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What does an ethical business education look like?

Illustration by Ricardo Tomás
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For years, consumers and workers have pressured companies to adopt a more conscious approach to doing business. Many have signaled they would. But clearly, the revolution has yet to happen.

During a devastating pandemic, business leaders have fielded complaints about inadequately diverse staff as employees fought for better pay and working conditions. Meanwhile, at many of the largest companies, CEO compensation and shareholder profits have increased. Companies have also redoubled their efforts to flash their environmental bona fides amid increasingly deadly effects of climate change.

It’s hard not to wonder why so many systems remain tragically broken. If the long-promised regime change has been stalled, where did it get stuck?

One possibility: something remains askew upstream at the world’s business schools.

About one third of Fortune 500 companies are led by executives with MBAs, and about 200,000 MBA students graduate each year from US schools alone, fanning out into high-paying jobs at influential consulting firms, banks, asset managers, healthcare systems, and tech companies, as well as new businesses of their own. Arguably, they should have a disproportionate amount of sway in changing what’s considered business as usual. So business leaders and business school professors are asking: Are MBA programs doing enough to prepare students for the realities of today’s social and environmental demands?

Why business school educations were designed to be narrow

For more than half a century, business schools were organized around the principle that maximizing shareholder returns was the prime responsibility of any corporation, an ethos made famous by economist Milton Friedman in the 1970s.

Business schools leaned into that vision. As a result, even today, many schools “jump right into teaching students the technical skills of running a business,” says Stephen Cummings, a professor of management at the Victoria University School of Wellington, in New Zealand. Rather than explore capitalism as one of many world views, or encourage critical thinking about the very purpose of businesses, most institutions mainly train students to run organizations by motivating employees, cutting costs, and finding new markets, while making a lot of money in the process. A school’s success was, and largely still is, measured by how much its graduates earn.

Following the 2001 Enron scandal and 2008 financial crisis, however, companies—and business schools by extension—were humbled into at least appearing to be more self-critical and concerned with the social good. Meanwhile, the environmental movement connected the dots for consumers, linking reckless capitalism and the profit motive to lost forests and species, smog, and an existential threat from climate change.

More companies are now recognizing that designing a more socially just economy is not only morally correct, but smart business. Stakeholder, rather than shareholder, capitalism is the only sustainable way forward, says the influential business lobby group the Business Roundtable. (To be sure, that group’s 2019 call to action has evoked as much cynicism as praise). Meanwhile, an even more radical degrowth movement is also gaining momentum among climate scientists and economists.

Responding to urgent calls from students, faculty, and global companies that need to hire employees (pdf) who understand how to navigate new demands for ethical business practices, the Association to Advance Collegiate Schools of Business (or AACSB International), the oldest accreditor of business schools, set a new standard in 2020. Now its members must demonstrate how they contribute to a positive social impact. “Schools are now tasked with defining what that means,” says Leon Prieto, an associate professor of management at Clayton State University.

How business schools are evolving to be more socially responsible

Even before the pandemic, several prestigious MBA programs had already begun expanding the number of classes they offer that are concerned with the greater good. The University of Pennsylvania Wharton School of Business offers more than 50 courses related to social impact, the New York Times recently reported. Student interest in social enterprise and impact investing is surging at smaller schools and at the more traditional and prestigious institutions, like Harvard Business School, the Duke University Fuqua School of Business, Columbia Business School, and Stanford’s Graduate School of Business.

For the past three years, all first-year MBA students at Yale University’s School of Management have taken a class on power and politics. One assignment is to study the wealthy school’s power dynamic with the local community in New Haven, Connecticut. And last year, the Aspen Institute’s Ideas Worth Teaching awards celebrated professors specializing in racial equity in the workplace, sustainable finance, and the ethics of business analytics at colleges around the world.

“Can we possibly justify teaching students to go out and profit their investors by depleting society and the rest of the planet? It’s just not a viable ethical position,” Tom Lyon, faculty director of the Erb Institute for Global Sustainable Enterprise at the University of Michigan’s Ross School of Business, told Time last fall.

