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Fostering Ethical Leaders By Transforming Business Education

Business schools have not always been able to build business leaders with a societal vision or a moral compass.

The world, of course, needs business professionals and business schools are still the best way to contribute to that end. Perhaps more importantly, however, the world needs “business citizens”. Business schools have the potential to transform students into those types of individuals, a potential that hasn’t been realised enough yet.

Over the past few decades, business schools have not always been able to build business leaders with a societal vision or a moral compass. Many of the figures entangled with ethical failures graduated from the top business schools, leading one to question what exactly is being taught there and what is being missed. Over the course of their educational journey—whether in an undergraduate business degree or an MBA—many students do not show a recognisable elevation in moral development. On the contrary, sometimes the moral stance of students gets murkier with a business education.

This could be attributed to the overwhelmingly narrow focus on the economic aspects that some business educators reinforce, even if inadvertently. In many business courses, emphasis on profit maximisation dominates the educational discourse. Despite an increased importance given to ethics education, reflected either in terms of offering stand-alone courses or in terms of embedding ethics within teaching in each class, the message does not seem to sink in. Profit maximisation remains an explicit prime, almost exclusive, virtue in many business schools.

Today, we can look at how some of best business schools can increase their legitimacy by not only focusing on professional development, but also on the development of their students as “business citizens”—the unrealised potential of business schools in character development and how this would eventually contribute to societal development.

A Case for Business Schools

There is much in support of the continued legitimacy of business education. Schools of business remain well situated as the primary choice for many students and employers. Educators are still able to link their educational curricula with market needs. Moreover, business education is able to transcend disciplinary silos as it has become more attractive to professionals in other disciplines such as engineers and healthcare professionals. This is related to a growing interest for those working outside the field of business to pursue education in business and management to match the changing roles they assume in their organisations.

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Primary socialisation, as many scholars note, happens within the family and the early years of one’s life. During that period, the early values are planted and embraced; attitudes are formed; and, preferences and ensuing behaviours are shaped. The school is also a part of this early socialisation process, as the individual becomes embedded in a system that helps shape one’s personality and tendencies. For the business student, business schools represent the second phase of socialisation, dubbed as secondary socialisation. This is where new beliefs and value systems are introduced, and complementary or alternative conceptualisations of the world are moulded. A business school—particularly the one that embraces liberal education, which emphasises access to interdisciplinary knowledge and a broad array of skills—opens the door to various life perspectives, presents new opportunities, and, provides positive challenges to the young person. Attitudes often change and value systems get altered during the university years. Business schools have the potential to become the centre place for the secondary socialisation of future business professionals, through building character and virtues.

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Character and Business Education

Business schools need to graduate students who have the necessary skill sets, competencies, primary experiential experiences, and character to operate in the real world. Corporate universities, open-education platforms, and other similar institutional arrangements cannot properly substitute for the business school experience. Specifically, such power-houses of learning cannot build character in a way a business school can.

Many business schools, at present, are not able to build student character in a sufficient manner. Early studies suggest that higher education institutions spend little time in “building character or a social conscience” and universities make only a limited contribution in that regard. Business schools suffer from the same normative myopia that faces managers in organisational settings. Ranking higher and better among prestigious business schools, attracting higher levels of funding, enticing more and better students to join, and increasing the employability of students are all reasonable and valuable performance indicators for higher education institutions. Yet, in prioritising those sound objectives, business schools often ignore the value systems (relating, for example, to the need to cater to a larger set of stakeholders in business decisions) they need to embed in their students while going after those grand aims. This failure does not render business schools obsolete or illegitimate. Business schools need to be fixed, not eradicated.

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For the business student, business schools represent the second phase of socialisation, dubbed as secondary socialisation.

Character is something unique to every person, but it can be developed. The role of a leader character has not been addressed sufficiently in business. A person of character refers to a person who has attained an admirable level of wisdom, courage, integrity, humanity, humility, justice, perspective, temperance, judgment, and transcendence. Conceptualisations of character refer to it as encompassing internal properties—that are related to, though not synonymous with, personality—and behavioural manifestations.

