The Big Think Business School and Society
MBA elites and the creation of “intelligent idiots” This can be witnessed by its graduates who have been associated with some of the most daunting corporate scandals of the last century, leaders such as Jeff Skilling of Enron, Stanley O’Neal of Merrill Lynch and Jamie Dimon of J.P Morgan Chase to name but few. It can also be witnessed from the egregious pay gap between chief executives and the average employees, the junk bond takeover mania, the real estate mortgage bubble and the ensuing financial crisis. He further pin the blame of Donald Trump election back to the Harvard Business School.
A new book within management education circle has placed responsibility for the calamities being witnessed within society squarely at the door of the Harvard Business School. “THE GOLDEN PASSPORT, HARVARD BUSINESS SCHOOL, THE LIMITS OF CAPITALISM, and the MORAL FAILURE of the MBA ELITE” by financial journalist Duff McDonald. The book claims that complex challenges faced by society such as Income Inequality, Financial meltdown of 2008, corporate myopia and short-termism and the corporate greed is because of the kind of education being offered by Harvard Business School to new cohorts of management leaders all over the years.
The author asserts that the schools has not been walking the talk and are indeed complicit to the complex societal challenges being witnessed around the world, Instead of helping to solve societal challenges as declared by its objective the school has always been advancing corporate greed and shareholder value maximization as the single corporate objective.
The author begins by questioning the authenticity of the school’s objective which was formulated by former school’s dean Wallace Donham in 1926 after observing that: “The business group largely controls the mechanisms placed in society’s hands by the development of science and technology and is therefore in a strategic position to solve the problems that comes with this mechanism. Therefore our objectives as Harvard business School should be the multiplication of men who will handle their current problems in a socially constructive ways”.
The school has become “a money machine unto itself” as much of that wealth found its way back to the school as these corporate elites give back generously to their alma mater, writes Duff Mcdonald.
The main culprit of this sorry state of affairs is Michael Jensen a now Professor Emeritus at Harvard, notes Mcdonald. Harvard professors such as Michael Jensen have at all times advance curriculum, research and pedagogy that is not aligned to the school’s founding objective of educating socially responsible managers
The author further asserts that on this social significance narrative the Harvard Business School has always been “an enormous failure”. Indeed Harvard business school is just posturing. Oliver Burston agrees that HBS have actively freed their students from any sense of moral responsibility.
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KATALYTIK BUSINESS REVIEW
Michael Jensen is regarded as one of the foremost management theorist and scholar of modern times who pioneered the “Agency theory” which simply support the long held theory of shareholder value maximization as forwarded by classical economist Milton Friedman. In his 1970 New York Times article titled “The social responsibility of business is to increase its profit” Milton Freidman argues that those corporate executives who will pursue other goals than that of maximizing shareholder value should be treated as corporate delinquent and loose cannon who are hell-bent in opening floodgate to socialism. In 1976 Micheal Jensen co-authored a paper with William Meckling titled “Theory of the firm: Managerial behaviour, Agency cost and Ownership structure”. In the paper Jensen argue that if shareholders are the only constituency that matters as forwarded by Friedman then hostile takeovers, leveraged buyouts, Share buybacks, corporate downsizing, outlandishly high corporate executive pay and share based executive compensation while neglecting societal wellbeing is regarded as normal business operation. Short-termism, obsession with stock price and quarterly earnings would become the hallmarks of how corporations operate and what business school would teach new cohorts of business leaders. Mcdonald contends that Jensen and the Harvard Business School are responsible for all these societal challenges and calamities as a result of how business would operate. The million dollar question is, is this an indictment on business schools and management education across the world? Harvard Business School has always been the benchmark of management education and business education around the world. Indeed Harvard Business School has always been followed and copied in how it operates, it has even been copied when it comes to referencing research work. Many within management education circle agrees that the organizing principles of management education and business schools is problematic because of its narrow understanding of corporate purpose (maximization of shareholder value) by business schools, which they believe it leaves many MBAs and business school students believing that they are legally and morally obligated to maximize stock price for the shareholders. In an article by Kelley Holland published on 14 March 2009 propounds that Critics of business education have many complaints, with some of them claiming that business schools have become too scientific, too detached from real-world issues while others say students are taught to come up with hasty solutions to complicated problems, with another group contending that business schools give students a limited and distorted view of their role — that they graduate with a focus on maximizing shareholder value and only a limited understanding of ethical and social considerations essential to business leadership.
The belief is that such shortcomings by business schools might have left business school graduates inadequately prepared to make the decisions that, taken together, might have helped mitigate the economic crisis and societal challenges the world is facing today. One CEO in a CEO conference was asked what he thinks about the kind of education given to prospective cohorts of leaders, The CEO answered that the problem is business schools are creating and developing “intelligent idiots” who are intelligent enough to maximize shareholder value while they are idiots because they cannot genuinely connect with society, they cannot appreciate that there is the world out there. Is this the true assessment of the state of management education and business schools around the world and South Africa in particular? Does South African Business Schools complicit in creating “Intelligent idiots”? Looking at the complex challenges facing humanity and society in the country, you can only be the judge on how are our beloved business schools are doing in preparing future generation of business leaders.
by Tsele Moloi 2 KATALYTIK BUSINESS REVIEW