MBA Programs Undermine Ethics: An Interview with Matthias Huehn

SPI: Professor Huehn, your provocatively titled article, “You Reap What You Sow: How MBA Programs Undermine Ethics” was recently published in the prestigious Journal of Business Ethics.* Can you give our readers a summary of the arguments in your paper?

MH: I looked at three aspects of business education: the pedagogy, the structure of degree programs, and the ethical underpinnings of the theories taught. Milton Friedman once said that economics/business is a science and therefore ethics has no place in the formal science of economics. But economics is a social science, it is the science of man. How can one study human action without acknowledging values? Business students only believe this because reflection is systematically suppressed. Being taught without reflection is not education, it is training at best, indoctrination at worst. The three aspects I looked at appear to be designed to suppress reflection, especially about values.

SPI: Is your hypothesis about MBA programs reducing students’ ethicality supported by empirical evidence?

MH: There are a large number of empirical studies (survey-based and experimental) that show that anyone who comes into contact with the anti-ethical narrative inherent in mainstream economics theory is affected. For instance, The Aston Institute conducted two big surveys in 2001 and 2008 and found that business students’ confidence in their own ethical decision making competences was inversely correlated to how long they studied. All other student groups developed their ethical skills as they moved through their degree programs. Business students also stick out in another way: they are not interested in learning, they merely want the degree.

SPI: Do you think MBA training is partly to blame for the Global Financial Crisis?

MH: The vast majority of my colleagues would say yes. I am not so sure, and the empirical evidence – for what it is worth, is not very strong I believe. Banks work within a legal and political framework that is designed by politicians. Look at Goldman Sachs. They helped the Greek government cheat so that Greece could join the Euro Zone. That wasn’t Goldman’s decision – that was politicians who wanted the cradle of European civilization in from the start. I place the blame first and foremost with politicians who create bubbles for short-term gain – I think Tocqueville got it right 200 years ago.

SPI: Why did you write this article?

MH: Business faculties produce more graduates than any other university department. Business students are not only the single biggest group of graduates, they also acquire positions of responsibility faster than other graduates. However, they are very confused when it comes to values. They see the purpose of life as maximizing their personal utility, and because they have been taught that their individual egoism is beneficial on an aggregate social level, they believe they are doing good by being egoistic. Adam Smith warned that such a belief would turn a vice (selfishness) into a virtue, and that this would destroy the difference between vice and virtue. Business schools teach a theory that has extremely strong ethical content but tells students that selfishness is neutral or good because it is “rational”.

SPI: How has the response to the article been so far?

MH: As expected: pro-change activists of all persuasions are positive – the traditionalists ignore it. The editor of one of the top-tier journals told me that I was very brave and I would have to tread more carefully if I don’t want to end my career. That clearly shows how emotional this debate is.

SPI: Are there other scholars who share your view, and how widespread is it?

MH: Generally, I think business ethics and management education scholars agree with me. They are also quite optimistic that things will change for the better. I am not. I believe that management education by and large will remain firmly wedded to the training concept. One reason is that it is an enormously profitable business: the business schools usually cross-subsidize the other schools in a university, and teaching business factory-style is cheap.

SPI: How does the case study method commonly used in MBA programs reduce the ethics quotient of students?

MH: I was recently invited by a top-tier business school, the ESMT in Berlin, to make the cases against cases, arguing against Richard McCracken of the Case Centre. Richard and I discovered that we agreed on most points: cases can, in some subjects at least, be an important pedagogic tool. But if they are the only tool used, they are detrimental. It also depends on how they are used. If you use a case to generate an open discussion, like I do in my ethics classes, they encourage reflection. However, in almost all business schools, you have 80 or so students in the classroom and they only get the chance to say something every five classes. They get asked a question and must come up with the one correct answer or they get a bad grade. This is reflection-free training and not education. Students should be taught to value new questions more than old answers. Business students are afraid of new and messy questions. Adam Smith wrote about the impartial spectator, our conscience. The impartial spectator permanently challenges us with unwanted questions and we need this ethical sparring partner in the classroom, not a professor who seems to have all the answers. The case method drills students to believe in old answers, not a good basis for life-long learning.

SPI: Why does the syllabus of MBA programs promote an unethical attitude in students?

MH: The structure of programs is the least important of the three factors, but it does its part. Business students learn almost exclusively from textbooks that pre-digest the enormously diverse list of subjects that they are taught. They rush from lecture to lecture, from test to test. There is no time to reflect. This is cramming, and cramming produces very short-term, shallow knowledge.

SPI: Your say that “bad/unethical theories can create bad/unethical practices.” Can you elaborate on this statement?

MH: Sumatra Ghoshal made that argument in 2005: if you teach students that they must always be radically selfish in order to be rational managers, you should not be surprised if they listen to you and become radically selfish. I call this the Wang-Moosmayer Paradox of management education. Long Wang et al. surveyed business students and found that they view “greed” as something positive. In an unrelated survey, Dirk Moosmayer asked business professors what they wanted to achieve with their teaching. They said: we want our students to become socially responsible members of the community. Business professors thus teach radical selfishness as an “economic virtue” (McCloskey), and expect the outcome to be socially responsible citizens – a clearly completely absurd situation.

