Teaching Tougher Standards
The Enron scandal may not be entirely responsible for the surge of interest in ethics in business education; but it certainly provided a boost. So did Sarbanes-Oxley, or SOX, the law created in the scandal’s wake to compel compliance with ethical accounting practices.
Nonetheless, ethics is an important and integral component of MBA and Executive MBA programs – no longer likely to be a lone class taught by a philosophy professor, but a concept embedded in practically every course from marketing to management.
“More and more you are seeing institutions including [ethics] across the curriculum, as opposed to just one class,” says Mike Gerber, president of the Atlanta Regional Consortium of Higher Education (ARCHE), “to convey both academically and realistically that ethics is a process for decision-making and behaving, not just a course in college to take and get out of the way.”
Triple bottom-line reporting, for instance, is about more than just financial accountability, says John Knapp, president of The Southern Institute for Business and Professional Ethics. “It’s part of a larger trend. Businesses are more accountable to the public in today’s climate. Everyone wants to know more.”
Catharine Kuchar, director of education services for the institute, says the Internet “increases the ability to monitor conditions, and encourages people to take companies to task.”
The Southern Institute, a 12-year-old organization founded by business and professional leaders, is headquartered on the campus of the Columbia Theological Seminary in Decatur and affiliated with Kennesaw State University and Clemson University. “Ethics is a growing concern in every sector of society,” Knapp says. “Our initial mission was to raise awareness; now, it’s more on providing resources to help strengthen the management of ethics.”
Different EMBA approaches demonstrate how ethics has saturated 21st century business curricula. In 2003, Georgia State University’s J. Mack Robinson College of Business EMBA program was ranked in the top 25 in the world by BusinessWeek, with Robinson’s business ethics program in the top five. Retired Deloitte Touche Tohmatsu CEO James E. Copeland, whom the Atlanta Business Chronicle called a “role model for ethical business practices,” is a Robinson Global Scholar and participates in its EMBA program. Flexible MBA and EMBA students at Robinson can compete for the Carl R. Zwerner Prize in Business Ethics, which awards $7,500 to those who demonstrate potential for success based on “ethical conduct, integrity and community involvement.”
Our courses focus on law and culture,” says Dave Forquer, assistant dean and lecturer at Robinson. “Where those two intersect – and where they diverge – is an area we’ve always been concerned with. It’s interesting that in the current climate, new legal standards are impacting other processes within the company, whether financial, as it relates to reporting, or other areas. It’s no longer specific, it’s interdisciplinary – it touches everything. Ethics has migrated to assume the relevance of technology or globalization as a theme.”
Forquer says a class such as Organizational Behavior is impacted, for instance, because of new transparency requirements in accounting created by SOX. “You can’t talk about those things without talking about implications that arise as a result of SOX in the context of the course,” he adds.
“It’s everywhere. Look at strategy in resource deployments. You can’t have a discussion today about outsourcing without the legal and ethical components. With outsourcing, you can clearly demonstrate the net positive impact on the U.S. economy, but there is an undeniable net negative impact on certain segments. How do you reconcile the economic gain with that negative impact? All of us are really pondering a lot of the traditional material.”
Tensions And Boundaries
Students are driving the current interest in ethics, Forquer says. Executive students, he says, “see on the one hand that they are agents for the shareholders. On the other hand, they make decisions within the context of the laws and culture [they] work in, and what they all realize is, there is a lot more tension than they may have thought.
As for whether SOX creates a new boundary for risk-taking that isn’t good for the economy, it’s a little too early to tell. Although it has become an ever-growing piece for discussion … being an ethical leader is not a functional issue. We all need to be ethical leaders.”
Sheb True, professor of ethics at Kennesaw State University’s Coles College of Business and a Faculty Fellow for Ethics and Scholarship in the RTM Institute for Leadership, Ethics, & Character, has a similarly holistic view of how ethics has been incorporated into Executive MBA curricula, leveraging the philosophical core of ethics in the context of making business decisions. By teaching ethics from an applied perspective as opposed to moral point of view, True wants his students to approach decision-making from a perspective he calls E3: “Is it effective, is it efficient, but first of all, is it ethical?
“[Students] are receptive to that approach because they see the relevance, but there’s no pointing fingers,” True says. Executives at Coles are taught to identify individual and company values upfront, he says, to be applied toward [assessing] how stakeholders are affected by their decisions. It’s not fixed in stone. “They may have to change their values to make decisions, or refine those values,” he says. “Merit, for instance, sounds good; but sometimes the decision must be based on other factors.
“Especially with executives, we are not trying to be a preacher, or change their values. But we want them to re-evaluate their own values in the process of doing business, and articulate them in order to act on them. If your only tool in the box is a hammer, everything begins to look like a nail.”
Identifying rights and responsibilities, then weighing how they shift in different situations, becomes an ongoing element of economic education. True uses Wal-Mart as an example. “Investors have rights; stakeholders are another framework. In the case of Wal-Mart, should the community carry more weight than the shareholders? That’s a debate, but at least it gets you thinking about it. The business answer is the stockholder is more important. But sometimes a negative impact on the community trumps that rule. You try to be objective, but there is always a subjective context.
“I’m not trying to make a socialist statement,” emphasizes True, who has a business background. “But it pays to look at all the angles.”
