inside or outside. This automatically leads to mastering of all desires, and therefore all attachments and infatuations, which means Ananda and in Ananda, where is the room for being unethical? 



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