Several of these supposed dimensions of character are related to morality. A business school has the potential to develop character and the underlying virtues. In that, a business school is better placed, at a certain point of the educational journey of the future professional, to offer more than what other emerging alternative educational mechanisms—online universities, corporate experiences, etc,—are able to offer or even more than what the workplace can offer.

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The Role of a Business School

Being more relevant to the practitioners’ needs does not mean that business schools need to operate like corporations. Business schools are well positioned to offer an experience that is not likely to be duplicated in the business field. Corporate cultures do not replicate the university experience. Even later life experiences in incredibly positive and celebrated organisational cultures would not be able to replace the university experience. Businesses overwhelmingly emphasise the value of organisational culture, but the cost of non-compliance is huge. Employees who do not fit the culture sometimes find it necessary to leave and find other jobs. The turnover experience for a university is not the same. While universities encourage a “school spirit” in terms of commitment to the university and its ideals, a good university gives students the pluralistic experiences to an extent that is not typically paralleled in corporate contexts. This cultural pluralism poses an enriching experience to university students and is one important contributor in the development of character.

Students playing Chess in campus at K J Somaiya Institute of Management at Vidya Vihar in Mumbai. Photo: Amit Haralkar

Character Development

To raise the issue of moral education in a business school is bound to face scepticism. Focusing on the moral dimension might be perceived as a distraction from what business schools are designed to do in the first place. Their role, it might be argued, is to develop professionals who are able to contribute to the bottom line, improve company competitiveness and increase higher levels of profitability. In that, many business theories and approaches taught in schools have been developed with a primary end in mind, making the highest return on investment, mostly assessed through a financial lens. This is not to say that those approaches and concepts are immoral; they are not. Yet, by failing to sufficiently address ethical underpinnings of business decision points, these theories position morality as operating outside the realm of business thinking. This has led to the development of amoral theories that relieves students and future managers from any sense of moral obligation.

Higher education institutions spend little time in “building character or a social conscience”.

Working on character development in a school of business is more easily said than done. Yet, this is doable, and a business school has the potential to develop business character among students. In a family, one gets exposure to early virtues, and certain aspects of character are formed. Yet, the impact of the family in influencing business character is rather limited. Very focused trade schools, or virtual universities that emphasise depth of knowledge rather than depth of experience are also not powerful places to develop business character. Moreover, waiting for a person to develop his or her business character after they join a business would come too late; many businesses are not well equipped or ready to allocate the resources and time necessary for character development. In some cases, some ill-advised businesses with toxic cultures might essentially even contribute to the destruction of character, rather than building it.

Moral Awareness

How can a business school develop moral awareness? As research shows, people’s moral development does not stop in childhood. As people mature into adulthood, they keep growing, from a moral perspective. Studies suggest that there is a role for a course in ethics in developing moral awareness. While many business schools dedicate such a course in business ethics and social responsibility, it is not enough to create moral awareness vis-à-vis the thorny business issues. The ethical dimension of business not only needs to be emphasised in every course, but also needs to be a common and recurring theme throughout the business student’s journey.

Some studies suggest a relationship between an ethical work climate and moral awareness as people are likely to be influenced by the context in which they work. When there is a value-based culture, leaders would emphasise the importance of values while making a business decisions, and the organisational culture would expect and reward ethical behaviour. Consequently, it would be more likely that employees would become more alert to those situations that might pose an ethical challenge.

Accordingly, the journey toward moral awareness needs to be reinforced in the classroom and the business school. The business school has to be a model of ethics and social responsibility as an organisation with whom the student can interact. If business education fails to present the university unit as a role model for how an ethical climate would look like, then a major purpose of university education is lost. The three or four years of university education represent an opportunity to develop, further beyond primary socialisation, one’s conceptualisation of what is right and what is wrong.

