MBA oath—a pledge of integrity created by a group of graduates from Harvard Business School—will prove largely ineffective in warding off the type of corporate misdeeds that led to the U.S. financial crisis. Pro or con? " />

MBA Oath Is Nothing to Swear By

The MBA oath—a pledge of integrity created by a group of graduates from Harvard Business School—will prove largely ineffective in warding off the type of corporate misdeeds that led to the U.S. financial crisis. Pro or con?

Pro: An Impotent, Misguided Gesture

Harvard Business School MBAs have proposed that all MBA students sign a special oath, and I don’t believe that’s a good idea.

First, the oath invites violation of fiduciary responsibilities. In many countries, board members and, as a consequence, managers have a fiduciary duty to maximize the wealth of the shareholders. None of them would accept that managers promote "social and environmental prosperity worldwide" as the HBS oath does. Externalities such as the consequences of business decisions for the environment have to be dealt with by the government.

Second, the oath is a misplaced response to the financial crisis. It assumes that the financial crisis was caused by unethical MBAs gambling with other people’s money. Research shows, however, that banks where the CEO held a lot of stock were also the banks with the biggest losses. Moreover, 81% of the mortgage-backed securities purchased by bankers for their own personal accounts were AAA-rated. These securities turned out to be the most mispriced: They produced poorer returns than the lower-rated tranches. So the evidence shows that bankers have made mistakes and board members may have been ignorant, but they are not crooks.

Third, the idea that we can prevent the next crisis simply because we sign an oath seems excessively naive. Rather than focusing on pledges, businesses should make sure that managers comply with their fiduciary and ethical responsibility to maximize the wealth of the people who pay their salaries, i.e., the shareholders.

The HBS oath aims to achieve exactly the opposite by including the whole world as a stakeholder. If MBA students insist on taking an oath that promotes better corporate governance, I would propose the following: "I pledge to maximize 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."

Con: A Path to Integrity

The MBA oath will come to be seen as a declaration of a new way of thinking, and will significantly prevent future misdeeds. The opening sentence of the oath states a new perspective:

"As a manager, my purpose is to serve the greater good by bringing people and resources together to create value that no single individual can build alone."

This language explicitly links managers’ actions to a larger, social purpose. It rejects the belief that the aggregate of individuals’ self-aggrandizing behavior best maximizes social good. It’s both an ethical statement and an economic statement.

A new, hyperlinked economy is emerging. Business is more interdependent than ever before. Yet our business vocabulary is still dominated by our competitive relationships, not by our common interests. Rather than linking value creation to "sustainable competitive advantage" and "maximization of shareholder wealth," the oath links it to collaboration with others.

Old competition-based thinking will continue to exert drag, but new realities are compelling us to see that success is increasingly driven by collaboration, not competition. The oath is a wake-up call to review the world in which business operates.

Business has come to believe in management by monetary incentive and leadership by pushing the boundaries of the legally permissible. We rely on external force to correct excesses: laws, processes, prosecution, and regulation. There is no internal belief system beyond self-aggrandizement.

We have forgotten another belief system, one articulated by Nelson Mandela in the movie Invictus: leadership by example, and management by inspiration.

The oath invokes both. The absence of enforcement mechanisms doesn’t weaken the oath—it underscores the idea that management itself must be responsible. An oath made to a regulatory agency is worth nothing; an oath to one’s own society is binding.

The oath will be effective, because it’s an idea for our times.

Opinions and conclusions expressed in the Bloomberg BusinessWeek Debate Room do not necessarily reflect the views of Bloomberg BusinessWeek, BusinessWeek.com, or Bloomberg LP.

Reader Comments

CPA

Oaths like this are worthless. People take oaths all the time and break them without a care.

Ron

When I started at an investment bank just out of school, my bosses told me to "forget everything I learned in college" and learn the "Lehman way of doing things." I suspect business grads will forget about any oath taken in school once they start in the banking world.

Susceptor

As with attorneys, I suspect that the only way to make sure they live up to any oath that may be given would be by setting up some regulatory agency that could police these people and their ethical behavior.

Mustafa

It is all about the almighty dollar. America is no longer the beacon of the world. We have sadly lost our credibility before the rest of the world. We are being looked at as pure cons and crooks including our Ivy League schools like Harvard.

