Thursday, June 18, 2009

Should MBA's take an oath on ethics?

This year a group of graduating Harvard MBA's decided to write and sign an oath that they would act to "act with utmost integrity and pursue my work in an ethical manner." Expecting no more than 100 of their classmates to take the pledge, the authors were surprised to see that at graduation more than half of their classmates had taken the pledge. The oath has now, as they say today, "gone viral" to other business schools and has received good press from Business Week and the Economist.

My reaction is mixed. On the one hand I am glad to see that more MBAs realize that the behavior of certain members of previous graduating classes helped create the current economic and financial mess. Further, I personally believe that some training in ethical leadership is an absolutely essential element in management education. This is now a required course in NC State's MBA program. If students want to take the oath -- and, more importantly, live up to it -- this activity could well end up being for the "greater good" (that's from the oath!).

My main reservations are twofold. First, the self-flagellation of MBAs and business schools is getting a bit carried away. If regulatory agencies such as the SEC had done their jobs and if the housing bubble had not been sustained through government actions (low interest rates from the Fed, various hijinks from Fannie and Freddie), today's economy would be in much better shape. Sure there are cases of market failure, but there was plenty of government failure as well. Second, managers have to walk a fine line in balancing the interests of society and the interests of their shareholders, as Milton Friedman argued many years ago. Those who end up on the wrong side of that line subject themselves and their organizations to severe penalties. Typical economics lesson -- there is a role for both carrots and sticks.


  1. The fact that these MBA students have to proclaim their "ethical compass" is just another blight on the MBA community. Let's identify and move past the greedy selfish minded folks, and salute all the other MBA's who are out there already doing good and practicing business in a competitive and ethical way.

  2. Excellent article Dr. Allen. In fact, I had recommended that the ethics course (which I took) become required for all concentrations, in the feedback I provided at graduation (MBA, class of 2004).

    As I recall, the hunger and ambition, to somehow stand apart, and rise to the top among peers, was incredible. Piety and promises are low-hanging fruit though, and carry little weight with VCs.

  3. It seems everyone is getting into the blame game. Last I checked my macro econ book shocks to the economy can actually have a profound ngative effect. It seems tripling the cost of energy had no effect on the economy rather the bad economoc news was due to ethical behavior. Taking an oath to fix something that wasn't the problem not only is self-centered to the extreme it reveals these sudents' fundamental lack of understanding how the economy works. So when the company that employs these oath makers have financial problems rather than fix the problems these futures captains of industry will sign an oath to be ethical. That won't help their companies any more than this oath will fix the ecomony.