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Business ethics demand versus supply and more


Business ethics demand versus supply and B-schools

Indian banking industry at present is in the midst of controversies. The recent high profile scandals notably PNB fraud involving the Gitanjali Group and ICICI bad loans involving Videocon, have created tremors across corporate corridors, e.g., change in leadership in both the banks. It seems business ethics is once again on the Board Room agenda, as always at the time of crisis. However, these instances of surface surfing unfortunately are far from the deeper realities.

In 2012, in an article entitled: Do Business Schools Incubate Criminals? Luigi G. Zingales, a finance professor at the University of Chicago, had argued that the scandals that expose corruption and deception in business were not merely the doing of isolated crooks; rather they were the result of an amoral culture that business-schools helped foster. He emphasized that the cleansing should start from B-school classrooms, which is a herculean task considering various business ethics demand and supply dynamics.

On the demand side, we have the company employees and B-school students (the future managers and leaders). Research reveals that managers tolerate unethical actions in order to maintain harmony as moral actions can lead to confrontations, efficiency as ethical decision-making are time consuming, and image of power and effectiveness as morality is idealistic and utopian. As a corollary, they prefer to select performers rather than ethical performers. I have even met management development program participants who have said, “Is there something called business ethics?”  

When the markets do not take business seriously, it is simple to note that most students also do not take business ethics seriously. On many occasions, I have often come across students who were dead sure that things seldom move in market without gifts and inducements. It makes me to ponder, “Are they drawing inspirations from Ratan Tata’s speech at the Harvard Business School in 2011?” In that speech, Tata had said, “I think corruption has become worse and if you choose not to participate in this, you leave behind a fair amount of business.” Furthermore, students are doubtful about the effectiveness of Rakesh Khurana and Nitin Nohria’s MBA Oath, a mechanism to facilitate ethical behaviour at workplace. One of them even wondered, “Why should we consider Nitin Nohria seriously when he is a prime accused in the Ratan Tata and Cyrus Mistry feud. My answer to them has always been the following, “You may not like everyone, but do not kill the (ethical) message in the name of the (unethical) messenger.” It seems the demand side is blissfully ignorant about the importance of business ethics.

The story from the supply side is predictably unethical. Many B-schools in India do not have business ethics as a compulsory course nor planning to have one. I have a personal experience in this regard. In a faculty interview, when I highlighted the importance of business ethics, a professor of a leading B-school mocked at me and told, “Our students should master mathematics and economics, not ethics.” You know what! He has published many scholarly articles on business ethics. Till date, I express dismay at his (deliberate) ignorance about Adam Smith, the founding father of modern day economics (and management), being a professor of moral philosophy at the University of Glasgow!

Furthermore, many people who teach business ethics are either management practitioners or do not have any formal education in ethics nor in business ethics. This augurs well with the “common sense approaches” to teaching business ethics. As many of them are management practitioners, they can also create what industry demands—short-cuts to business ethics. Movie based teaching is also gaining popularity. As a result, classroom rigour has become abysmally low. For example, analysing the ethical dilemma in the movie “Michael Clayton” can be either done by applying common sense or under the rigour of ethical theories. The former can lead to analysing one situation from a limited perspective but the latter can lead to analysing not only one situation but a class of similar situations from a broader perspective. This brings to the fore an interesting question. Is the supply side knows what the demand side expects and deliberately providing everything but business ethics?

In 1991, in an article in Accounting Horizons, Late Lawrence Revsine, an ex-professor at Kellogg School of Management, argued that unethical business was often facilitated by academics who developed “demanded theories” for company insiders, thereby giving the latter the leeway to cut corners. These academics in the process get remunerated with enhanced prestige and consulting fees. Is unethical decision-making a result of a hidden collusion between the supply and demand sides? Whatsoever, it certainly is more than what meets the eye. Forget (Ms.) Kochhar! The rut is far deeper.


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References

Khurana, R., & Nohria, N. (2008). It’s time to make management a true profession. Harvard Business Review, 86, 70-77.
Revsine, L. (1991). The selective financial misrepresentation hypothesis. Accounting Horizons, 5, 16-27.
The Hindu BusinessLine (2011). Corruption in India has become worse: Ratan Tata. Retrieved from https://www.thehindubusinessline.com/economy/corruption-in-india-has-become-worse-ratan-tata/article23055089.ece
Zingales, L. (2012). Do business schools incubate criminals? Retrieved from https://www.bloomberg.com/view/articles/2012-07-16/do-business-schools-incubate-criminals-

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