The business school has to be a model of ethics and social responsibility as an organisation with whom the student can interact.

Moral Judgment

Making the right ethical decision is not just about understanding or even embracing ethical norms and approaches. Many good people, with good intentions, make wrong decisions—from an ethical perspective. This question is more about understanding business and business principles than just understanding ethical norms or committing to a good life. A person who does not understand the ins and outs of insider trading, for example, might fail to make the right decision when faced with a conflict of interest situation. In this case, knowing about agency theory, asymmetry of information, and people’s psychology and biases in making investment decisions, is at least as important as identifying with what is good from an ethical perspective. Business education thus needs to foster the various business concepts in a way where the decision-makers, or the students, understand the various intricacies of various business transactions deeply.

Moral Motivation

Moral motivation refers to “the reasons, motivations, impulses and/or stimuli that drive a person to act morally”. The motivation to act in a moral manner is not categorically determined by primary socialisation; there is room for later influences, and this has great implications for educators. Business schools can also operate at the level of developing the motivation of a student to do what is right. A business student who understands the ethical underpinning of marketing to vulnerable populations, might nevertheless fail to be motivated to do the right thing when faced with a decision where a trade-off needs to be made between making a profit and marketing to a vulnerable population.

Experiential business learning helps increase the moral motivation of students. Some schools adopt community-based projects, where students have to participate in a project that engages external societal elements. This would be a fascinating opportunity for a business school to make students aware of the needs and challenges facing those communities. Motivation to act in the right manner is not a classroom activity; this has to be done on the ground. Business schools will make themselves more relevant when their instruction opens up to the outside community, beyond the walls of the academy into the real world.

Moral Courage

Courage refers to the determination to take the appropriate “right” action even when faced with powerful opposing forces. Teaching courage is not easily done in the classroom. Courage, which is arguably the “most universally admired virtue”, is acquired during early childhood through family socialisation, and developed later by life experiences. Business schools can contribute to the development of this virtue. If courage is “the resolve to act on moral convictions even when it is not comfortable or self-serving to do so”, then business schools need to create contexts where students are able to develop this virtue. In that, courageous actions, even when leading to undesirable outcomes, would be evaluated based on their learning potential, and not solely on their short-term consequences.

NDIM Institute For MBA in New Delhi Photo: Tribhuvan Tiwari

There is some evidence to suggest that students’ moral courage is intensified in the context of psychological safety. When students operate in university contexts, where they feel safe, this would develop their courage and bravery-key elements of character. Giving people voice to present their opinions and perspectives without fear of reprisal, will positively contribute to the motivation to act in an ethical manner. Business schools adopting transparent and authentic communication with students contribute to that end.

Developing Business Citizens

In their incessant desire to have a “strong” curriculum, business schools have traditionally expended a number of initiatives to increase the professional side of the school. Much of the curriculum reflects a desire to broaden knowledge and conceptual business knowledge. While this effort is admirable, an over-obsession in that direction will push a business school away from developing a business citizen. I define a business citizen as the one who understands important business concepts and has access to relevant business tools and techniques, but—on top of that—has an appreciation and an understanding on how to operate a business under various, often conflicting, competitive, societal, environmental, and ethical demands.

Giving people voice to present their opinions without fear of reprisal will contribute to the motivation to act in an ethical manner.

Leveraging the University Experience

For schools that are implanted within a larger university system, a school needs to leverage on this embeddedness. There might be pressures from faculty to emphasise a uniform culture and build a community around the business school. Yet, it is worthwhile to look at this embeddedness as an opportunity rather than as a hurdle. For stand-alone business schools, there needs to be alternative ways of creating a broad relationship with a larger community beyond the walls of a business school.

Why is this important? Businesses do not deal only with business partners, and their relationships are not restricted to suppliers, customers, and employees and the interactions among them. There has been growing importance given to engaging third parties, including governmental agencies, NGOs, and the larger community, in the university experience. The university becomes a microcosm of the bigger world.