His course in decision-making begins with a test case that includes what he calls a dilemma. “We ask them [students] to tell us which issues are the most important and need addressing, and we get great MBA answers – great financial and market analysis. But we say how come the dilemma – such as ‘What amounts to a bribe?’ – didn’t make the priority list? We want to increase ethical sensitivity, when the challenge is that no one thinks [he or she] is unethical. We point out that the business icons and leaders that make it have to be able to communicate to the people why they’re correct.”
At the other end of the scale, “We don’t want analysis by paralysis, an ivory tower view of everything at the expense of practicality, efficiency or effectiveness,” True says. “We just want students to have a framework that is easy to define, establish and control.”
The Sarbanes-Oxley Factor
Results of a recent poll of 378 CEOs in the Southeast conducted by the Southern Institute on business ethics indicate “the huge majority think the [SOX] bill is overkill,” Knapp says. “They think the many are paying for the sins of the few. The survey also showed that most CEOs believe businesses headquartered in the Southeast operate at a somewhat higher ethical standard than those in the rest of the country.” That perception may arise partly from regional pride he says, and partly from the Bible Belt culture, which places great value on higher ethical standards.
Some ethicists have even expressed concern about “SOX fatigue,” fearing that companies may become so focused on – and stressed by – the implementation of transparency rules that there may be little effort made to apply ethical decision-making beyond what is required by law.
Knapp believes that SOX’s forced focus on accounting issues may have diverted some organizations from other issues that need attention. SOX has been a time consuming and costly compliance undertaking for a lot of businesses, he says, but it’s very narrow. The focus on accounting issues, he adds, may draw attention away from the many other ethical issues that require companies’ attention. Ethics isn’t only important to accounting; companies have to pay attention to how they conduct business in every area.
True says the law is no substitute for a company’s internal values. “We can’t let SOX be a surrogate for thinking ethically,” he says. “Laws can help to clarify and streamline the decision-making process, but problems can occur when we rely on too much regulation and it begins to serve as a crutch.”
What really helps a company to act in an ethical manner is having a clear idea of its mission. He cites two companies as examples – Southwest Airlines and Atlanta-based HomeBanc Mortgage Corporation. HomeBanc, he says, decided to honor expired lock-in loan rates when Hurricane Wilma prevented customers in Florida from closing loans before their rate-lock period expired.
“Legally, they could have raised it, but they made an ethical decision not to let the law affect their mission, which, to me, is a great thing,” True says. “Southwest Airlines, which he says puts employees ahead of short-term financial performance, decided to reduce costs in ways other than laying off workers during the post-9/11 profit drop.”
Knapp says a number of factors are contributing to demands for a broader approach to providing ethics education – in and out of the classroom.
“In MBA programs in particular, there has been a great movement to infuse ethics. Actually, there is a Society for Ethics Across Curriculum made up of both business leaders and academics,” he says. “It’s a fairly recent movement, and very healthy. I don’t think it’s a fad. We provide ethics orientation sessions for state boards across the state, with close to 40 participating, including the DOT, Board of Regents and department of corrections. That’s never happened before. There is a recognition by leaders that they need to be more intentional in applying ethics to management.”
Knapp says the U.S. State Department recently asked the institute to brief officials from 12 countries on four continents – including the Slovak Republic, Malaysia, Kenya and Mexico – specifically on how governments and business organizations manage ethics. “It’s not coincidental. It relates to larger trends. There’s a loss of trust in institutions, a trust we can no longer take for granted. It’s a new way of thinking for a lot of people. You used to rely on an employer to tell you about the company. Now, multiple sources such as blogs have created an unsettled atmosphere. It’s certainly created confusion, because it’s also more difficult today to qualify sources.”
The Global View
The United States’ responsibility to developing and emerging countries is essential to continued economic success based on global trade, Knapp says. “There are huge dangers. In a lot of countries, there are very few rules or no well-developed regulatory structure. For a U.S. company to say they comply with the law wherever they do business – that is, they won’t break any U.S. or home country laws – is woefully inadequate. It’s up to companies to take their personal and professional standards abroad, and in many cases, the American standard of doing business should be higher. The development of a strong, coherent regulatory structure is part of the maturing of a market economy, and we haven’t gotten there yet.”
Knapp cites Atlanta-based UPS as a positive example of how to take business abroad. “They are very astute about establishing a promotion of ethics and compliance in the 200 countries where they do business,” he says.
“Once it was taken for granted that people received ethics education in the home or the church,” Knapp says. “You don’t assume that any more. People look to public education and the universities for that education. And there is the perception today among leaders that new generations are not as prepared morally, with the same values.”
nges in American business have affected on-the-job ethics training. “It’s a more mobile society,” Knapp says. “People are more transient in their careers – you no longer stay with the family business or IBM forever. So employees are less invested in the long-term success of organizations than they used to be. And it’s a two-way street. Organizations aren’t thinking about the well-being of employees any more either.”
On a more positive note, Kennesaw State’s True believes that if the recent trend of focusing on business ethics in education continues, an ethical perspective can become more of a fundamental and inclusive part of business models and decision-making process, as opposed to a separate component or afterthought.
“Remember that at first, many people wore seat belts for fear of getting a ticket. But today, people do it for safety – it’s become a part of their consciousness.”
“We think from this point on ethics will be embedded in education, and talked about more and more,” says the Southern Institute’s Kuchar. “I don’t know if today’s students are more ethical, but they’re certainly more aware of it.”