Fall 2007 was a fascinating time to be an MBA student.
As financial firms throughout the country suffered the fallout from the home mortgage crisis — much of it the product of questionable decision-making by those firms — students such as Brad Kenney, who graduated with his MBA from Kent State University in 2009, followed and discussed every development. “We had a lot of lively discussions about why the economy was collapsing,” Kenney says.
But it also was a sobering time for students because they were shocked and angered to learn about the unethical behavior of Wall Street executives and other business leaders. The rage in academia and the public grew when media reports revealed executives collected huge bonuses or landed on their feet with new jobs at other Wall Street firms even though their poor conduct contributed to business failures, job losses and a credit crisis that crippled companies throughout the United States.
“What kind of message does that send to students coming out of business schools?” asks Kenney, now a senior consultant with Ernst & Young in New York. “It says why not go into a career in finance, where you get to play around with numbers and make million-dollar bonuses for not doing anything that produces value.”
The shady practices that caused the Great Recession have made ethics courses freshly relevant at business schools throughout Northeast Ohio. Most, but not all, schools in the region require an ethics component in their degree programs. Some universities without ethics requirements are considering revising their standards but note that creating new classes is a long, difficult process.
Either way, some members of the business community are worried about a repeat of the fallout from the accounting scandals of a decade ago, which produced massive federal legislation but not much of an increase in ethics studies in the country’s business schools.
Local Ethics Courses
In 1983, Baldwin-Wallace College became one of the first colleges in the nation to receive an endowment for a business ethics chair, with a gift from former Sohio CEO Charles E. Spahr.
The Berea college requires business undergraduate and graduate students to complete an ethics course. In fact, ethics is taught in each of the college’s programs. And professors receive training to help them teach ethics in their business classes.
Similarly, John Carroll University, in University Heights, has been requiring all undergraduate business students to take at least one course in ethics since 1985, says Paul Lauritzen, a professor of religious studies at JCU. Business graduate students are also required to take at least one ethics course.
Five years ago, JCU’s Boler School of Business worked with the university’s program of applied ethics to create a grant fund to help business professors develop and incorporate business ethics components into their course lessons.
Kent State University requires MSA accounting students to complete a course examining professional issues and ethics in accounting.
However, the University of Akron does not require undergraduate or graduate business students to take an ethics course, says Ken Aupperle, a professor in the Department of Management, who has conducted extensive research in business ethics and moral decision-making. But students can take a business ethics course as an elective, which is offered by the philosophy department.
“We’re talking about developing an ethics and leadership class at the graduate school level, and I believe the leadership at the University of Akron is committed to it,” Aupperle says.
“However, the challenge for most business schools is that it’s not easy to get classes approved because it is a very, very extensive process,” he adds.
Streamlining the MBA
As Aupperle sees it, many colleges are constantly looking to streamline the curriculum for time-strapped students who need to earn an MBA to advance their careers.
As a result, programs focus on offering required classes and only the most essential elective courses that are needed to earn a degree. This means ethics classes often fall by the wayside.
That said, most business schools typically review ethical case studies in MBA courses. But Aupperle, who based his doctoral dissertation on business ethics, says the problem is that most professors can only pay “lip service” to ethics because he believes the majority of them never received formal ethics training.
He doesn’t believe that the most recent corporate scandals will lead many colleges to launch business ethics courses. After all, Aupperle notes, he didn’t see many schools offer business ethics courses after the massive accounting scandals that surfaced in the late 1990s and early 2000s at Enron, Tyco International, Adelphia and WorldCom.
In response to these scandals, which cost investors and employees of these companies billions of dollars, Congress passed the Sarbanes-Oxley Act in 2002, which imposed new regulations to make corporate financial reporting more reliable, accurate and transparent.
Compliance vs. Character
Since then, publicly traded companies have made significant investments in compliance programs that have clear consequences, ethics training and hot lines for employees to report wrongdoing, says Peter Rea, a business professor at Baldwin-Wallace.
But Rea says the response to the accounting scandals didn’t get to the root of the problem. “You could argue whether Sarbanes-Oxley went too far or not far enough, but it certainly didn’t protect us any, did it?” Rea says.
“So this suggests something else is going on. I would argue that the missing piece is character,” he says. “Compliance by definition is based on rules. Character by definition is based on choice. Each of us has a choice on how we want to conduct ourselves. Of course, we are not always going to be right. But if an organization recognizes the importance of business ethics, it gives the company a chance to make its leaders stronger to think and to act in an ethical manner.”
Rea and Alan Kolp, a Baldwin-Wallace professor of religion, co-wrote Integrity Is a Growth Market, which describes how the seven classical virtues — courage, faith, justice, prudence, temperance, love and hope — can be effectively applied in today’s business world and help reinforce and develop character leadership.
“[Virtues] effectively serve business because business is ultimately a social enterprise, and ethics is ultimately about our relationships with others,” write the authors.
Rea notes these virtues are the foundation of a liberal arts higher education. “One of the objectives of higher education is to develop leaders of character,” Rea says. “I do think that has gotten lost. The risk of making education exclusively professional is that you lose this wonderful heritage of character education, what it means and how to go about it.”
Even though the recent business scandals were deplorable, Rea says, they need to be put into perspective.
“According to research conducted by the Association of Fraud Managers, about 6 percent of the nation’s work force is involved in some type of fraud,” Rea says. “On one level, this is a big number because a small percentage of people can bring down an organization. On the other hand, 94 percent of employees are not lying, not cheating and not stealing.”
Realistically, ethics training will not prevent all future business leaders from participating in scandals, notes Aupperle. But for most MBA students, it makes a difference.
“I think a lot of people fail to think things through on an ethical level,” he says. “Ethics training can help MBA students think through ethical dilemmas and give them insights into their own behaviors that can effectively guide them through difficult and complex ethical challenges.”