4 ms·

Why MBAs should not sign the Harvard Business School oath

15 points by vrobancho 17y ago

rbanffy 17y ago
I have many problems with this point-of-view. Before any fiduciary obligation, a manager (just like any other human being) has moral obligations towards society. The fiduciary obligation is to create value to your shareholders, but not just the present ones that will dump your stock the same week they bought it. For those long-term investors, I believe the "I will strive to create sustainable economic, social, and environmental prosperity worldwide" idea creates a lot of value in the long term. As for the oath promoting unethical behaviour, the first promise takes care of that. The ethanol companies... well... They are thriving in Brazil. There must be something in trying to make it from corn that is fatal to companies. The oath being a misplaced response... I am not sure about that either. It's obviously a response to some less-than-ethical behaviour that had disastrous consequences to shareholder value. But that same unethical behaviour paid handsomely for those who were able to jump ship fast. I wouldn't call benefiting that group a smart business move and many companies that aimed that way no longer exist. As for people not being driven by pledges, again, I am a professional engineer and I took an oath when I graduated. I have so far been true to it and I take it very seriously every day of my professional life. If he doesn't like the idea of striving "to create sustainable economic, social, and environmental prosperity worldwide", that's fine by me, but I think everyone of us would benefit from such a mindset.
- alex_c 17y ago
  As for people not being driven by pledges, again, I am a professional engineer and I took an oath when I graduated. I have so far been true to it and I take it very seriously every day of my professional life. Yes, but you are most likely someone who strives to behave ethically regardless of oaths and pledges. The people who need the pledge the most are also the least likely to follow it when it's really put to the test. That's why reading about the HBS pledge was one of the few times I laughed out loud - long and hard - at something I read online. Maybe I'm too cynical. The article's tone is a bit hard to swallow, but I think the point about "externalities" is valid. In other pledge-driven professions (medicine, engineering, I'm guessing law) the interests of the professional tend to be aligned with the contents of the pledge - or, at least, not usually in direct conflict. That will never be the case in business as long as taking the moral high ground will put you at a competitive disadvantage.
  - rbanffy 17y ago
    Anyone who is not willing to promise to behave ethically will have a hard time doing so, regardless of effectively promising it or not. I would never, ever, under no circumstances, let someone like this graduate. Ethics are not optional in any profession. And don't be cynical. Instead, try to actively be a force of good. Just a little push here and there. It doesn't matter if it's just a trickle. With enough trickles we can make a very nice river.
    - njharman 17y ago
      > Anyone who is not willing to promise to behave ethically will have a hard time doing so That is not true. Many people don't accept the authority or legitimacy of those who would demand a pledge (religious, anarchists). I reject out of principal any pledge (and the subjugation to authority it implies). I do the right thing because it is the right thing. Someone asking me to pledge to do the right thing is an insult and an attack on my character/honor. Pledges are also, psychologically, a cop-out. Like giving money to poor people. They let one feel good about themselves and not dwell on the consequences of all their other actions.
      - rbanffy 17y ago
        I feel that, by taking the oath I took, I was reaffirming my commitment to act on a set of professional guidelines. It's also a powerful commitment - you state the rules that will bind your professional (and many times, personal) conduct for life. That's a big thing - a rite of passage (something important we have precious little left). It turned engineering students into professional engineers. It's insane to reject every pledge out of principle. A pledge, specially one like that, sets a good example - a model of conduct. If you are not happy with it (like the author), propose an alternative one, one you would be comfortable taking.The worst that can happen is to make an empty promise, one you know you won't keep. It's deeply demoralizing and we have had lots of that in upper management lately. And, finally, sorry if you feel attacked, but nobody is obliged to trust you to even know what's "the right thing", much less to do it or to agree with the rest of the society on what "good" means. That's what pledges are for.
