The Ethics of Harvard MBAs

Bloomberg had a odd article on the varying fortunes of Harvard MBAs (and some alumni of other Harvard graduate programs). It duly notes that they range from unquestioned successes like Lou Gerstner to more controversial figures, such as Jeff Skilling, Paul Bilzerian, Henry Paulson,, Stan O’Neal, and of course, George W. Bush

Generalizing about HBS graduates is tricky. It is the largest graduate school program in the world, turning out roughly 900 MBAs a year, which almost guarantees some heterogeneity in the population, Thus it might be more useful as an indicator of business behavior generally, in part because force of numbers gives Harvard MBAs some sway, in part because the program more so than others sets out to create CEOs, and finally because only a few MBA programs, such as Yale School of Management’s, are highly distinctive (Yale has a strong emphasis on not-for-profit management.

After the accounting scandals of 2002, where Skilling and other Harvard MBAs played high-profile roles, the school studied what it could do to improve the conduct of its graduates. It concluded that students’ ethical compasses were set before they got there, which one could view either as accurate or a way of punting. Thus, the school gave some motherhood statements about changing its admissions policies.

So what has happened? Consider this section of the Bloomberg article:

Harvard Business School’s two-year program instills confidence “to go out and aim high and to think you can work on the world’s stage,” said Scott Snook, an associate professor at the school. Yet, not all students mature psychologically while at Harvard, he said.

Snook studied 50 students from before they enrolled until they graduated in 2006. Using psychological tests and interviews, he found that one-third were still, in respects, stuck in adolescence, and had trouble empathizing.

Snook found another third inclined to define right or wrong in terms of what everybody else is doing. That might explain why even well-educated executives have fallen prey to the subprime- mortgage debacle, he said. Snook said the study will be published this year.

“They can’t really step back and take a critical view,” he said. “They’re totally defined by others and by the outcomes of what they’re doing.”

The subprime-lending spree shows that Harvard and other elite schools fail to mold managers who look beyond self- interest, said Rakesh Khurana, an associate professor at Harvard Business School.

“Business schools as an institution have not effectively addressed this issue of creating a profession that has the capacity for self-regulation,” said Khurana, author of “From Higher Aims to Hired Hands” (Princeton University Press, 2007).

Hhm. It looks that post 2002 study was wrong, or that Harvard did a lousy job of changing its admissions policies.

A final tidbit:

Bush, the first U.S. president with an MBA, has written that Harvard gave him “the tools and the vocabulary” of the business world. Now, in his final year in office, Bush faces a slumping economy and an unpopular war. His approval rating is 32 percent, according to USA Today/Gallup Poll research in March.

“Usually, if you’ve got a sitting president who graduated from your school, you’d talk about it all the time,” Snook said. With Bush, he said, “It’s almost studiously ignored.”

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  1. Richard Kline

    While this is cross-grain to the purpose of your post, Yves, I just can’t put out of my mind the question of who Dubya Bush _paid_ to do his course work for that diploma. I cannot, CANNOT, believe that a man as fundamentally stupid, unlearned, and incapbable of extracting any real content even from the few books he mentions in passing that he currently has read could have mustered a passing grade at a competitive graduate program, let alone one heavy on the math side like an MBA. Who’d he pay, ’cause it’s a no-brainer he couldn’t cut this course?

  2. Yves Smith

    First, a lot of people who graduate from HBS aren’t the brightest bulbs. Only a fairly low percentage (under 10%) is either flunked out or drops the program. And you get a long way in that program by stating the obvious, with conviction.

    Second, in the runup to the 2004 election, someone sent me a video of Bush giving a speech and taking questions when he was campaigning for Texas governor. The difference was stunning. He could handle multisyllabic words and complex sentence structures with confidence, and could field questions with answers that appeared nuanced. So the intervening years of hard drinking killed more brain cells than most of us realize.

  3. Anonymous

    I read a news story yesterday that implied that high school girls have success or failure based on peer pressure, specifically so in math. Girls who end up with supportive friends that do well, seek to keep pace as a group.

    Harvard peer pressure is all about rich spoiled brats enjoying the closed society of a system based on nepotism which is a natural extension of their social environment. Harvard is just a daycare center where kids can play and then party. Four or five years later, they are given keys to corporations. I think Warsh represents this fairly well, but then again, I think he went to stanford, then ends up as a Fed Gov at 35…sitting on his ass, obviously unable to function!

  4. Anonymous

    There’s also an interesting premise here – that it is the job of business school to teach ethics. If we accept that, then it follows the non-MBA businessmen are by nature less ethical, and thus less desirable as clients, counterparties etc.

    Since we observe that this is not the case, I can only conclude that it is not the job of b-school to teach ethics but rather a requirement of society at large, begining in the home and continuing through school. Indeed, the desire for ethical dealings is not confined to the business world. The premise here is that society at large wants ethical dealings – I hope that is true!

    (As an aside, at b-school I had no ethics class, just a 2-hr seminar at the begininning that boiled down to “Don’t do anything you wouldn’t want to see on the front page of the journal.” At the other extreme, the CFA ethics section was so over the top as to paint some normal business dealing with the unethical brush.)

  5. Richard Kline

    Yeah, well, I do know that few graduate programs wash out their aceptees, especially at the masters’ level: it reflects poorly on the _program_. And these MBS barns are tremendous cash cows for their institutions, so I guess.

    And I agree with the very first observation regarding the impact on attendees ethics by these programs, that the ethical perspective of those individuals is largely set before they ever arrive. Whether or not these programs should teach ethics, they will have little impact on the actual morals or lack thereof of those whom they instruct.

