In Hopes of Ethical Behavior

December 8th, 2010 by under Business and the Economy, Ethics. No Comments.

Some academics criticize business education as being too vocational and argue that a student majoring in business does not receive a liberal education. Most undergraduate business programs include a healthy dose of general university requirements; students are not able to take four years of nothing but business courses. One of the purposes of a college education is to teach students the art of critical thinking, and there is much analysis and thinking required in our business courses. Business and the economy are key to determining the quality of life for individuals and for the political power and influence of nations. So I have always been comfortable with my choice to teach business.

What I find discouraging, however, are the distressingly frequent lapses in business ethics. The financial crisis of the last few years provides a large number of examples of questionable ethics. One widespread destructive practice was mortgage brokers moving people from loans they could afford into completely unaffordable mortgages. A Stanford MBA at Goldman Sachs constructed a security which he designed to lose money for one client so that a favored client could “bet against” that security. It is not that ethical problems are new, we have had them since the beginning of business, even predating the patent medicine salesman. But in a complex economy with many different incentives and pressures, the opportunities to behave unethically are abundant.

Business schools have long struggled with their role in teaching ethics. I remarked to some friends that the financial meltdown shows that we were not successful in teaching ethical behavior to our students 25 or 30 years ago as it is those students who were responsible for much of what happened. Ethics courses are hard to design and teach, and they often get low student ratings. Maybe it is because the students don’t perceive them as immediately useful in their careers.

I believe that a simple approach to ethics might help. I have some questions taken from different sources that a manager should ask when confronted with an ethical dilemma:

1. How would you feel as a customer if the company takes a certain course of action (think exploding gas tanks, sudden acceleration, adulterated medicine, tainted food).
2. How would your actions look if reported in the newspaper or posted on a web site?
3. And the acid test: what would your mother say if you discussed the issue with her?

In the technology field one of the major ethical questions revolves around intellectual property (IP). The Internet has made a lot of content free, but there is clearly content that originators think should be protected. Will individuals provide content if there is no way to be compensated? In a knowledge economy IP is the product, and people cannot survive without some way of obtaining revenue for their labor. We continue to struggle with what IP should be protected and with the ethical considerations of sharing content.

The challenge for business schools is to find a way to weave ethical considerations into the curriculum and to make the experience have a lasting impact. As our graduates rise in the ranks they will encounter more situations in where they need to be guided by ethical standards. I understand the tremendous pressure managers are under to produce results, show strong quarterly earnings and keep their stock price up. But ethical lapses have destroyed companies (think E.F. Hutton for one) and caused incredible harm to individuals (Bernie Madoff comes to mind). The three ethics questions stated earlier are a start and it might be good to post them in every CEO’s office.