Thoreau and Emerson, both alumni of Harvard, were once reminiscing over their Alma Mater, in the course of which Emerson is believed to have said that the University had by then all the branches of knowledge. “Branches are fine”, Thoreau is believed to have commented,“But what about the roots?”
The Financial Crisis: In Retrospect
In the last decade, some over-greedy mortgage brokers, profit-chasing banks and financial institutions in the United States of America triggered the global financial crisis which exploded into a worldwide economic meltdown. The brokers lured high-risk buyers with poor or no credit history into accepting housing mortgages, and the financial institutions packaged these high-risk debts into Collateral Debt Obligations (CDOs) and sold them to unsuspecting investors across the world, many of them being retired employees who unknowingly invested their life’s savings in these toxic securities, and ended up losing all of it. The economic downturn led to large-scale mortgage defaults and foreclosures causing collapse of many of the world’s leading investment banks. This led citizens across continents into the thick of a financial turbulence. The capital markets were on a spin, job losses were phenomenal and the global economy was beset with the threat of deepening recession. What followed were desperate efforts by nations to steady their tottering economies.
What was the cause behind this corporate and economic catastrophe? Was it the lack of regulation and governance systems, or the lack of value systems? While different scholars, academics, policy makers, regulators and researchers have given different answers to this question, I firmly believe that it was a lack of both. Whether it is the East Asian crisis of the 1990s, the mortgage crisis in the USA in the 2000s or the Eurozone crisis in the current decade, it is the value systems of people at the helm of affairs, or rather the lack of them, that has created problems for multiple stakeholders within and outside the organisations. The society has ended up paying a heavy price for the misguided decisions of a handful of top-notch corporate leaders.
In his inaugural address at a Conference on Ethics and the World of Finance in August 2009, Duvvuri Subbarao, then Governor, Reserve Bank of India observed,
“John Stuart Mill said that if we make men honest, good and decent, then they will make themselves honest, good and decent engineers, doctors and teachers, and may I add, financial sector professionals.The financial sector is, after all, a reflection of the society in which it operates. So, the approach to bringing ethical values into finance has to begin not by special efforts to enforce or regulate ethical standards in finance, but by fostering a value system in society at large.”
Where and how could this value system be inculcated in individuals? At home, in the school, at college, during professional education, in the management training programmes of corporations,or in the Board room? In my opinion, every individual learns a set of values at each of these stages of one’s evolution. However, if one is deprived of the learning at any specific stage of one’s growth, the lacunae may remain for a lifetime. Thus, parents, teachers, professors and corporate leaders, all have to play an important role in this process of values inculcation through personal practice and then by guidance and mentoring.
The Role of Management Education
Management education can play a phenomenal role in molding the value systems of budding managers and entrepreneurs.They need to betaught and exposed to the technical and social implications of variousbusiness theories, models and frameworks; and importantly the true purpose and objective of management as a profession. Along with the focus on Corporate Social Responsibility or CSR, there is a need to focus on the ‘Social Responsibility of Management Education’.
Highlighting the role that true education can play in the life of a student, Mahatma Gandhi once observed,
“The real difficulty is that people have no idea of what education truly is. We assess the value of education in the same manner as we assess the value of land or of shares in the stock exchange market. We want to provide only such education as would enable the student to earn more. We hardly give any thought to the improvement of the character of the educated.”
As highlighted by Thoreau at the start of this article, management education has covered over the last century practically all aspects of social and community life through diverse branches of study and subjects, functional areas and specialisations. However, the roots of this system of education, the purpose for which each of those branches of learning were started, have not been sufficiently nourished, and in certain cases out-rightly neglected. No doubt, some parts of the tree have collapsed, and we see today, a lack of faith and trust by the common man in business and its managers, especially in the large corporations.
In this context, it would not be wrong to opine that management institutions have failed in their responsibility to produce morally-oriented leaders for the business world. Today, the objective of most management programmes is to prepare students who can succeed in the world of business as it exists, and not as it should. Retaining the status-quois an accepted norm. ‘Serve the system; do not challenge it’, is the advice given to students. The lack of ethical orientation in the Management Education model is its worst failing. The root of this problem is that integration of knowledge with wisdom is rarely attempted in educational institutions. The result has been that excellent academic performance, competence and capability have not been combined with the commitment to use these for societal welfare. The self-centric syndrome in all fields has remained dominant. Unfortunately, in many cases, such an educational system has produced intellectual giants but moral dwarfs with lot of ability, and very little nobility. The corporate crimes and terror attacks are a case in point.
The Ills currently faced by Management Education
Contemporary management thinkers like Rakesh Khurana (Dean, Harvard College, USA), Joel Podolny (Former Dean, Yale School of Management, USA), Peter Pruzan (Professor Emeritus, Copenhagen Business School, Denmark), and S.K. Chakraborty (Founder Convener, Management Centre for Human Values, Indian Institute of Management Calcutta, India) have highlighted the role and importance of values and ethics in business management and management education.
According to Khurana (2007), the original intent of instituting a management degree was to educate a managerial class that would run America’s corporations in a way that would serve the broader interests of society rather than the narrowly-defined interests of capital or labour. Even though the initial business schools were established with an eye towards serving the public good, Khurana noted that business schools have strayed away from their initial intent. He further observed that the university-based business school of today was a troubled institution, one that had become unmoored from its original purpose and whose contemporary state was in many ways antithetical to the goals of professional education itself.
