Comments on: When business schools get it wrong

By: A Free Spirit

A Free Spirit — Sun, 11 Oct 2009 20:55:13 +0000

I suspect that business schools would do better, ironically, if they were more academic. I have just posted on a problem that academic standards would have rectified: http://deligentia.wordpress.com/2009/10/06/politicizing-academics-business-ethics-compromised-in-the-classroom/

By: John McLaren

John McLaren — Thu, 16 Jul 2009 10:54:59 +0000

I admire your stance on ethics. I just don’t think it’s the answer to future woes. The way the world financial system is structured allows just a single rogue element to bring the whole house of cards down. And I don’t believe in People, Planet, Profit as the mantra for business. It’s ironic that it was a Shell marketing slogan coined for them by SustainAbility in a bid to improve their image in light of the enormous damage they have done to the environment. When the UN pushed the idea for 3BL the had in mind public companies. I also believe that the problem is not what they don’t teach in Business school. I think the problem has been too many manager who haven’t been to business school and end up as fad managers…. they lose focus on the basics and grasp at all kinds of new fads pushed by unqualified gurus (who have a book on Amazon) in an effort to appear competent. The list of fads adopted recently by business is long …re-engineering, Six Sigma, TQM, MBO,SOO,Knowledge Management, Flexi-time etc etc. Flexitime was even taken up by misguided executives who instead of leading from the front, were working from home ! They never stopped to think that it didn’t apply to them. No wonder companies failed. Studies done by a number of F500 companies in early 2000’s showed that flexi-time had a devastating effect on reamwork, morale and communication … so the stopped it.
Send more managers to business school is my answer. Even Jack Welch would have benefited from business school (he did have a Ph.D). He had no women or people of colour on his senior staff ever. He spent millions fighting government efforts to get GE to clean up the toxic sludge he was dumping in the Hudson River…. yet people still blindly follow his business philosophy.
And now we are going to have the next fad … Green Sigma ! That should take some focus off the real bottom line.

By: Graham Willcock

Graham Willcock — Wed, 15 Jul 2009 06:45:51 +0000

Thanks for an interesting (contrarian?) viewpoint John and for er ….. a challenging interpretation of what I said. If only I could delineate the issues quite as clearly as you seem to be able to do. But I do grant your astuteness at finding any potential weaknesses in my argument and it makes for an interesting discourse. When it comes to the field of business ethics however I have resigned myself to fighting an uphill battle. That’s because ethical business practice and regulation are not the same thing and I would argue that business people who act because of regulation alone are no more ethical than those who act in contravention of it. Ethical business practice is determined by the underlying intent … but now I get ahead of myself.
In trying to do your comment justice can we at least agree that the financial crisis is a disaster for consumer and business confidence? As with any disaster however there is rarely one contributing factor – usually there is a cumulative effect over time and trying to unravel the cause becomes the domain of academics world over. My contribution, for what it is worth, is that it seems to me that unethical behaviour has become institutionalised – systemic if you like – to the point that people are not able to see it for what it is. It is now the ‘norm’ to indebt people to the point they can never escape. They are the ultimate customer for life. You ask where the tipping point was – the cumulative effect of people living beyond their means, encouraged by bond originators, financial institutions and political parties, together with the pervasiveness of technology I think all contributed to the crisis. Shareholders who wanted an above average rate of return and who were prepared to pay inordinate amounts of money to management boards to keep them ‘focussed’ on that purpose meant that the conflict of interest between sustainability and the need to make this quarters (bonus?) profit became untenable. That was the tipping point and anything more precise than that I doubt will be possible.
Certainly a lack of regulation may have been a contributing factor in some instances as were criminality on the part of some and greed on the part of others. These do need to be addressed. I wouldn’t agree though that either George W Bush of Fanni Mae had philanthropic or altruistic motivations in lending money to people they knew would never be able to pay them back. Most regulatory authorities and governments around the world reach for a default position that if current legislation was insufficient then what is required is more of the same. As far as I am concerned you can legislate and regulate all you like – resolution only comes with an understanding of what ethical business practice is and isn’t. And if that is not the domain of business schools then what is? For as long as business schools profess to want to nurture business leadership, not just an understanding of the language of business, then they are partly accountable for the lack of business and consumer confidence we now face. And I am holding them so. For behaviour to be ethical it needs to be reasoned and it needs to take into consideration the interests of those people affected by it. If one cannot rely on business professionals to know how to do this then business schools need to teach them it, case study by case study.

By: John McLaren

John McLaren — Mon, 29 Jun 2009 19:57:55 +0000

PS : You need to get some decent formatting options for your comments section !