- tshtf 17y ago
  Surely nothing is wrong with following the orders of the shareholders. What is the difference between their recommended oath: I pledge to maximise the wealth of the people who pay my salary, i.e. the shareholders, unless the shareholders tell me in advance that they want me to do something else. and All Political Leaders stand as appointed by the Fuehrer and are responsible to him. There is such a thing in this world as individual, moral responsibility.
Avshalom 17y ago
"board members and, as a consequence, managers have a fiduciary duty to maximise the wealth of shareholders." Not all business are publicly traded corporations.
- einarvollset 17y ago
  Doesn't matter, also applies to shareholders of private companies.
  - wjy 17y ago
    Yes, it does. In a privately held company in the U.S., the shareholders decide what the rules are, so long as they're within the law. They have no obligation beyond that. Edit: grammar correction
onoj 17y ago
Good God people, Why is this even a discussion ? If this Muppet is taken seriously - maximize the wealth of shareholders ABOVE ALL ELSE, then why not shoot rival fund managers? Invade small countries? You are either ethical or not. There is no middle ground.
- einarvollset 17y ago
  It's a discussion because it's true. In many countries, including the US and the UK it is illegal for a board of directors to not do whatever it takes to maximize shareholder value. The implications of that are particularly important when, as is currently happening in the US, there's a discussion of the role of government in things like health care. Basically: In a lot of cases it's illegal for a company to do "the right thing" if that right thing looses the company money, but isn't explicitly illegal. See pre-existing conditions. One thing that does fall out of this that is rather counter intuitive and the Ron Paul's of this world don't like to hear it is that quite often, big companies are lobbying for stricter regulation. The reason is that they may have ethical/marketing problems with doing a certain thing, but can't not do it, as there are other, less scrupulous companies that don't have these problems and thus squeeze them on price..
  - jhancock 17y ago
    "illegal for a board of directors to not do whatever it takes to maximize shareholder value" I hear this quite often but have never seen a law that says this. Do you know of one?
cduan 17y ago
So directors and officers have a fiduciary duty to maximize shareholder value, and therefore any obligation that conflicts with this duty is improper? I wonder whether the author would apply this to lawyers. They, after all, have fiduciary duties to their clients, such as that of zealous advocacy. Is he advocating that no ethical obligations should trump the lawyer's duty of zealous advocacy? If not, what is the distinguishing principle?
- jhancock 17y ago
  The lawyer analogy came to my mind as well while reading this article. The "Hollywood" version of a lawyer's duties to his client is narrow and not accurate. There are certainly lawyers that operate on this narrow definition, but its not inline with judicial process or state bar ethics and the lawyer's oath.
anigbrowl 17y ago
Considering the guy is from a rival business school, it may safely be assumed that at least 50% of these arguments are put forth solely to rubbish the competitor's product.
WinterAyars 17y ago
I think this is a pretty naive way to look at it. Of course Harvard realizes their MBAs often end up with a duty to maximize shareholder value at any and all costs. Isn't that kind of the point? "That" being to create tension between the two duties and hopefully get people to examine the system? This whole short-sighted duty to maximize shareholder value is unarguably a part of the problem with modern capitalism. That was the driving force behind the rush to the dizzying returns promised by the financial black magic that melted the economy.

