Nightmare on Wall Street: What Role MBAs?

Posted by: Louis Lavelle on September 17, 2008

Quick, what do Richard Fuld, John Thain, and Stan O’Neal have in common? If you answered that they all are or were in charge of failed Wall Street behemoths you’re only half right. Since 1994, Fuld has been the CEO of Lehman Brothers, which collapsed earlier this month, while Thain took over at the helm of Merrill Lynch from O’Neal in December, about 9 months before its distressed sale to Bank of America.

The other thing that the three men share is an MBA—Fuld’s from NYU Stern, and Thain and O’Neal’s from Harvard Business School.

Is that just a coincidence, or something more?

On the flip side, none of the recent leadership of other deeply troubled companies in the news recently have the degree--which proves that you don't need to go to business school to really mess things up. At AIG, which is alive today thanks to an $85 billion government bailout, and at Bear Stearns, which was brought to the brink of collapse in March when it was sold to JPMorgan Chase...no MBAs at the top. Ditto for Fannie Mae and Freddie Mac. (I'm not counting the new CEO at AIG, Edward Liddy, who has an MBA from George Washington University, or the new CEO at Freddie Mac, David Moffett, who has an MBA from Southern Methodist--the jury will be out on those guys for a while.)

I don't want to read too much into the fact that a few of the Wall Street firms happened to be run by guys with business degrees.

But I sometimes wonder if there's something about the training one gets in top MBA programs that might preordain this sort of thing. There's been a lot of ink spilled over the years about the various "failures" of business schools--to train managers (Henry Mintzberg's "Managers Not MBAs"), to "professionalize" business (Rakesh Khurana's "From Higher Aims to Hired Hands"), to teach ethics (just about everybody).

What, if anything, does the current nightmare on Wall Street say about the ability of business schools to turn out managers who have a healthy respect for risk as well as rewards?

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