Students understand that they must attend to a wider set of expectations and manage a broader set of relationships. This becomes the building block of developing the business citizen.

Connecting with Other Disciplines

One tendency by internal stakeholders at business schools, whether students or faculty members, is to encourage vertical depth. A business programme is thought to be better if it offers a deeper disciplinary coverage. As business schools prepare students for professional certifications, for example the CPA (Certified Public Accountant) or the CFA (Certified Financial Analyst), those schools recognise that there are additional accounting or finance courses that must be included in the curriculum. Such certifications, in addition to specific needs by employers, push into that direction.

The drive towards including more depth in professional competence in business education usually comes at the expense of courses outside the business disciplines. Faculty members and business school administrators thus find themselves in a continuous struggle between having to choose between more vertical depth in curriculum-more depth within business topics-versus horizontal breadth beyond direct business offerings (courses from outside business). While a certain level of depth is, of course, needed, a good differentiator for business schools could be in their ability to graduate well-rounded individuals with enough depth and breadth of education. Business schools will find that sometimes a certain degree of immersion in courses in humanities, social sciences, and hard sciences would complement their business educational experience.

Many businesses are not well equipped to allocate the resources and time necessary for character development.

Business schools should repel the urge to emphasise vertical immersion at the expense of horizontal education. Relevant courses in sciences would help students, for example, in understanding the real impact of their business decisions on the environment in which they live. Courses in social sciences help to understand the variables influencing societies and how people approach their lives and how they make decisions; this is valuable for marketers. Courses in humanities will broaden the perspective of future business leaders in making decisions of ethical significance.

Yet, the value of horizontal breadth lies in utilitarian ends regarding how this helps future decisions in business. A diverse curriculum develops the person as a citizen in a community where people need to live together whether they run profit-seeking businesses or not. People assume many roles in life; being a business professional is just one of them. Business schools will find it beneficial, through inter-disciplinary connections, not only to graduate a business professional but also to graduate a business citizen.

The Way Ahead

Business schools are legitimate institutions and will continue to provide legitimate solutions to the societies in which they operate. This legitimacy is increasingly getting challenged by new disrupters, facilitated by a drive toward globalised education in a hi-tech environment. Additional challenges to the legitimacy of the academy relate to the doings of the academy itself, including a myopic view of desired educational outcomes, and curricula that lack relevance. To counter that, business schools need to repurpose business school education around developing the character of the total well-rounded business citizen, who is not just a mere business professional. Success in doing that means that a school of business will remain relevant for generations to come.

Methodology

The Higher Education Institutes are measured by five criteria: Faculty Student Ratio, Research, Employability, Faculty Quality and Inclusiveness & Diversity. These five broad parameters are then broken down into several sub-parameters/indicators, each leading to an overall weightage. The criteria scores are then normalised; scores for each measure are weighted to arrive at a final overall score of 100. The methodology is the product of years of research. It is continuously refined based on user feedback, discussions with academic leaders and higher education experts, literature reviews, trends in data, availability of new data, and engaging with vice-chancellors, deans, researchers, academicians and prominent educationists.

Observations from the result show that Indian Business schools are evolving and addressing the problem from the 3E framework of education, i.e. Experiential Learning, Experimental Approach and Entrepreneurial spirit. They are also facilitating world-class education for next-gen leaders by using online content, unique teaching tools, and case-based interactive learning that allows students to access advanced courses like Disruptive Strategy, Negotiation Mastery, Business Analytics, etc. It can also be concluded that they will seek to transform this current state of affairs and reshape the business school experience in India by promoting conscious capitalism. Therefore, the schools are putting actions behind their words on well-being, diversity, equity, and inclusion targets.

Dr Karthick Sridhar is Vice Chairman of ­Indian Centre for ­Academic Rankings & Excellence (ICARE), and one of the ­architects of India’s first ­government-approved Academic Audit & Rating Agency

(This appeared in the print as 'Fostering Ethical Leaders')

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