MBA programs need ethics reform

  • April 17, 2009
{mosimage}TORONTO - Some call it the “monster” model. For years, critics have charged that MBA schools have been teaching business students the mantra of maximizing shareholder profits with little regard for anything else.

But according to CEO and business ethics researcher John Dalla Costa, it's critical to have a reform of this business mentality now, given the depth of the economic crisis the world is facing.

The collapse of major banks in the United States and the troubles faced by the North American automakers have contributed to a ripple effect of lost jobs and eroding public confidence in the economy. In March, Canada’s unemployment rate hit a seven-year high of eight per cent. Since October 357,000 jobs have been lost. In the United States, more than five million jobs have been lost during the recession, with 663,000 lost jobs in April alone.

What's a possible solution to fix this broken business model?

In an upcoming book, Dalla Costa, a Harvard Business School graduate who founded the Toronto-based consultants Centre for Ethical Orientation , hopes to present the case for “moral capitalism” which challenges the oft-repeated business mantra that “greed is good.”

Moral capitalism, he said, teaches that the environmental and social impacts of business “will not be an afterthought to the profits of shareholders, but will be of equal priority to shareholders.” His book will also examine the importance of “management by collaboration” and the necessary skills for effective managers.

“It brings ethical sensibility and business sensibility into a more unified kind of approach,” he explained.

The book will also resurrect an important lesson. During the Depression of the 1930s, protectionist and anti-immigrant policies led to the growth of an extremist political movement, he said.

“We need much more compassion and generosity now,” he said.

While the government talks about stimulating the economy, Dalla Costa urges the need to “stimulate community.”

“We’ve so stripped our city of dignity and people feel it. Broken communities lead to more defensive, angry and more fearful citizens,” he said.

“This is the time when we need much more generous imagination on the part of business leaders.”

But Dalla Costa also cautions that although political leaders like German Chancellor Angela Merkel and French President Nicholas Sarkozy have suggested the creation of a “capitalism with a conscience,” he said he is concerned that as the economy picks up again, business leaders might not feel a need to re-examine old habits.

Dalla Costa, a Regis College masters of divinity graduate and current doctoral student, also points to Catholic social teaching as a source of ideas for this new business model.

“(The late) Pope John Paul II wrote a lot about economics from the point of view of making sure that human dignity is preserved, making sure that economics served the community, and not the other way around,” he said.

“In a sense, the teachings have been quite prophetic.”

Meanwhile, at Dalhousie University in Halifax, its new MBA school director, Peggy Cunningham, says the university wants to help in training more well-rounded business leaders of the future and creating a more well-rounded business school education. Students will be looking at a “long-term focus on the creation of value,” she said, instead of just about maximizing shareholder profits.

“Business has lost its way,” Cunningham said.

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