Can the B-School Teach Right From Wrong?

The meetings began in 1981. Four ethics professors at the Harvard Business School and Dean John H. McArthur joined Securities and Exchange Commission Chairman John S.R. Shad to discuss their ethics research over lunch. A B School scholar recalls hearing reports that, year after year, Shad "hadn't been sufficiently convinced that the school was serious about [ethics]."

This year Shad, a B-School alumnus, was convinced.

At a gala B-School gathering in New York City, McArthur announced in March that Harvard would be setting up a $30 million ethics endowment. Shad had provided two-thirds of the grant.

The gift from Shad, who is stepping down to become Ambassador to the Netherlands, comes at a time of unprecedented interest in classroom ethics stimulated by the recent Wall Street insider trading scandal. The SEC Chairman's donation coincides with President Bok's efforts announced last year to create the university-wide ethics program now run by Kennedy School Professor Dennis Thompson.

"The Harvard Business School is the preeminent institution in the field and it can and should lead by example," Shad said upon announcing his grant. "In effect, we're starting at the top of the pyramid--with the outstanding faculty and student of the Harvard Business School--but this experience will ultimately permeate the pyramid's much broader base."

Shad's purported prior skepticism regarding Harvard's commitment to the field of ethics is shared by many financial experts across the country.

"I do think it is ironic that the gift went to an institution that historically had done so little in the field of business ethics," says Manuel Velasquez, chairman of the Society for Business Ethics and the Director of the Center for Applied Ethics at Santa Clara University.

"I hope it will set the pace for a new wave of research and interest. Frankly, Harvard hasn't shown much of a commitment to business ethics in its business program at all," says Thomas J. Donaldson, Wirtenberger Professor of Ethics at Loyola University of Chicago. "I'm surprised" Harvard received the money, he says.

But R. Edward Freeman, a visiting professor at the Darden Business School at University of Virginia, says he was "not surprised," because of the Business School's prominence. Freemen works at the 20-year-old Center for Applied Ethics at Darden.

"Harvard is a place you love to hate, but you really pay attention to what Harvard does and you hope it would take advantage of this opportunity. I'm very disappointed that it hasn't done more," says Norman E. Bowie, a philosophy professor and director of the Center for the Study of Values at the University of Delaware.

Many scholars have criticized the B-School for showing relatively little institutional commitment to the field of business ethics. They point to the absence of any tenured ethics professors in its MBA program and required courses in the discipline. But others defend Harvard's record saying the University has kept pace with its rivals in its teaching of ethics, and addresses the issue regularly, although informally:

Most agree, however, that the new endowment will subject the B-School to widespread scrutiny, especially from rival business schools.

"Harvard has a tremendous responsibility now to set a leadership role. A required course in business ethics is an important first step. I am not saying one ought to not work ethics into other courses--I think we ought to have ethics interwoven into other business courses," says W. Michael Hoffman, director of the Center for Business Ethics at Bentley College in Waltham, Mass.

At the time of gift's announcement, McArthur said Harvard would definitely not be introducing a required ethics course into its MBA program. The changes would be more comprehensive, he added.

"I was somewhat taken aback that [McArthur] would say so bluntly that they had already made a decision not to require a course in business ethics. That seems a bit premature to say such a thing right on the heels of getting $30 million," says Hoffman. "It did not show a great deal of sensitivity and commitment to the responsibility."

But David J. Vogel, professor of business and public policy at the University of California at Berkeley, says he does not consider individual ethics courses to be of any educational value. If business school students are unable to recognize ethical issues in their other fields of study, then there is little point in isolating the discipline, he says.

While McArthur has repeatedly declined to be interviewed directly by The Crimson, Assistant Dean Joseph L. Bower recently echoed McArthur's earlier statements, saying that "fundamental" curriculum changes with an aim of focusing on ethics would be implemented at the B-School during the next 10 years. Bower would not elaborate, saying major reforms are still under consideration by the faculty.

"Shad and I both feel that this faculty can only make a real impact in this domain if the subject is tackled on an unprecendented scale," McArthur said to reporters at the time of the announcement. "It is clear to us that ethical issues have to be considered as they arise in the profession of business--constantly, and unexpectedly," he said, adding "They have to be imbedded in the very fabric of what we teach and research at Harvard Business School."

