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From: Ginger, Laura
Sent: Tuesday, August 20, 2002 11:50 AM
To: Ginger, Laura
Subject: NYTimes.com Article: Lessons Learned in Business School
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Lessons Learned in Business School
August 20, 2002
By ROBERT PRENTICE
AUSTIN, Tex. - When Joseph Wharton established the nation's first
business school at the University of Pennsylvania in 1881, he made
business law one of five basic business school disciplines. More than a
century later, the study of business law has given way to the study of
business ethics.
But business students do not need to study business ethics
so much as they need to study business law. The scandals at Enron,
WorldCom and ImClone did not occur because executives were not
conversant with the difference between teleological and deontological
approaches to resolving ethical questions. It goes without saying that
these scandals involved serious ethical lapses. But they also involved
serious violations of business laws. They occurred, at least in part,
because their participants had an insufficient knowledge of,
appreciation for and, yes, fear of the law. Business schools have played
a role in this disaster.
Because today businesses face far more complicated rules
and regulations than they did a century ago, the need for managers to
have a realistic appreciation of the legal environment in which they
operate is more important than ever. Some business schools still have
strong business law programs, but most have spent much of the last three
decades reducing, marginalizing and often eliminating their business law
faculty as other disciplines grew in stature and popularity.
Consequently, in many business schools most students get
their only look at the legal environment in which they will operate from
faculty who view the law as an impediment. Finance professors have told
me that insider trading rules and financial disclosure requirements
simply undermine the efficiency of the markets. Accounting professors
have explained to me that rules limiting the ability of accounting firms
to provide internal auditing services to a client (and thereby prepare
the same books that they later purport to audit independently) are
pointless, because accountants would never risk their reputation by
acting improperly. (Many accounting professors still believe this, but
they are quieter in the aftermath of Enron.) No wonder many business
professors impart to their students an impression that the law exists
simply to be manipulated or evaded.
At several leading business schools, many of the faculty
that teach business law no longer even have law degrees; economists and
political scientists offer policy courses that focus on lobbying.
Indeed, much finance and economics research and teaching is built on the
silly (though occasionally useful) assumption that man is a rational
maximizer of his own utilities - and that these utilities can be
measured financially. Not only is this unrealistic but, as the law
professor Charles Pouncy has noted, it also encourages the view that any
business strategy or activity that does not maximize monetary reward is
suspect. This is the message that business schools tend to send - and
companies like Enron tend to follow.
With the help of well-intentioned donors, several business schools have
established business ethics centers. Unfortunately, research shows that
it is very difficult to teach ethical values to undergraduates, harder
still to teach them to M.B.A. students and all but impossible to get
through to those enrolled in executive M.B.A. courses. If they didn't
get a sense of right and wrong from their families or their faith, it's
unlikely a business school professor can instill one.
Ethics courses can help those who are truly
well-intentioned find their way through ethical dilemmas
where the law gives no clear answer. But even these people
will founder when they go to work for companies that value results over
honesty; at such firms, acting ethically is always difficult.
There has never been a more crucial time to emphasize law
in a business curriculum. Too many people forget that capitalism was
saved from its own excesses by the securities laws passed in the 1930's.
Recent scholarship shows that countries with strong judicial systems
administering rigorous financial laws enable companies to raise money
more quickly and facilitate more efficient stock markets. Legitimate
companies want laws that require accurate financial disclosure and rules
that punish fraudulent firms.
Centers for the study of business ethics are necessary to represent the
ideals to which we aspire. But most business students will always view
business ethics as hortatory rather than mandatory, as extra credit
rather than required.
Instead, business law professors should explain to students that legal
requirements are not optional. Such requirements enable our
free-enterprise system to function - and disobedience carries a personal
as well as a societal cost. My colleagues and I must tell this story
more forcefully than we have in the past. But to do so we need a more
prominent forum in the business schools of America.
Robert Prentice teaches business law at the McCombs School
of Business at the University of Texas at Austin.
http://www.nytimes.com/2002/08/20/opinion/20PREN.html?ex=1030862187&ei=1
&en=7b89cd605df14587
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