Faced with a recession-trashed job market, students have been applying to M.B.A. programs in greater numbers since 2008. That's bad news for the many critics who charged that it was graduates of these M.B.A. programs who helped create the recession in the first place. Peddling mortgage loans to credit-poor borrowers and betting on a sure-to-pop housing bubble may have paid off in the years leading up to the financial crisis—and boosted the stock prices of many firms run by people with M.B.A.'s—but they ended up being both harmful to the economy at large and losing strategies for those firms.
Indeed, if you want evidence that there's a problem in business education today, "the financial crisis is Exhibit A," says Judith Samuelson, executive director of the Aspen Institute Business and Society Program. The accusations against business schools are many, but a chief criticism is that educators overwhelmingly focus on short-term profits instead of the long-term consequences of business decisions. "There's an assumption at a lot of business schools: Just do your job, pursue your self-interest, and everything works out," says Tim Fort, the Lindner-Gambal professor of business ethics at George Washington University School of Business.
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Recognizing that they are now under a microscope, many business schools are re-evaluating the importance of business ethics and different methods of teaching ethics. "At some schools, you could be laughed at for raising ethical issues in a finance class. I don't think that's the case anymore," says Fort. As schools add classes that offer guidance for dealing with ethically ambiguous scenarios or introduce ethical sidebars to issues taught in other classes, they are also beginning to include programs less expected in business school, such as classes on environmentalism.
By no means does everyone agree that a lack of ethics contributed to the financial crisis. "We would still be in this soup if everybody—from homeowner to investment bank to rating agency—had behaved according to the law," says Richard Shreve, an adjunct professor of business ethics at the Tuck School of Business at Dartmouth College. Many of the M.B.A. graduates making bets with credit-default swaps were simply ignorant of the full consequences, not willfully negligent. And there were many other contributing factors to the housing bubble that were out of the hands of most businesspeople, such as the expansionary policies of the Federal Reserve.
The Association to Advance Collegiate Schools of Business, one of the major business program accrediting organizations, has never required business ethics as part of a school's curriculum. Several schools, such as George Washington, have made it a requirement anyway. Merely teaching business ethics in the classroom is not enough for fundamental change, says Samuelson of the Aspen Institute. "If that's the only place you raise questions about social and environmental impacts, the message you send to students is that it's like philanthropy," she says. "It's something you do when you're not focusing on your business." It takes a curriculum overhaul to really change students' mindsets, Samuelson argues. The Graduate School of Business at Stanford University, for example, has developed courses that address the controversies that arise when dealing with different cultures, such as Google's policy toward Chinese censorship.
Ethical evolution. This recession was not the first event to change attitudes about business ethics. When Shreve started teaching ethics at Tuck in 1992, his philosophy was that he wasn't there to change hearts and minds. Rather, his goal was to inform students of the ethical dilemmas they might face in their careers. But the backlash against business schools resulting from the 2001 Enron scandal caused him to modify this approach. "The image in the popular press is that the business schools are taking very bright, ambitious young men and women, teaching them sophisticated techniques, and turning them loose, armed and dangerous. But it occurred to me, if we aren't careful, we could be doing that," Shreve says.