15 points by vrobancho 17y ago

I have many problems with this point-of-view. Before any fiduciary obligation, a manager (just like any other human being) has moral obligations towards society. The fiduciary obligation is to create value to your shareholders, but not just the present ones that will dump your stock the same week they bought it. For those long-term investors, I believe the "I will strive to create sustainable economic, social, and environmental prosperity worldwide" idea creates a lot of value in the long term. As for the oath promoting unethical behaviour, the first promise takes care of that. The ethanol companies... well... They are thriving in Brazil. There must be something in trying to make it from corn that is fatal to companies. The oath being a misplaced response... I am not sure about that either. It's obviously a response to some less-than-ethical behaviour that had disastrous consequences to shareholder value. But that same unethical behaviour paid handsomely for those who were able to jump ship fast. I wouldn't call benefiting that group a smart business move and many companies that aimed that way no longer exist. As for people not being driven by pledges, again, I am a professional engineer and I took an oath when I graduated. I have so far been true to it and I take it very seriously every day of my professional life. If he doesn't like the idea of striving "to create sustainable economic, social, and environmental prosperity worldwide", that's fine by me, but I think everyone of us would benefit from such a mindset.

alex_c 17y ago
As for people not being driven by pledges, again, I am a professional engineer and I took an oath when I graduated. I have so far been true to it and I take it very seriously every day of my professional life. Yes, but you are most likely someone who strives to behave ethically regardless of oaths and pledges. The people who need the pledge the most are also the least likely to follow it when it's really put to the test. That's why reading about the HBS pledge was one of the few times I laughed out loud - long and hard - at something I read online. Maybe I'm too cynical. The article's tone is a bit hard to swallow, but I think the point about "externalities" is valid. In other pledge-driven professions (medicine, engineering, I'm guessing law) the interests of the professional tend to be aligned with the contents of the pledge - or, at least, not usually in direct conflict. That will never be the case in business as long as taking the moral high ground will put you at a competitive disadvantage.
- rbanffy 17y ago
  Anyone who is not willing to promise to behave ethically will have a hard time doing so, regardless of effectively promising it or not. I would never, ever, under no circumstances, let someone like this graduate. Ethics are not optional in any profession. And don't be cynical. Instead, try to actively be a force of good. Just a little push here and there. It doesn't matter if it's just a trickle. With enough trickles we can make a very nice river.
  - njharman 17y ago
    > Anyone who is not willing to promise to behave ethically will have a hard time doing so That is not true. Many people don't accept the authority or legitimacy of those who would demand a pledge (religious, anarchists). I reject out of principal any pledge (and the subjugation to authority it implies). I do the right thing because it is the right thing. Someone asking me to pledge to do the right thing is an insult and an attack on my character/honor. Pledges are also, psychologically, a cop-out. Like giving money to poor people. They let one feel good about themselves and not dwell on the consequences of all their other actions.
    - rbanffy 17y ago
      I feel that, by taking the oath I took, I was reaffirming my commitment to act on a set of professional guidelines. It's also a powerful commitment - you state the rules that will bind your professional (and many times, personal) conduct for life. That's a big thing - a rite of passage (something important we have precious little left). It turned engineering students into professional engineers. It's insane to reject every pledge out of principle. A pledge, specially one like that, sets a good example - a model of conduct. If you are not happy with it (like the author), propose an alternative one, one you would be comfortable taking.The worst that can happen is to make an empty promise, one you know you won't keep. It's deeply demoralizing and we have had lots of that in upper management lately. And, finally, sorry if you feel attacked, but nobody is obliged to trust you to even know what's "the right thing", much less to do it or to agree with the rest of the society on what "good" means. That's what pledges are for.
tshtf 17y ago
Surely nothing is wrong with following the orders of the shareholders. What is the difference between their recommended oath: I pledge to maximise the wealth of the people who pay my salary, i.e. the shareholders, unless the shareholders tell me in advance that they want me to do something else. and All Political Leaders stand as appointed by the Fuehrer and are responsible to him. There is such a thing in this world as individual, moral responsibility.

Avshalom 17y ago

"board members and, as a consequence, managers have a fiduciary duty to maximise the wealth of shareholders." Not all business are publicly traded corporations.

einarvollset 17y ago
Doesn't matter, also applies to shareholders of private companies.
- wjy 17y ago
  Yes, it does. In a privately held company in the U.S., the shareholders decide what the rules are, so long as they're within the law. They have no obligation beyond that. Edit: grammar correction

onoj 17y ago

Good God people, Why is this even a discussion ? If this Muppet is taken seriously - maximize the wealth of shareholders ABOVE ALL ELSE, then why not shoot rival fund managers? Invade small countries? You are either ethical or not. There is no middle ground.

einarvollset 17y ago
It's a discussion because it's true. In many countries, including the US and the UK it is illegal for a board of directors to not do whatever it takes to maximize shareholder value. The implications of that are particularly important when, as is currently happening in the US, there's a discussion of the role of government in things like health care. Basically: In a lot of cases it's illegal for a company to do "the right thing" if that right thing looses the company money, but isn't explicitly illegal. See pre-existing conditions. One thing that does fall out of this that is rather counter intuitive and the Ron Paul's of this world don't like to hear it is that quite often, big companies are lobbying for stricter regulation. The reason is that they may have ethical/marketing problems with doing a certain thing, but can't not do it, as there are other, less scrupulous companies that don't have these problems and thus squeeze them on price..
- jhancock 17y ago
  "illegal for a board of directors to not do whatever it takes to maximize shareholder value" I hear this quite often but have never seen a law that says this. Do you know of one?

cduan 17y ago

So directors and officers have a fiduciary duty to maximize shareholder value, and therefore any obligation that conflicts with this duty is improper? I wonder whether the author would apply this to lawyers. They, after all, have fiduciary duties to their clients, such as that of zealous advocacy. Is he advocating that no ethical obligations should trump the lawyer's duty of zealous advocacy? If not, what is the distinguishing principle?

jhancock 17y ago
The lawyer analogy came to my mind as well while reading this article. The "Hollywood" version of a lawyer's duties to his client is narrow and not accurate. There are certainly lawyers that operate on this narrow definition, but its not inline with judicial process or state bar ethics and the lawyer's oath.

anigbrowl 17y ago

Considering the guy is from a rival business school, it may safely be assumed that at least 50% of these arguments are put forth solely to rubbish the competitor's product.

WinterAyars 17y ago

I think this is a pretty naive way to look at it. Of course Harvard realizes their MBAs often end up with a duty to maximize shareholder value at any and all costs. Isn't that kind of the point? "That" being to create tension between the two duties and hopefully get people to examine the system? This whole short-sighted duty to maximize shareholder value is unarguably a part of the problem with modern capitalism. That was the driving force behind the rush to the dizzying returns promised by the financial black magic that melted the economy.