The classes were held at 190 East Delaware Street directly across from the John Hancock Center. Ironically, the name of the MBA program was the “190 MBA.” What a remarkably undistinguished name!
Much of what I learned three decades ago is no longer valid. But as the philosopher John Dewey once said, the measure of an education is not what you learn, but your ability to learn how to learn.
For example, the Chicago Booth faculty constantly inculcated the notion that the purpose of a business is to “maximize profits.” All of the faculty members towed the line in terms of advocating this point of view.
Some CEOs follow this dictum to the extreme. The maniacal focus on quarterly profits culminated in the 2001 downfall of Enron Corporation, which morphed into a house of cards, the foundation of which consisted of inflated and, in some cases, downright fraudulent profits and assets.
The most recent incarnation of profit-maximization gone amuck is manifested in the financial services industry. As reported in The New York Times, it is an open secret on Wall Street that many firms use end-of-the-quarter window dressing to make their financial statements appear to be better than they really are. For instance, the management team at Lehman Brothers loaded up on an $85 billion portfolio of risky mortgage-backed securities. They did not want their shareholders and stakeholders to know about this portfolio, because such knowledge could negatively impact the firm’s stock price and their executive bonuses. So the management team moved these securities off their books, which the New York Times described as a “shell game.”
This reminds me of the David Mamet movie, House of Games, in which a small-time criminal Mike (played by Joe Mantegna) dupes various naïve souls with a multitude of cons and acts of deception. Senior executives at Lehman are on an equal moral footing with Mike the criminal. The only difference is that many of the Lehman swindlers have MBAs and could concoct more sophisticated acts of deception than the fictional Mike. Unlike the movie which was quite entertaining, the cons perpetrated at Lehman Brothers resulted in the largest bankruptcy filing in US history, an event that almost toppled our financial system.
Business school education has instilled the ethos that a good manager should win at all costs. In a recent Wall Street Journal article, it was stated that many people blame the business schools for educating their students to focus on manipulating the financial system, and, in that respect, they are partly responsible for producing the managers that have been culpable for the recent corporate melt-downs. After all, the Harvard MBA and former CEO of Enron, Jeffrey K Skilling, was the mastermind of the scheme that manipulated the firm’s stock prices. The jury convicted him of various crimes, including twelve counts of securities fraud, and he is currently serving a 24 year sentence in federal prison in Waseca, Minnesota.
At one of the business schools that I teach at, DePaul University, there is a major effort to incorporate ethics into the curriculum. This represents a sea-change in thinking, namely, that the role of business is not to simply produce leaders who will be solely focused on their self-aggrandizement at the expense of society. Rather, the implication is that business has a role to play beyond profit maximization. Indeed, it suggests that ethics do matter.
What do you think? What is the purpose of business? Does senior management have any ethical responsibilities to society at large? If so, what are they?