MBAs and Ethics: Straddling the Line?

Posted by: Louis Lavelle on July 11, 2011

U.S. Attorney Preet Bharara is no stranger to MBAs. His crackdown on Wall Street bad boys in the Southern District of New York bagged one of the biggest of prizes, the Galleon Group’s Raj Rajaratnam, the billionaire hedge fund manager and Wharton MBA convicted in the biggest insider trading scandal in history.

But lately he’s had his fill. In a speech made to the New York Financial Writers Association at the CUNY School of Journalism on June 6 (Bharara.pdf) and first reported by Crain’s New York Business, Bharara complained of a question he says he hears far too often from MBA students at top business schools.

Bharara has been visiting with MBA students at Wharton, Columbia, Harvard, and Stern, along with business groups, hedge funds and directors of Fortune 500 companies, to talk about ethics, personal integrity, and corporate culture. Let’s listen in:

I talk about the perils of walking the line - the line between what is legal and what is not, the line that is dangerous to get close to and criminal to cross. And I have been struck by a question I have been asked on more than one occasion. It goes something like this: “Mr. Bharara, you’ve talked about making sure you don’t cross the line and that it is dangerous to wander too close to the line. So, exactly how far from the line do you recommend people stay?”

After Long Term Capital Management, Enron, and Arthur Anderson, after WorldCom and Tyco and Adelphia, after AIG and Countrywide Financial, after the Lehman Brothers collapse and the global financial crisis, after an entire decade of financial misadventure, the most pressing question MBAs are asking is what can we get away with?

To Bharara, that’s a question that’s not worth asking. The problem is the approach - line walking - doesn’t work.

[I]f you are single-mindedly focused on walking the line, you are bound to end up afoul of regulators, and God forbid, criminal prosecutors,” he said. “Even more dangerous perhaps, you are sending a message to every other person at the firm that line-walking is a good idea. That can work for a while, but people will invariably miscalculate and bad things will invariably follow.

He equated that with someone trying to game the line between the legal drinking limit and a DUI. Spokeswoman Ellen Davis declined to elaborate any further on Bharara’s remarks.

MBA students: consider yourself warned.

—Kiah Lau Haslett

Reader Comments

Theron Horgan

July 11, 2011 11:27 AM

Ethics are a huge part of business and I would agree that the "line" should not be crossed. I would however point out in defense of the students question that an MBA program teaches you to operate as close to the line as possible, i.e. managing inventory, transportation costs, excess company cash ect. I would also point out that at least some portion of their compensation is typically based on how efficiently they manage the resources they are given which will lead to this type of question in many situations. I am not arguing with the point that we have had a rash of very unethical people and need to hold ourselves to a higher standard but I completely understand the students question and very well might have asked it myself if I had been there.

Dan Benson

July 11, 2011 12:48 PM

"So, exactly how far from the line do you recommend people stay?”

This question from MBA students absolutely infuriates me. Every production worker in America makes quality oriented control charts every single day to statistically predict points of non-compliance. So, MBA's, I suggest you use the same math you make $25k per year factory workers you deem expendable to calculate when you will become a criminal! Apparently your moral terpitude and basic sense of right and wrong have failed you as they disappear into the fog.

Michael Chmura

July 11, 2011 1:06 PM

I certainly can understand Prett Bharara’s frustration with this question: “how close can we get to the line without finding ourselves in trouble?” It suggests the assumption that ethical business is only about the “thou shalt not’s:” that is, the unfortunate limitations that we are forced to live with.

The trouble is that when business education – and businesses themselves – start from this position of “ethics as constraints,” we have already lost our best audience. We have already alienated the most creative and action-oriented and ambitious of our students and employees: the ones we want to enlist in the development of responsible, ethical and lucrative businesses.

Instead if we start from the assumption that these high-potential students and employees actually have moral values and that they would welcome the opportunity to find ways to voice and enact those values in their professional lives, we can focus less on just how close to the storied line we can dance, and rather on where it is that we actually want to go.

It is precisely this conclusion -- that we are asking the wrong questions in business education -- that has led to a new approach to values-driven leadership development. Instead of asking “what is the right thing to do in a particular situation?” and then struggling with just how far we can go and still be inside the constraints of law and ethics, the Giving Voice To Values curriculum (www.GivingVoiceToValues.org) asks “Once we know what we believe is right, how can we get it done?”
That is, how might those same creative, ambitious employees and students find innovative ways to succeed in business, ethically.

This approach – based on solid research in social psychology, cognitive neuroscience, as well as management – focuses less on ethical reasoning and decision-making and more on ethical action. It is built upon the idea that we are more likely to do the things that we have rehearsed. Therefore, through pre-scripting, peer coaching, action planning and the actual voicing of intent, students and managers build the “moral muscle” such that values-driven action becomes their default position, rather than a counter-intuitive position that they have only arrived at through labored philosophical analysis.

Giving Voice To Values is not about trying to change managers; it is about helping them to be who they already want to be at their best. That is not to say that there are not those among us who will cheat and steal and lie; they will always be with us. But rather, this approach is based on the idea that there are many who would actually rather behave ethically if they felt they had a shot at being effective. After all, we don’t need everyone to be ethical; we just need enough.

Giving Voice To Values has been used in over 150 pilots on six continents. The curriculum is available for FREE to educators. And increasingly businesses are also adopting the approach in their internal training and leadership development. Developed with venture support from Aspen Institute and Yale SOM, it is now housed and supported at Babson College.

Mary C. Gentile, PhD
Author of Giving Voice To Values: How To Speak Your Mind When You Know What’s Right (Yale University Press, www.MaryGentile.com)

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