But one oft-repeated criticism of business schools’ collective response to the times is that reforms are mainly happening around the edges. Students get an education in ethics almost exclusively in elective courses that can allow an institution to up its social impact street cred without disturbing its core purpose or culture—and without asking professors to rip up their syllabi.

How one school redesigned the MBA experience

There are a few exceptions. About 10 years ago, Stephanie Schleimer, MBA director at Griffiths Business School at Griffiths University in Brisbane, Australia, asked her faculty to rethink every aspect of the MBA program—every course, every extracurricular activity, the entire program design. After the financial crisis, she says she was feeling “ashamed of the way business schools had taught students to be ruthless leaders.”

The ensuing process alerted Schleimer to how badly out of touch the MBA education really was. At a meeting with “a very famous author” of a strategy book, she recalls a baffling exchange: “I said, ‘But there’s no chapter on strategy and sustainability,’”she recalls, “and he just looked at me in this blank way and said, ‘Why should there be?’”

“That was in 2009,” she adds. “I believe our MBA education, globally, is still quite outdated.”

Griffith’s business school faculty began to work closely with researchers at the university’s environment school, pairing business and science students for problem-solving project work addressing major challenges in the Asia-Pacific region. Instead of accounting, students take “accounting for accountability,” and professors gravitate to case studies about smaller organizations doing community or philanthropic work. Students may study the typically “shamefully low” percentage of workers in companies with disabilities, whether mental or physical, says Schleimer, and think about ways of organizing jobs to be more inclusive.

At Griffiths, Schleimer has created a business school that’s not incrementally different from others, but different in kind. “I’m quite upfront about it and I have been very strict with marketing about it,” she explains. The school’s promotional material must not depict a traditional MBA program. “When I speak to potential students, I’m very happy to say ‘If you want a more executive white collar MBA, we’ve got some great universities across the river here in Brisbane that are very good at that. We won’t be for you if that’s all you want.’”

Schleimer remembers some students were confused when, in her strategy class, she began talking about shared values. A few years into the shift, the school began running surveys to find out, she says, “Are we becoming too green for everyone?” But students and alumni wanted more of it.

Over time, the student body demographics shifted. Whereas the gender ratio once skewed male, today, 58% of the business students are women. In the past, most applicants came from higher income households, but now all socioeconomic backgrounds are represented. Many graduates launch non-profits or change career plans to pursue work that’s more purpose-driven, says Schleimer.

While few business schools are as ambitious in their transformation as Griffiths, there are signs of shifting priorities elsewhere across the spectrum of institutions.

The kingmakers behind school rankings, such as the Financial Times, have begun formulating ways to measure social impact, including socially conscious research and field work, at MBA schools. (Most recently, the FT produced the Responsible Business Education Awards. Its main top 100 MBA school ranking considers corporate social responsibility, or the number of classes addressing ethics, and social and environmental responsibility, giving it a weight of 3%.) Only Corporate Knights, a Canadian publication covering “Clean Capitalism,” publishes an annual, global Better World MBA Rankings that is solely concerned with a school’s social impact.

Case studies are more likely to involve questions about a company’s social and environmental impact

These days, case studies used to teach problems future executives must solve often reflect the wider world’s interest in embedding social justice and environmental consciousness into corporate culture. Richard McCracken, director of The Case Centre in the UK, says that not only are authors—usually business school professors—producing more cases explicitly about the UN’s sustainable development goals, or social movements like #MeToo and Black Lives Matter, but they’re ensuring that conventional case studies feature protagonists who are diverse in race, gender, and orientation, and not as victims of discrimination, but as decision makers and leaders.

If instructors fail to seed the conversation with questions about equity or climate change, students will raise them, says Kimiloluwa Fafowora, a student at Stanford’s Graduate School of Business. The professors do appear to try, she says. Before teaching a case, faculty consider how the material might play in today’s social context, “but given the gap between students—our age and the lifestyles we live, the time we live in, and the values that we have—versus our professors’ and case writers’, there is a gap that needs to be bridged.”