DC

I don't see how an oath can bring any practical value to those MBA besides its face value, especially for those who don't care about moral value.

And starting from when do we need an oath to remind ourselves doing moral good is what human supposes to be?

Raghu

I think oaths like this are just on paper. There will be different influences acting on us when we are working in a responsible position. Sometimes the decisions we take at an organizational level will not adhere to the oath we took. For a person who really cares for these kind of oaths, it will become a nightmare to overrule this so as to justify the job responsibility.

Brendan

This oath will be as effective as the "chastity oaths." Research showed that the frequency of premarital sex (and teen pregnancy) is not affected by those types of posturing.

What the business world needs is not the equivalent of a oath, but the equivalent of a condom (translate: more regulations) to avoid "accidents" (translate: unethical behaviors).

Scott

Oath? Are you kidding? The only way an oath matters is if the people taking it have morals. People put their hands on Bibles every day and lie.

DanTe

MBA = Massive Bulls' Anuses. Suitable for unloading massive amounts of bull in a short amount of time. Hiring a lot of Massive Bulls' Anuses generally leads to the loss of company value through uncontrollable diarrhea of funds paid in bonuses (pronounce bull-anuses). All justified by overly convoluted spreadsheets and pretty colored charts. It is a meaningless degree consisting of 2 years of learning jargon and canned case studies of companies with no grounding in real finance and history studies of past cycles. I would bet most of these Massive Bull's Anuses do not even know what a Dutch Tulip Market was. When hiring, stick to the real [stuff]. At least a Masters in Science requires some brains.

Jim

An oath for MBAs does nothing to contravene a fiduciary duty to a company. The goal of "maximizing the wealth of shareholders" sounds impressive, but is (intentionally?) opaque--what is the metric for that measurement? If the goal is to maximize shareholder wealth each day, then the goal of managers and board members is to burn through a company's assets in search of the greatest short-term gain. Seriously?

Some of the very comments here illustrate the naiveté that surrounds the role of a "manager." Businesses exist to serve a customer and that should be the goal of each employee, including management. The MBA was originally created to train "professional managers," and over time the perception was diluted that an MBA was a means to make money. However, most MBAs(and non-MBA executives) are professional managers who work rather meager lives compared to more popular perceptions. Managers where a lot of hats--coach, counselor, decision-maker, facilitator, scapegoat, figurehead--and they touch the lives of many people. An oath isn't about preventing an event that already happened, it's about recognizing where there was failure. From Enron to Fort Hood, management failed to act responsibly, and that needs to change.

The MBA oath is a means to recognize the changing dynamics of managing. A global business community means that a company is more of a "social" institution than ever before. People rely on companies to manage their money, health, food, utilities, and provide employment. This latest economic meltdown has highlighted how much society depends upon companies, and companies need to manage their resources, and for that one needs a professional manager. The MBA oath provides a unification mechanism that can provide an ethical floor during times when management decisions are all gray.

Will an MBA oath make everyone good and altruistic? Of course not, nor does any oath that anyone takes. Whether a person will remain true to their word is a issue that is beyond the scope of everyone excepting the individual in question. However, businesspeople--MBAs, managers, or just plain folk--do not go far without integrity. The MBA oath is a message to all managers--to change the business culture, the change starts with you.

Tom

Having gotten my MBA from Harvard in the early 90s I find this to be one of the most insanely stupid and naive things I've ever come upon. In my day I'm quite sure there would not have been more than a handful of section mates that would have taken this oath...I'm also certain that they have now taken positions in non-profit organizations.

Now I see that nearly half the class of 2009 took this oath, I am sickened. What has happened to HBS? The simple solution is for people to do what is legal and what helps the company's bottom line. Anything that starts moving into that green weenie territory is indefensible. I don't want people working for me thinking about how doing something can impact anything but the bottom line.

In the future when I see a resume from an HBS alum come across my desk I will do one thing: verify whether they took this oath. If they did I can assure you they won't be getting an interview from me. I want employees that want to make money, not vote for Obama and eat granola.

Ashish Roy

Why are doctors still swearing by the Hippocratic oath? Why do Presidents take oath? Why do justices take oath? Are there video cameras that are recording whenever they are reneging on their oaths?
The argument of no good is coming out of oaths can be extended to all. So why have oaths at all?