SPI: It seems the problem of MBA programs in regards to their approach and effect on ethics is two pronged: the process and the philosophy. First, under process, pedagogy and syllabus do not allow reflection and promote a false sense of security and superiority in regards to the ability to problem solve. Harvard Business School (HBS) is trying to improve the MBA training process. Can you tell us more about what it is doing especially in regards to its FIELD project?

MH: As part of the first year curriculum, students at HBS have to create a venture. The first time HBS did this, three projects were sold, two of them for more than 100,000USD, I believe. The vast majority of the microbusinesses had a social focus, the three that were sold also had a social focus. Think about that: MBAs have to create a business that is profitable from the start in order to get the credits. And they create businesses that deliver a social value! How can you be a radical egoist if you have to put yourself in your potential customers’ shoes? In order to create value you have to understand the values of others first. Value is what ethics is about – and Adam Smith said that is what makes markets tick

SPI: Is Harvard the only school trying to improve its MBA program so that its graduates do not emerge with an amoral approach to business?

MH: To be perfectly honest with you, I think it is the vision of one man to radically change the Harvard MBA: Dean Nitin Nohria. He faces stiff opposition from within the faculty, I fear. I hope he will succeed – it would make Harvard the pioneer in business education again. Harvard has an enormous advantage over many other institutions that would allow them to experiment: they don’t need to make money with the MBA (that comes from Executive Education) and it gets the best students anyway. There is also another big group of universities that traditionally have followed a more philosophical and value-based approach to management education: Catholic universities. One big player like Harvard and a pretty big group (like the Catholic universities) might be enough to reach a tipping point.

SPI: The second prong of the problem of MBA programs is the underlying philosophy of the content. You and others have criticized the neoliberal assumptions of rationality driven by self-interest and maximizing shareholder value as “unrealistic”. Moreover, these assumptions are often not borne out empirically. Yet, it may be easier to change a process than to alter an entrenched philosophy that is now ascendant ideology. How do we change the philosophical underpinning of management (and finance)?

MH: I agree on both counts: we have to change the underlying ideology and it will be very, very difficult to do so. I avoid the term neoliberal because I think it is misleading: the ideologists of the Chicago School claim that they are the intellectual heirs to Adam Smith. That is wrong: Smith was completely non-ideological. Smith saw economics as part of moral philosophy, yet the Chicago boys pretend it is a formal science like mathematics. Business is there to create value for customers and not to create a profit. The profit is the very welcome side effect of creating value. The Harvard newbies understood that instinctively and aimed for value in order to be able to generate a profit. Will they still understand that after two years of being exposed to “greed is good” and “economics is value-free”? The ideology of economism goes wrong in two more ways: first, we are not always radically selfish, and secondly, selfishness is not a good thing, is it? Why do we accept that in business we should be different people than in private life? The counter-argument one hears is that there is no alternative to the rational expectation paradigm. That is also wrong. Here are two: Adam Smith proposed an economic system based on sympathy, and the anarcho-capitalist libertarians also do economics without rational man.

I think if we could get rid of the politicization of the debate that would also help a lot. Milton Friedman was clever but unwise to accuse everybody who disagreed with the Chicago School of “preaching unadulterated socialism”. That’s no way to have an academic debate, and it’s obviously untrue: anarcho-capitalists are less socialist (statist) than Friedman, but their guru, Murray Rothbard, saw ethics as the foundation of economics.

SPI: Let’s say Harvard is unsuccessful in leading other MBA programs to change their pedagogy and syllabus. Let’s further assume the neoliberal/Chicago paradigm continues to be the predominant theory. Where will this state of affairs with MBA programs undermining ethics, ultimately lead?

MH: I honestly don’t think it will get worse. On the other hand, it is already quite bad. I believe that the market will right things. In Germany, we have a rebel university, the Zeppelin University. They offer the only four-year bachelor programs in the country, all their academic offerings are firmly outside the rationalistic paradigm, they value reflection and encourage a vigorous debate. They are incredibly successful. Sooner or later, this market of one will grow into a bigger niche like it always does. I doubt that we will see a full reversal though. But that’s fine: a market should have different offerings, I think. Then there is the market of ideas. There is this massive discrepancy between common sense and implicitly shared morality, and an ideology that says ‘be greedy, greed is good!’ In the long run, good ideas tend to win in the marketplace. Basing one’s society on greed as a virtue is just too obviously a bad idea.

SPI: Thank you Professor Huehn.

* Hühn, Matthias, “You Reap What You Sow: How MBA Programs Undermine Ethics,” Journal of Business Ethics, Volume 121, Issue 4, June 2014.

Professor Matthias Huehn is adjunct professor of management and Associate Dean of International Affairs at Kuehne Logistics University, Hamburg, Germany. As Associate Dean of International Affairs, Professor Huehn is responsible for growing the KLU’s network of partner universities. He started his career as an investment banker and then became a strategy consultant working for Accenture. His first academic positions were at two German universities of applied sciences. He then held professorial and managerial positions at several international universities and gained in-depth experience in very different university systems, among them the German, the British and the American.