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People who say it cannot be done should not interrupt those who are doing it. Welcome to From On High.

Sunday, February 18, 2007

On Business Ethics

I know a little bit about business. More than some, less than others, to be sure. And I've learned, over the years, quite a lot about the ethics that dictate the moral principles upon which business professionals operate in this our glorious system of capitalist free enterprise.

All modesty aside, I guarantee you this: I know more about the subject of business ethics than does most any professor of political science/public administration alive today. So when I read a column in the newspaper headlined "Business Unethics," written by one, he gets my attention.

And, as I suspected would be the case, the premise adopted by this particular professor of political science/public administration is completely lacking in perspective and exhibits a woeful misunderstanding of the business community, our motivations, and of the way we operate.

In today's Roanoke Times:
Business unethics
By Reginald Shareef, professor of political science/public administration at Radford University


The public should pay close attention to the frenzied debate in America's graduate business schools over the teaching -- or lack thereof -- of managerial ethics.

This topic has dominated writings in the leading administrative science journals for the past five years. Simply put, many business school professors now acknowledge that a cause-and-effect relationship exists between contemporary business school education (with its emphasis on profit maximization) and the recent spate of corporate scandals.

Proponents of the status quo argue that business schools should continue to teach the philosophy of pragmatism; that is, the belief there are no absolute ethical values and it is OK for the manager to engage in unethical behavior to maximize profit.

For instance, a recent study of graduates of the top 13 MBA programs found that students who believed that profit maximization was the manager's primary responsibility increased from 68 percent at the beginning of their graduate education to 82 percent by the end of their first year.

Conversely, reformers of the MBA curriculum advocate changes that teach students they are stewards for society's scarce resources and that more than money -- for instance, safe products, ecological sustainability, preventing human suffering -- are at risk when making administrative decisions. (link)
The author of this lecture goes on to what I think is his real point - the lack of armor on Humvees in operation in Iraq in George Bush's failed war, Katrina, etc. (I know it makes no sense. Just go and read it yourself.)

But to the points Professor Shareef makes, where to start?

Let's begin with his sources. Or lack thereof.

"Proponents of the status quo argue that business schools should continue to teach the philosophy of pragmatism; that is, the belief there are no absolute ethical values and it is OK for the manager to engage in unethical behavior to maximize profit." Really? Someone's out there teaching college students that it is okay to be unethical in your business dealings? Who?

We're not told.

Secondly, is it wise for a professor of political science to delve into subjects he knows nothing about, only to embarrass himself with this kind of jaw-dropping pronouncement?
For instance, a recent study of graduates of the top 13 MBA programs found that students who believed that profit maximization was the manager's primary responsibility increased from 68 percent at the beginning of their graduate education to 82 percent by the end of their first year.
Personally, sir, if I were a professor of a graduate level business course, and 18% of my students thought their primary responsibility as business managers was anything other than maximizing profits, I'd be alarmed. And if I found myself in the unfortunate position of supervising a numbskull - one holding an MBA for Christ's sake - who doesn't understand the primary purpose of business (preventing human suffering?!), I'd fire him. With a vengeance.

Do you honestly believe a manager's primary responsibility is not to maximize profitability (and, in turn, shareholder equity)?

Only in the cloistered halls of academia can "ecological sustainability" and "preventing human suffering" be considered more important to any businessperson. The landscape, Professor Shareef, is littered with the rotting carcasses of thousands of shattered corporations that lost sight of what should have been the primary responsibility of their managers - profit.

Those other pleasantries are fine, like "ecological sustainability," for companies that find themselves awash in cash and can afford to dabble in such things, at least temporarily, and those - like Ben & Jerry's - that use it skillfully as a marketing driver. Otherwise ...

Here's what I've picked up in the real world: Mitigating human suffering has its place. As does one's focus on recycling efforts. But maximizing profits must always reign supreme. Or you'll be doing your mitigation from the unemployment line.

Here's what I've learned also: Business ethics courses are generally worthless. What I learned in my one graduate level course amounted to little more than - bribery is a bad thing, and pulling shenanigans with the financial statements will bring on unfavorable and unintended consequences, and fraternizing with employees is now a no-no, and lying, cheating, falsifying, deceiving customers and stockholders is not good ...

... the same stuff one was taught in Sunday School.

There is no MBA course known to man that is going to prevent a scoundrel from being a scoundrel.

So. Stick to your academics. And write your letters admonishing us business managers for losing sight of what you perceive to be our "primary responsibility" if you must.

As for me, I have to get back to doing what the stakeholders in my company - shareholders, executives, board of directors, employees, families, even customers - require of me. I must earn them a profit.