Abhisek Nanda

It's up to the graduate to stand by the oath. The culture of credit cards and loans was a sure hit. Some Ivy League guy might have proposed the plan back in boom years. All followed it. No one knew the consequences. I think the managers are driven by profit and bonuses and forget the basics of their oath.

Jose Torres

There is such small thinking exposed in some opinions here. A journey of a thousand miles begins with a single step.

An oath to act with integrity, given to one's MBA classmates while in class, integrates a key value driver of the MBA in the first place - the networking.

Look at the Galleon Insider Trading issue--almost everyone was connected as a classmate at a leading B-School. If those students had talked about an oath while in class, and then given one, perhaps one or more of the participants would have declined. And isn't that progress?

BTW, the Harvard students responded to a challenge from Angel Cabrera, president of the Thunderbird School of Global Management. Dr. Cabrera has pioneered the whole MBA oath movement--and every Thunderbird class since 2004 has been discussing the oath from Day 1 at school and taking the Thunderbird Oath on graduation.

Jose Torres
MBA 2009
Thunderbird School of Global Management
http://www.thunderbird.edu/about_thunderbird/inside_tbird/oath_of_honor.htm

pepperidge

40% of all U.S. marriages--probably the most important oath in our lives--ended in divorce. What's the point in more oaths?

DanTe

Thanks, "Jose Torres," for proving my take on MBAs (Massive Bull's Anuses). Your flowery response with supposed support on how a useless oath blathered by useless MBAs can somehow change a current MBA scandle is...enlightening. Gotta say: You unload a lot of bull in a very pretty MBA way. That's just us "small thinking" people's take on it.

Proud About Being Oathed

Theo - Why are you macro-ing? The Oath is about the micro.

Tom - Why so bitter? Has life been so hard on you? You should take an oath that you don't have issues that skew your personality.

DanTE - Which B-School rejected you for you to carry so much pain and resentment?

Pepperidge - What was your GMAT score for analytical reasoning? Nevermind.

Jose - No wonder T-birds have the best rep!

Jim - Brush up on your understanding of shareholder's wealth maximization. Are you a teacher? Those who can't teach?

Which leads me to everyone who doesn't have the concept right about the goal of increasing shareholder's wealth.

Every MBA knows that a stock's price fluctuates according to the public's fundamental and technical perceptions of a stock.

The theory is that the current price reflects all current info.

If a potential investor senses that a company is short-sighted and profit-twisted, then he or she reasonably won't want to waste time or money on it.

Consequently, the market will pick up on that negative impression and depress the stock price further.

Witness Vedanta's price movement before, during and after the Avatar hype.

It is strong evidence as to how morally ethical current investors are.

Ethical investors would want ethical managers. Keep the Oath going strong.

DanTe

Thanks again "Proud About Being Oathed." Macro-ing, micro-ing, maximization, increasing shareholder's wealth, fundamental, short-sighed, profit-twisted, witness, ethical managers. About the only catch phrase you didn't unload was "think outside the box." Your constant flowery nothingness just continues to highlight the nothingness of this oath of oafs. And no, no schools rejected me.

Hugo van Randwyck

If, by the time you are in college you need to make an oath to be honest, it may be too late. Better to start earlier in children's upbringing and learn values before they leave school. The simple fact is the politicians in Washington swear an oath--and look what happened; they rewarded all the irresponsible bankers and not the well managed banks. Shareholders need to have more opportunityy to set directors' remuneration and easier ability to fire short term decision makers. Shareholders could also have the opportunity to vote for new auditors--that could help more honest people get more easily promoted.

Prof P.Madhu Sudana Rao & Mulgeta Damie

In fact, after completion of every professional course, there will be oath-taking, since they are trusted for what they say. Every person will have a limited knowledge. Hence they have to rely upon others.

A professional post graduate is supposed to be a master in the subject, provided he learned the subjects with devotion, sincerity, and in an applied context. The MBA degree holders can be either employed or self employed.

The oath they take is to be implemented, since one of the management's principles is to follow moral and ethical values for long term benefit and continuation point of view. If they do not practice what they learned, what is the difference between a quack and a qualified person?

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