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Wednesday, June 9, 2010

Nitin Nohria: Can He Restore Ethical Behavior in Business?

It is no sin to be a businessman. But it certainly becomes a sin if businesses are carried out in an atmosphere of ‘no trust’. For, in the absence of trust and cooperation between businessmen, the country would collapse soon.

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 of which it is still struggling to come out of.

Business is an ethical activity. With globalization, the need for ethics in business has only become all the more important. 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 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, further intensified the aversion of the public for financial professionals.

The general mood of the nations, following the mess created in the global financial markets by business leaders, was well captured by Nitin Nohria, the newly appointed Dean of the century-old Harvard Business School, when he said in the sidelines of his prestigious appointment: “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 that HBS students are “very concerned about the image of business and its place in American life and the world in general.” Nonetheless, it is encouraging to note that Nitin Nohria, whose perspective is said to be ‘innately global’, is seized of the gravity of challenges that he and his Business School face today, for he said: “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.”

Indeed, he is one of the first to suggest that Business School students take a professional oath of conduct. In an article co-written with Khurana in 2008, he observed that managers had ‘lost legitimacy’ in the past decade, and suggested a ‘code of ethics’ for the management profession, like the Hippocratic oath, hoping that it would “create and sustain a feeling of community and mutual obligation that members have toward each other and toward the profession.”

Though he feels disturbed by the missing leadership bond with employees and the public, as is revealed by the recent multiplication of business scandals, he says it can be reestablished: “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.”

While being happy with his appointment as the Dean of HBS on the one hand, and being aware of business schools’ failure to develop leaders who are up to the challenge of grappling with the problems of businesses that “spill over boundaries”—whose “goals are not clear, pathways haven’t yet been established, stakeholders are politicized, and no one is clearly in charge”—on the other, every Indian wishes Nitin Nohria good luck at HBS and all success in his endeavor to provide the business world with leaders of character and competency.
                                                                                                                 - GRK Murty


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