By: John McLaren

John McLaren — Mon, 29 Jun 2009 19:55:02 +0000

I didn’t really want to argue about 3BL reporting but what the heck. I think it is still far from the core purpose of business and is still pretty much a vague paradigm struggling to gain real acceptance. The concept of a Triple Bottom Line in fact turns out to be a “Good old-fashioned Single Bottom Line plus Vague Commitments to Social and Environmental Concerns”. And it so happens that this is exceedingly easy for almost any firm to embrace. By committing themselves to the principles of the 3BL it sounds like companies are making a more concrete, verifiable commitment to CSR and sustainability. And no doubt many are. But it also allows them to make almost no commitment whatsoever. Without any real social or environmental bottom lines to have to calculate, firms do not have to worry about having these “bottom lines” compared to other firms inside or outside of their sector; nor
is there likely to be any great worry about the firm being seen to have declining social
and environmental “bottom lines” over the years or under the direction of the current
CEO. At best, a commitment to 3BL requires merely that the firm report a number of data
points of its own choosing that are potentially relevant to different stakeholder groups –
typically in the form of a glossy 3BL report full of platitudinous text and soft-focus
photos of happy people and colourful flora.From year to year, some of these results
will probably improve, and some will probably decline. Comparability over time for one
firm is likely to be difficult and time-consuming for anybody without a complete
collection of these reports and handy filing system. The firm can also change the
indicators it chooses to report on over time, perhaps because it believes the new
indicators are more relevant (…or perhaps to thwart comparability). And comparability
across firms and sectors will often be impossible. At any rate, such comparisons will be on dozens or hundreds of data points, not on any kind of global figure like profit/loss,
cash flow, return-on-investment, or earnings-per-share. The mere fact that it has
produced a social report or a code of ethics tells us very little about a firm’s actual commitment to the principles expressed in the documents. It is relatively costless to produce these documents, and – especially if they are relatively vague – they do not generally open up any serious risks for a corporation. On the other hand, both types of documents can play a critical role in a firm’s serious strategy to improve its ethical and social performance and to integrate this goal into its corporate culture. I think clear and meaningful principles are most likely to serve firms of the latter type; and that
vague and literally meaningless principles like those implied by the Triple Bottom Line
are best only for facilitating hypocrisy.

By: John McLaren

John McLaren — Mon, 29 Jun 2009 17:33:13 +0000

I did as you suggested and read Godsell’s article. The conundrum for me is who to believe. In your previous reply you stated that we must listen to Matthew Lynn precisely because he has not been in the business world. Well for that to be universally true then the corrollory must be true ( If A=B then Not-A =Not-B). So bsed upon that we should discount Godsell’s theories because he HAS ben in business.
What I find amusing about the argument that unethical behaviour is responsible for our economic woes is the following : Why now ? If ethics has been absent for so long then what was the tipping point ? Does unethical behaviour accumulate over the years and reach critical mass ? Or was there shortened period of extreme unethical behviour by many people ? There is not a shred of evidence that unethical behaviour had any part in the economy. Sure there were a few instances of unethical individuals but that will always be the case. To me what is ironic is that most commentators across the spectrum have agreed on the root causes and they were actually actions of good intent i.e to provide homes to the poor. So Bush and co passed regulation that allowed companies like Fanny Mae to lend trillions to the poor in the form of home mortgages. That ws not unethical. There was bad decision making by the government in that they did not create jobs for the poor to sustain the mortgages and the “assets” became toxic. By that time they had been securitised, repackaged and sold on many many times down the financial value chain. Where was the unethical behaviour ? Nobody seems to be able to point it out other than very vague suggestions which hold no water in a constructive argument. As the oft misquoted (even now by me) line goes … the road to hell is paved with good intentions. It was bad government policy (Bush’s people famously appeared at the NYSE with an axe shouting “That’s what we are gonna do with regulation !”) but with good intent. Did anybody act unethically by wanting to help the poor ? They failed to have foresight by not putting restrictions on the mortgage-lenders until jobs had been created. Unethical ? Certainly not. I have not seen any link between ethics and protection against economic cycles. People down the value chain were not aware of the nature of the assets as they had supposedly been underwritten by government in the first place. Unethical ? Nope … maybe a lack of due diligence but nothing more sinister. I think even Twitter is growing faster than the case for unethical business practise being a major cause of the current economic climate.

By: Graham Willcock

Graham Willcock — Mon, 29 Jun 2009 09:36:48 +0000

The purpose of business is to deliver against the triple bottom line – profit, planet and people. The emphasis is on sustainability though and that requires a reputation for ethical business practice that diminishes the risk to customers in their interaction with an organization. Reputation is based on a vision and value set that appeals to the customer (it encourages trust) – a value set that is based on the ethos (values system) of an organization and the mores (character) of its employees. I agree that teaching someone about ethics cannot make them more ethical per se but there is a link between those companies that talk about ethics and ethical business practice.

By: John McLaren

John McLaren — Sun, 28 Jun 2009 22:13:39 +0000

Well I reckon it’s because the sole reason a business exists is to make a profit. And there is very little proof (imho) that ethics contributes in any way to increasing profits. What is needed is to teach politicians how to form a proper regulatory framework for business in which unethical practises will be impossible. Teaching someone ethics can never make them ethical just because they learned about it at business school.