    And Dubya, hard-drinkin’ _since_ he got elected in Texas? I mean, I really don’t keep up on his personal timeline, but doesn’t this go back on, y’know, his pact with God?? . . . Could it be blow, maybe??? The man sure does _not_ seem to function congnitively.

  6. anon

    I have found Harvard MBAs to be unambiguously afflicted with excessive hubris, compulsive salesmanship, mediocre intellect, and unimpressive analytical skills – in other words, quite well positioned to assume leadership roles in business.

  7. insurance guy

    One of the problems with business school in general is that it teaches that management’s role is to serve shareholder interests and that shareholder interests are best served by maximizing profit.

    Ethics are a personal thing. If you’ve been taught to serve shareholders by maximizing profit, but the goal is in conflict with an ethical dilemna (that is ignored by peers) it takes a strong character to swim against the current.

    Business school gives managers an excuse to look the other way – “Its not my role to judge”. But shareholders generally don’t make moral judgements either, so you have a void.

    In my view that’s the main flaw with Business Schools when it comes to ethics. They should teach people that they are personally responsable for their own decisions. That shareholders choose management teams in part based on their ethical judgement.

  8. S

    Goes back to yoyur earlier post that MBA is a worthless degree – that or it should be 6 months not 2 years. All that said, go Columbia

  9. Anonymous

    @insurance guy

    Interesting comment. I agree with your conclusion but don’t see it as such a bad thing. If you don’t like the ethical choices management makes don’t invest (or try to kick out management).

    Profit maximization is indeed key, and the primary responsibility of management. (This was repeated far more at b-school then the 2-hr ethics class.)

    This also works in reverse, which galls me. For example, management decides to give money to support Kosove independence. I am a Serb. Management should not make such ethical decisions with shareholder money. Pay a better dividend and let the shareholder decided where to give. (ignoring the tax consequences)


    One of the 1st things we did in b-school is calculate the NPV of an MBA. Depending on your assumptions, the answer could be negative. Don’t remember the recruiter saying that tho. :)

  10. Bernie M.

    Isn’t the current financial contretemps a perfect example of Heller’s Law?

    The first myth of management is that it exists.

    Bush is an easy target. Perhaps too easy. Who can say how smart Jack Welch, for example, really is?

  11. Anonymous

    To me the most interesting observation was that a third of the students defined right and wrong by what everyone else was doing, which implies they are easily swayed by the crowd. Hardly different from being “stuck in adolescence” (the descriptive phrase for another third), where seeking acceptance is a prime motivation.
    There seems to be a disconnect between the portrayal of someone who is “totally defined by others” as someone who ony acts in his or her [sub-text “rapacious”] self interest.
    I am not defending the HBS’ers, but I am not sure that the conclusion and sub-text of the article – MBA students are not ethical – is supported by the quotes about the study. In fact, it is a non sequitur. There is something more nuanced here, if anyone cares to think about it.

  12. Anonymous

    I didn’t go to HBS but went to a school across the river. I did go post-Enron, so the courses had content that was specifically aimed at ethics and we had a lot of work on “moral compass”. I can say from my own experience that everyone’s compass was well-developed before we hit that room, and nothing changed on account of the program. People are people.

    When I read this, I have to admit that my reaction (in a discussion with a friend from bschool who also read it) was that neither one of us had ever worked with an HBS grad that was ever worth a damn. My own evaluation is that they are always told they are the best and brightest until they “suck their own exhaust” as it were. I now work with a bunch of alumns from my alama mater and I have to say, they are a bunch of scrappy, hard-working, and mostly ego-less individuals. Frankly, seeing the H on a resume is a clear no hire indicator to me, but I’m sure I’m offset by their vast alum network that perpetuates the gross mediocrity.

  13. insurance guy

    Anon 9:17am

    The problem with that attitutde is that the vast majority of money in the market is managed by professionals on behalf of others. If management and professional investors both adhere to profit maximization at the expense of personal ethics, ehtics are never served.

    This reminds me of a scene from The Corporation where an Ad exec who specifically targets children is asked if what she does is ethical. Her response?

    “It’s my job.”

    The problem is that we teach managers that their own morality comes second to profit maximization. At the end of the day, a lot of people abdicate responsibility.

  14. Anonymous

    MBA programs sole value is the alumni network. I am a Wharton MBA and i can confidently say that the network is the greatest benefit the school gave my for my $110k. As for ethics, there is no course that is going to make much difference. You will do what is acceptable in your work environment. The only people who can resist the peer pressure are those that do not need the job.

  15. Anonymous

    What most MBA students have very much in common is a very strong instinct for social climbing.

    To that extent, that makes them that much more devious and untrustworthy (on average) than the rest of the population.

  16. Anonymous

    I know a few companies where certain MBAs – specifically HBS and Stanford – are categoric no-hire flags, no exception allowed. None admitted no matter how good the individual candidate is. The problem is contagion : once one gets in, the network follows.

  17. Anonymous

    Remember in the film Kingdom of Heaven, where Liam Neeson knights Orlando Bloom, then slaps him for his future failings? Remember what Neeson charges Bloom with: to preserve justice and defend the helpless. When I saw that, my first thought was: That’s exactly what they need to do with graduating MBAs.

  18. Anonymous

    “Harvard peer pressure is all about rich spoiled brats enjoying the closed society of a system based on nepotism which is a natural extension of their social environment. Harvard is just a daycare center where kids can play and then party. Four or five years later, they are given keys to corporations”

    Now, who wants to eliminate the gift tax on unearned income transfers at death ?

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