Test of Authority: An Ethical Change of Course

Some preeminent American M.B.A. schools have done a course correction informed by core human values’ navigational data. Harvard University, U.C.-Berkley’s Haas School of Business, the Wharton School at the University of Pennsylvania, and others aimed to reform their business-school cultures with increased emphasis on ethics and teamwork. They observed that corruption occurs for some people at the intersection of power, greed, and rationalization.

Course corrections take time. The Wall Street Journal reported this news in February 2011: “Harvard Changes Course.” It quoted Dean Nitin Nohria: “The public lost trust in business, and some of our graduates seem to be responsible for that.” Nohria was appointed to be the 10th dean of the Harvard Business School in July 2010. His credentials are magnificent. Harvard University President Drew Faust chose him for his position. Ms. Faust and Mr. Nohria are praiseworthy. Let’s hope they can back up their belated strategy with insightful organizational development planning and execution.

The gap between the least paid and most paid in America shows a fascinating relationship.  One cited study compares the average income for hourly workers and CEOs. The trend is remarkable. “In 1970, the average CEO compensation was 11 times the average hourly worker wages. In 1980 the gap was 42 times, and in 1990 CEO compensation was 85 times greater than average hourly wages. CEO compensation in 2000 demonstrates a pay gap of over 531 times the average hourly worker wage.” Since then, the disproportional pay gap has widened.

Professor Peter F. Drucker, outspoken in his concern for how public and private organizations operate morally and ethically within society, pointed out that the purpose of business is to create and keep customers. Curiously, it appears most M.B.A. schools in the past 30-years deviated, insisting that the purpose of business is more simplistic, to maximize shareholder value. Many executives provided a convenient rationalization for making stock price Job #1, and sadly many board members conspired. Stock options are the largest part of executive pay. For some, there seems to be a sociopathic response (i.e., manifesting itself in extreme antisocial attitudes and behavior and a lack of conscience). Here, don’t look at executive charity contributions – look at the level of despair, resentment, and anxiety in the corporate culture of the organization the executive leads – oh yes, and that disproportionate pay gap.

Hence, consciousness-raising is still evolving or pursued by most contemporary thinkers and executives at M.B.A. schools. Contrast and compare this to your C-Suite and board of directors. Examine the degree to which the business’s core idea embraces all stakeholders or is, alternatively, limited to shareholders. Look at the authority invested in diversity and inclusion. What degree of workforce disengagement is tolerated at the top of the house when profits are deemed acceptable?