It’s the beginning of the fall semester and MBA programs across the world are preparing students to become good business leaders.
Over the past few years, and in reaction to high-profile corporate scandals, many MBA programs have added additional courses on business ethics and corporate social responsibility (CSR). But for people outside of the universities, the content of these courses remains obscure. What are future corporate managers being taught under the heading of ‘business ethics’? In what context are students instructed on their "social responsibilities" as businessmen and women? Is a good dose of Milton Friedman all that is required or is there a need for something more?
Consider Harvard Business School.
The main CSR course at HBS, "Business Leadership and Strategic Corporate Citizenship" is an optional course offered during the 2nd year of the MBA program. The syllabus for this year’s version is instructive. The professor introduces CSR by explaining the three reasons why corporate leaders ought to act in a socially responsible manner: (i) it helps the world and is simply the right thing to do; (ii) corporations have an obligation to "give back" to society because it is society that has given business the license to operate and to make profits in the first place; and (iii) it increases profits in the long run.
"We endorse all three reasons for corporate social responsibility," says the professor, "but we will largely ignore the first two" because, well, because this is a university, not a high school debating club.
Now consider London Business School.
The United Kingdom is arguably "ahead" of the U.S. in terms of adopting CSR policies (they have their own government website and minister responsible for CSR). So how does the UK’s preeminent business school compare to Harvard in this regard? First, the LBS course, "Business Ethics and Corporate Social Responsibility", is a required course that one takes at the very beginning of the MBA program. Second, as the title indicates, this course combines CSR with business ethics. As outlined in a 2004 syllabus, ‘business ethics’ focuses more on the decisions of an individual manager with respect to the corporation, whereas CSR focuses more on the relationship between the corporation as a whole and the rest of society.
Like the Harvard course, the London course asks students to examine cases in recent business history in which CSR has been front and center, such as Nike and the sweatshop debate, or Shell oil and human rights in Africa. And while the readings generally support the ‘doing good is good business’ view of CSR, students, at both institutions, are also exposed to the Milton Friedman view, as well as the conflict between being responsible to shareholders vs. being responsible to all of "society". So what’s missing?
One problem is that this type of MBA course — and there are many others out there — attempts to deal with a political subject in a non-political way. For instance, the corporate campaigns waged by non-government organizations are a key reason why corporations come to embrace CSR in the first place: think McDonald’s or Wal-Mart. Yet the technocratic point of view favored by business schools does not equip students with the ideological perspective that is necessary to understanding either CSR’s supporters or its opponents.
In the case of the Harvard course, the professor endorsed an ideological position — I believe CSR is good because it helps the world — but would not allow that position to be examined. Instead, a student is to assume its validity from the start, and focus on how a business leader can most effectively manage its various "stakeholders", that is, shareholders, employees, suppliers and NGOs.
The usual response, then, is that the professor should offer the Friedman position — the social responsibility of business is to increase its profits — as an alternative and to stress the role of the manager as agent of the owners of the corporation (the shareholders).
But this, too, is insufficient. Under the Friedman view, a corporation can use every means within the law to increase profits for its shareholders, such as lobbying the government for special favors or to support new industry regulations that will fall most heavily on the competition.
Perhaps what is needed is to rethink the way ‘business ethics’ is taught; such that an ethical businessman is one who is responsible not to shareholders or stakeholders, but to the free market system and its components, including private property rights, voluntary exchange and competition. Generally, this is the Friedman view, but broader. It suggests that the role of business is not only to follow the rules of the game, but to not use the law to alter the rules of the game in ways that impede the functioning of the market. Isn’t this the true social responsibility of business?