Today comes news
that newly-minted MBAs are making more money than ever before, which made it
an excellent day for Princeton University Press to host a lunch in New York
to plug Rakesh Khurana’s new
book, "From Higher Aims to Hired Hands: The Social Transformation of
American Business Schools and the Unfulfilled Promise of Management as a Profession".
I was in excellent company: Justin Fox of Time, Dan Gross of Newsweek, and
a brace of reporters from BusinessWeek. The publicist apparently was looking
forward to something of a debate, but in the absence of any visible apologist
for business schools as they operate today, the lunch turned into more of a
very enjoyable Khurana monologue, occasionally punctuated by questions from
the assembled hacks.
Khurana’s thesis is more or less encapsulated in his book’s title, and a lot
of the discussion was centered on the concept of management as a profession
– something which a noble non-profit entity such as Harvard University
should be proud to teach. This idea is closely aligned with the idea that the
liberally-educated Protestant elite, who lost family control of their companies
around the turn of the century, would retain control of those companies by dint
of the combination of strong management and weak owners (shareholders). Management,
in turn, would run the nation’s biggest companies not for the sole benefit of
shareholders, nor for the benefit of labor, but rather for the greater good
of society as a whole.
This idea of the role of management has become delegitimated over the past
30 years (roughly since George W Bush got his MBA from Harvard in 1975), to
the point at which MBA students now speak of creating shareholder value as though
there were no other conceivable purpose to management. The irony is that the
schools those MBA students attend would never exist were it not for that higher
; indeed, Yale and Princeton lack business schools precisely because
they felt a university to be no place for an entity whose prime raison d’être
is to make its graduates wealthy.
Without this higher purpose, business schools have become cast adrift rather.
The professors, most of whom do not have MBAs themselves, find themselves more
the servants than the masters of their aggressive and ambitious students, who
generally aspire to end up in whichever sector will make them the most money.
As a result, says Khurana, there is now "an implicit contract between students
and faculty: if you don’t push us, we won’t push you". There is no exam
at the end of the degree which tests knowledge or ability, and there’s certainly
nothing analagous to the Hippocratic oath; rather, business schools have become
credentialling factories, advertising themselves on the basis of the wealth
of their graduates and the value of the contacts one receives there.
Business-school graduates are not taught that theirs is a moral profession,
beyond the standard imprecations that good ethics is good business. They abjure
any responsibility for society as a whole, and they justify massive pay packages
on the grounds that it’s in shareholders’ best interests to make sure that management’s
interests are aligned with those of owners by giving management lots of shares
and options. The implication, of course, is that without that kind of bribe,
managers can’t be trusted to act in the interest of shareholders either.
It’s quite a compelling story, although I’m not convinced that business ethics
really have deteriorated materially over the past 30 years. I do think that
managers are held in lower regard than they were 30 years ago, but that’s a
slightly different question, and has more to do with the reporting of corporate
fraud than it does with morals empirically going down the tubes. That said,
I do wonder why it is that MBAs get paid so much money, given that
both they and their employers will usually admit that the MBA in and of itself
has very little value. After all, as Khurana notes, most business schools have
resorted to saying that they’re teaching "leadership" – which
is pretty much the one thing that no one has yet worked out even how to study,
let alone teach.