Teaching business ethics

Why do people lie, cheat and steal? Why do ‘good’ people do bad things – actions they know they shouldn’t take and do anyway? How much of someone’s anti-social behaviour is the result of individual character versus social pressure? Is there a way to prevent more people from doing harm?


In the past decade we have witnessed the results of business people doing bad things and the misfortune it has inflicted on individuals and society – and each time we ask, “What can we do to prevent such a bad thing from happening again?”

Is there a way to prevent another Bernie Madoff, Bernie Ebbers or Jeff Skilling? Or to prevent disasters large and small, such as those created by sub-prime lending, regulators not doing their jobs, insider trading or CEOs making millions of dollars while laying off scores of employees and/or manipulating financial statements? One hopes so and while the jury is out on how effective it is to teach ethics, no one is suggesting that we stop trying.

But what is ethics, anyway? Dictionary.com lists its main definition of ethics as: “a system of moral principles”.

BusinessDictionary.com has another definition: “The basic concepts and fundamental principles of decent human conduct. It includes study of universal values, such as the essential equality of all men and women, human or natural rights, obedience to the law of [the] land, concern for health and safety and, increasingly, also for the natural environment. See also morality.”

I’m not sure that some of these are universal values, but, nonetheless, both sources point to ambiguity and that ethics is not always dealing with ‘right’ and ‘wrong’, but may sometimes be a choice of a lesser of evils, a nuanced decision dealing with trade-offs or viewed as situational. Hence some of the problems we have in teaching ethics – and getting people, ourselves included, acting in an ethical manner.

The Association to Advance Collegiate Schools of Business, or AACSB, picked up on this theme in a report titled Ethics Education in Business Schools: “From the family to society at large, from government to the private workplace, ethical violations – breaches of private and public trust – have become a conspicuous feature of the contemporary landscape...

"Business schools must encourage students to develop a deep understanding of the myriad challenges surrounding corporate responsibility and corporate governance; provide them with tools for recognising and responding to ethical issues, both personally and organisationally; and engage them at an individual level through analyses of both positive and negative examples of everyday conduct in business.”

These words were written in 2004 and since that time we’ve had plenty of ethical lapses.

Financial crash and aftermath

After the 2008 market crash and resulting global recession, the media and business schools themselves began to wonder aloud how some of the world’s best and brightest had wreaked such havoc on the economy and on so many people's lives.

A 2010 Wall Street Journal article titled "Promises Aren’t Enough: Business schools need to do a better job teaching students values" noted: “Business education is much more scientific than it was in its early years. It has been made more rigorous by the rising influence of statistics and economics. We believe in analytics. Most organisations need more analytics. But analytics are not a substitute for values. Indeed, an over-reliance on analytics leaves managers poorly prepared to lead in moments when statistics obscure the full human dimensions of a choice.”

A New York Times article titled “Is it Time to Retrain B-Schools?” piled on: “Some say the schools have become too scientific, too detached from real-world issues. Others say students are taught to come up with hasty solutions to complicated problems. Another group contends that schools give students a limited and distorted view of their role – that they graduate with a focus on maximising shareholder value and only a limited understanding of ethical and social considerations essential to business leadership...

“Instead of being viewed as long-term economic stewards... managers came to be seen mainly as the agents of the owners – the shareholders – and responsible for maximising shareholder wealth.”

Business schools responded to the scrutiny by increasing their focus on ethics, everything from the MBA Oath project started at Harvard Business School to Babson College's Giving Voice to Values curriculum to a 38% increase in ethics courses offered by AACSB-accredited schools between 2009-13.

But do these programmes and-or classes work? A 2013 Wall Street Journal article titled “Does an ‘A’ in Ethics Have Any Value?" noted that “schools can't calculate the moral well-being of their graduates the same way they can quantify financial success or technical acumen. One of the few rankings available – the Aspen Institute's Beyond Grey Pinstripes report – was suspended last year, in part because researchers could not determine the net benefit of ethics courses. Without demonstrable returns, there's little incentive for deans to add classes and instructors.”

Teaching ethics effectively

So how do we better equip students to better understand ethical dilemmas and how to approach them? One way may be to understand what causes ethical lapses in the first place.

A 2014 Washington Post article titled “Can You Teach Businessmen to be Ethical?” suggests business schools may be approaching ethics all wrong: “We need to understand why people behave unethically, even when they think of themselves as virtuous.

"A metaphor I developed for this purpose is that the mind is divided into two parts that sometimes conflict, like a small rider sitting on the back of a very large elephant. The rider is our conscious reasoning. It’s the part of us that learns facts and formulates arguments. The elephant in contrast, is the other 99% of what goes on in our minds. It’s the automatic and unconscious processes like intuition, emotion and habit.

“In a mature person, the rider and the elephant work together harmoniously, but sometimes – as in the case of many ethical transgressions – our rational sense of right and wrong isn’t enough to steer the unconscious beast.

“As goes Medea’s lament, from Ovid’s poem Metamorphoses: ‘I see the right way and approve it, but alas! I follow the wrong.’ When the rider and elephant disagree, the elephant is a lot stronger. Ethics classes are aimed at the rider.”

Dan Ariely has done some great research into everyday cheating and how we rationalise behaviour that we know isn’t acceptable. For example, he does some research on cheating and “the results showed that when people could cheat, they generally did”.

In a Wall Street Journal article, Ariely notes: “Over the past decade or so, my colleagues and I have taken a close look at why people cheat... What we have found, in a nutshell: everybody has the capacity to be dishonest, and almost everybody cheats – just by a little.

“Except for a few outliers at the top and bottom, the behaviour of almost everyone is driven by two opposing motivations. On the one hand, we want to benefit from cheating and get as much money and glory as possible; on the other hand, we want to view ourselves as honest, honorable people. Sadly, it is this kind of small-scale mass cheating, not the high-profile cases, that is most corrosive to society.”

There are several posts on his blog about cheating, too. Worth a read – and a broader discussion across business schools.

So how can we improve our students’ ethical decision making? Good question. EthicalSystems.org, a not-for-profit organisation housed at New York University, collects and shares research on ethics that hopes to demonstrate that “in the long run, good ethics is good business”.

The research is really interesting and spans a wide variety of topics, including accounting, cheating and honesty, contextual influences, corporate culture, corporate governance, corruption, decision-making, leadership and teaching ethics, among others. The site also offers activities and cases on how to teach ethics, as well as a host of resources in this area.

How does your school teach ethics? What works and what is just wishful thinking? How might we approach the problem differently? How might we better instil ethics in students – and the broader business community?

Margaret Andrews is a seasoned academic leader with more than 20 years of experience in higher education, executive development, business and consulting. She has held leadership positions at MIT, Harvard University and Hult International Business School and has a track record of creating and launching successful programmes and turning around underperforming programmes and units. She teaches a variety of leadership and strategy courses at Harvard University’s Division of Continuing Education, and is also president of Mind and Hand Associates, a boutique consulting firm serving a global higher education clientele. You can reach her at margaret@mind-and-hand.com.