Fortunately, faculty members are pretty open to taking feedback from students, she adds. “They say, ‘Okay, we taught this case, did it land properly or teach the right lessons? And if it didn’t, let’s go back to the drawing board and update it for 2022.’”

A burgeoning movement to decolonize the business school—to free it from the dominant cultures of western economies and white, male thinkers—is also making inroads, particularly in the UK. Last year, the Bayes Business School, part of City, University of London, changed its name from Cass Business School, in acknowledgement of the Sir John Cass’ connections to the 18th century slave trade. And business school professors in Canada, New Zealand, and Australia are building courses or coursework about indigenous values of organizational systems.

Textbook writers are paying attention. In the US, for example, several books are now incorporating lost lessons from the late Charles Clinton Spaulding, using recent research into African American management history by Clayton State’s Prieto and Simone Phipps, associate professor of management at Georgia Middle State University’s School of Business.

Where do business schools go now?

Right now, for MBA students who want to earn MBA-grad salaries (to pay down student loans, if for no other reason) while honoring their inner conscientious capitalist, studying sustainable development and climate finance may be the most expedient options. Sustainable investing is now a multi-trillion dollar industry, and companies are turning to business schools for recruits who understand the financing requirements for renewable energy projects or can calculate a company’s risk of losses connected to climate change, the New York Times reports.

But other kinds of change have been slower. Perhaps that’s because some basic assumptions, including “the desirability of having a free market and a bias against government intervention in the economy” remain baked into business school teaching, says Todd Bridgman, a professor of management at the Victoria University of Wellington. At most schools, students can graduate without studying other ideologies and economic models, he notes. By contrast, Bridgman routinely introduces Marxian analysis, for example. He and Cummings have also researched forgotten, progressive lessons of early management thinkers who had more interest in human-centered organizations, sustainability and conservation, and social purpose.

Writing for the New Republic in 2018, a student at MIT Sloan called business schools “ideological institutions committed to a strict blend of social liberalism and economic conservatism” where debates over progressive issues are “performative.” In that case, it’s hard to imagine a day when business school grads become the kinds of corporate leaders who change now entrenched features of capitalism, like soaring CEO pay, for example, or the intense focus on quarterly share prices and investors at the expense of other stakeholders, including employees and the wider business ecosystem.

MBA programs have also made inroads with diversity and inclusion curriculum, but they have yet to take on racial justice, Paul Harper, a professor at the University of Pittsburgh Katz Graduate School of Business, argued in a recent interview for Poets and Quants, a news site dedicated to business schools. “What racial justice is going to mean for businesses and business schools? That knowledge is being created now,” he said.

Business, he added, can’t “play the role of leading society forward for the betterment of its citizens broadly, without owning up to the role that it has played in holding significant communities back and exploiting communities.”

Indeed, business professors should start “providing an education that’s honest and complete,” says Prieto. Capitalism deserves to be fully interrogated and its long destructive history—its use of slavery for the sake of profit, its use of child labor, the way it still enriches some nations at the expense of others—can’t be sugar coated. “It’s about teaching the truth and the whole truth, what we may see as the ugly parts or the embarrassing facts that will make some groups feel uncomfortable, because education is about learning.”

Business lessons ought to “always examine prejudice and racism, and the importance of being fair,” Phipps adds, “not as a cookie cutter diversity speech that gets squeezed in sometime later in the semester.”

She and Prieto are now speaking at business schools around the US, advocating for more to teach students about cooperative models of entrepreneurship, which Prieto says he has only found in course offerings outside the US. “It’s a business model that can actually help create a more just form of capitalism, one that focuses on solidarity,” he says.

That shouldn’t sound radical for modern business schools, but—at least for now—it is.

Editor’s note: This story has been updated to correct the name of the African American management thinker whose ideas now appear in several management textbooks, Charles Clinton Spaulding.