Observers say they are not sure that such changes are possible, however. "I think that would take a faculty whose members were already fully committed to business ethics, and Harvard's faculty has a reputation for being antagonistic to applied fields like business ethics," Velasquez said.

Currently only about 60 students are enrolled in the B-School MBA program's lone course devoted to business ethics. An optional course for second year students, "Ethical Aspects of Corporate Policy" is taught by Kenneth E. Goodpaster, an associate professor who will be leaving the B-School after the fall. Goodpaster's colleagues said he was advised by McArthur that his chances of tenure would be slim if he made a bid for a lifetime post.

Donaldson cites Harvard's denial of tenure to Goodpaster and Barbara Ley Toffler--its two associate professors specializing in ethics--as evidence of Harvard's lack of commitment to an ethics program. "I haven't seen them looking around for other people," he says.

Goodpaster and Toffler, along with Laura Nash, a former assistant professor of business administration and researcher of ethics case studies, are well-respected by their colleagues in the field of business ethics, says Hoffman. Nash moved to the Kennedy School when she was not offered tenure across the river.

"[Their denial of tenure] surely seems to leave us with some serious questions as toward the seriousness and competency of the Harvard Business School in establishing such a program," says Hoffman.

And several professors attribute this perceived lack of "seriousness" to a general Business School wide skepticism regarding the academic field of ethics.

"A lot of people are asking whether Harvard is now going over to the quantitative, hard-science attitude," says Norman E. Bowie, a philosophy professor and director of the Center for the Study of Values at the University of Delaware, where a first-year course in ethics is required.

"Harvard has not been in the forefront of the development of business ethics. The faculty at Harvard as a whole hasn't really integrated ethics into their courses. There are one or two people in the school who pay attention to business ethics," says Richard T. DeGeorge, a professor of philosophy at the University of Kansas.

"You can't seem to get tenure at Harvard if you're in business ethics," says Bowie, adding that he would advise junior faculty in the discipline against working at Harvard unless they were guaranteed tenure.

"The current interest in business ethics began after Watergate and didn't come into fruition until the late 1970s and the early 1980's. Harvard was not at all involved in the teaching, the writing and the research that was going on right at the turn of this decade, with the exception of people whom they have fired," says Velasquez.

"I have two worries about this $30 million: one is that they're going to bring people there to teach and to work who haven't studied and aren't skilled in ethical theory," Donaldson says, adding that if Harvard does bring in experienced faculty, "they will essentially ask them to put that training aside and just use the case method--I think that's what happened to Ken Goodpaster."

Some say the B-School's widely praised case-study method of instruction also makes the teaching of ethics extremely difficult.

"[Harvard has] a tendency to force people to put the ethical theory aside and I think they've straightjacketed their people by forcing them to work exclusively in the case-study method," says Donaldson. "To do business ethics without doing serious ethical theory is to do it at an elementary level, and is a half-hearted and inadequate approach."

"I don't know what the local politics are, but I can see that it's possible that the money be used in ways that don't foster the development of ethics in business, but I hope the danger is averted," says DeGeorge.

While acknowledging that instituting a comprehensive ethics program will be a gradual process, the B-School Dean said at the New York gala that important initiatives are already underway. McArthur points to Bok's University-wide ethics program, which is aimed at versing teachers in ethical issues in the various professions, and a B-School research project focused on competitiveness, ethics and leadership as examples of this effort.

"Compared to other major business schools, I would rank Harvard above average on their commitment to ethics," says Vogel.

The timing of Shad's gift follows the expulsion of first-year B-School student Randall D. Cecola last fall, when Cecola faced SEC charges of insider trading. Cecola played a small role in the same Wall Street scandal that incriminated Ira B. Sokolow and Martin A. Siegel, who obtained their Harvard MBAs in 1981 and 1971, respectively.

"Business schools have this nice racket where every time someone who has graduated from the school gets in trouble, people will throw money at the problem," Vogel says. "I think it's the most ridiculous thing I've ever heard. I think it's sort of a parody--the notion of throwing money at problems went out with the sixties. I think that schools are setting themselves up to be made fools of."