March 16, 2009 2:28 pm

Without ethics, the free market system is at risk

Bernie Madoff; France’s Société Générale bank scandal; and before them, WorldCom, Parmalat, Tyco and Enron. With corporate malfeasance a fixture in newspaper headlines, there is, not surprisingly, a clamour for ethics in business.

Still, wanting ethical business leaders is not the same as getting them. That is where business schools come in.

In 2004, the AACSB International – the principal accrediting agency for degree programs in business administration and accounting – formed a taskforce to examine ethics education in business schools. The goal was to provide guidelines for implementing strengthened standards. Some schools at the time embraced innovative strategies. But many more required just a single ethics course, often little more than an afterthought, and divorced from practical business matters.

No matter how well intentioned, ethics lessons were not being transferred into the private sector with adequate speed and commitment. The AACSB International task force concluded that business schools had not done enough to raise ethical awareness. It recommended that ethics permeate every curriculum, and it made ethics a factor in business school accreditation.

At The George Washington University School of Business, where I am dean, the ascending stairs in our main lobby are painted, step-by-step, with a message: “Who says . . . you . . . have to . . . step on . . . someone . . . to get . . . to the . . . top?”

Our mission statement contains a commitment to educate principled, ethical leaders. We vow “to deliver an outstanding education, advance knowledge and provide practical experience in diverse organisational settings, leveraging the unique advantages of our location in the Washington, D.C., area, in order to enhance the capacities of students, faculty, staff, alumni and the business community to be productive and principled members of society.”

In our new Global MBA Program, when we teach supply-chain management, we include a case study that involves child labour. One of our human resources classes dissects the Nike sweatshop drama. In another course, students discuss a chief executive from Taiwan with a value-based approach to business. Then they dissect how that chief executive can institutionalise those values when he steps down.

A finance class underscores how, despite its importance, full and fair disclosure of risks within securities is not a common practice among investment banks and broker-dealers. It’s easy to bring this lesson home because we are living through its consequences right now.

We don’t confine ethics just to classes. We have a university-chartered Institute for Corporate Responsibility. We also have a chaired professor in ethics. Timothy Fort, our Lindner-Gamble Professor of Business Ethics, has been a pioneer in research on the relationship between ethical business practices and peace. Where corporate corruption is rife, or bribery widespread, disputes are more likely to be settled with violence.

Because corruption ultimately exacts a price from a company, private sector employers want ethics-trained leaders. Murat Tarimcilar, our associate dean for graduate programs and the chief architect of the GWSB Global MBA Program, spoke with a broad range of constituents – including employers – in developing our approach to ethics education. Since its launch in the fall, the new curriculum has been well received by students and employers alike.

For me, there has never been any question. Business schools must ground future business leaders in the duties and rewards of stewardship. Tomorrow’s executives must understand the concerns of multiple stakeholders. They must wield power responsibly. They must recognise that corporate responsibilities go beyond short-term profit and loss.

I am not naïve. Business schools alone will not change corporate behaviour. But management educators and their institutions need to think deeply and creatively about how to advance the awareness, the reasoning skills, and the core principles of ethical behaviour.

If we fail to change the way we approach business, if we fail to adopt ethical standards and behaviour, we risk the very future of the free market system, which depends on transparent, honest and open enterprise to survive and flourish. That’s why we tell our business students that they must “act responsibly, lead passionately, and think globally.”

Susan M. Phillips is dean and professor of finance at The George Washington University School of Business in Washington, D.C., and a former member of the Board of Governors of the Federal Reserve System. She chaired the AACSB International Ethics Education Task Force, which laid out guidelines for incorporating the study of ethics as a required part of business school curriculums.

Previous soapboxes

Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from and redistribute by email or post to the web.