Podolny(2009) identified three major reasons for the current situation.
Firstly, in present-day business schools, teaching of leadership was about setting of the vision and the larger agenda of the organisation and was usually divorced from the nitty-gritties of executing it where ethics and values came into play.
Secondly, the management degree was measured in terms of the additional salary that it could earn for the individual and was usually considered to be a ticket to ‘big bucks’, instead of being considered as a professional degree which imposed a certain degree of accountability and responsibility on its holders.
Lastly, business schools continued to bask in the glory of the achievements of their graduates and did not take any responsibility for the harm that their graduates did.Given the fact that some of the biggest players in the corporate misdemeanour that afflicted Corporate America were graduates of premier business schools, this is a very valid point.
The Unholy Nexus between Corporations and Academia
There have been other issues as well. For instance, the unholy nexus between corporations and the academia. In the last decade, there has been an instance when a Chamber of Commerce from one of the Scandinavian countries engaged an eminent academic from one of the premier American business schools to write a research paper highlighting the investment prospects in that country so that companies could attract large scale foreign investments. However, the truth was that the economy of that Scandinavian country was in deep trouble, and the Chambers of Commerce tried to use the reputation of the eminent professor to camouflage the reality. The outcome was that huge investments made in that country based on the highly publicised research paper turned out bad in a couple of years leading to losses of billions of dollars. Such a corporate-academia nexus has turned out to be yet another bane of the changing equations in contemporary times. There have also been instances of very strong conflicts of interest whenpharmaceutical companies have used and paid eminent researchers to write papers highlighting the superiority of their products. This strongly conflicts with the freedom and integrity of academic researchers and leads to further lack of faith in the entire process.
Research Programmes without a Moral Compass
Another important issue is with respect to the nature of research programmes undertaken at these institutions that are funded by external agencies. Some of these have been controversial from the point of view of their impact on society and the environment, or both. For example, research related to defense, stem cells, genetically-modified products, etc. involve many moral questions, which are debatable. There is also the question of how industry has benefited and sometimes even exploited the results of research at universities. Referring to the health care industry, some of the devices like the Magnetic Resonance Imaging (MRI)and some medications such as those for HIV, were developed at institutions of higher learning, and handed over to corporations for commercialisation. Unfortunately, the prices charged by the corporations for the use of these devices and drugs, have made them beyond reach for many sections of the society. The lack of concern for environmental degradation is yet another serious problem that is not given the due it deserves. While I have highlighted a few cases, there are a hundred others across countries including in India, when things have gone terribly wrong.
The Need of the Hour
In the light of this discussion, I believe that there is a need for integration of values and ethics as an integral part of the curriculum of management education. While many agree to this viewpoint, there are many cases where values-based education is used as a fashionable window dressing, and is rarely a substantial part of the core curriculum. It is necessary to inspiremanagement students to follow the virtuous path in the world of business, management and financenot because the business world is undergoing turmoil in recent times, but because the original purpose of business education, or for that matter any education in the West or the East, was to mold responsible corporate citizens, who through their profession, would play a constructive role in societal, national and global development. I believe that given its scope, business education has the power to play a big role in this regard.
In today’s circumstances, there is a greater need for a new genre of managers, who would ensure the welfare of all organisational stakeholders in the process of organisational decision making while working towards the long-term objectives of the corporation. Such managers would not solely link their management degree to the type of salary that it would earn them, but also to the type of contribution they would be able to make to the company and to the society at large through the skill sets and unique capabilities that the degree has endowed them with. To achieve this, business schools could consider complimenting academic and industry-based inputs, with the development of an integrated personality of their students in all spheres – physical, mental, intellectual, psychological, social and spiritual. An education, which helps one discover one’s inner Self and true human qualities in addition to giving knowledge of the external material world, could in a natural way lead to the reduction of the distance that separates the rich from the poor. It would also go a long way to solve many other global problems relating to poverty and deprivation.
Of all the six Ms of Management – money, minutes, methods, machines, materials and men, men (human beings) are the most valuable. It is they who give value to the other five elements of management. When business leaders and management executives put human beings and their welfare at the core of their business and its purpose, and integrate the interests of diverse organisational stakeholders including the environment, society and the local community, with the basic purpose of business, that business management as a field, management education as a qualification, and management as a profession, would truly be fruitful and serve its purpose.
Dr. Shashank Shah is a thought leader in field of study at the cusp of corporate strategy and sustainability with over 100 national and international publications to his credit. He has been a Visiting Scholar at Harvard Business School, Fellow and Project Director at Harvard University South Asia Institute, Visiting Scholar at Copenhagen Business School, Editor-in-Chief of Harvard University Postdoctoral Editors Association and Consulting Editor at The Business India Group. A recipient of the President of India and Governor’s Gold Medals for excellence in the MBA and M.Phil. programmes at Sri Sathya Sai Institute of Higher Learning, and of the AIMS International Outstanding Doctoral Management Student Award at IIM Ahmedabad, his highly acclaimed books‘Soulful Corporations’, ‘Win-Win Corporations’ and ‘The Tata Group’ were published in 2014, 2016 and 2018 by Springer and Penguin Random House.
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