India Abroad - June 2009

Whenever an economic risis erupts in the United States, acoun- try where the MBA program was invent-
ed, the relevance of graduate business
degrees is called into question. The
current economic crisis is likewise
blamed on the greed of managers.
An assumption is made that MBA
programs are somehow responsible
for the crisis. There is no empirical
evidence that the decision-makers
responsible for the meltdown in the
financial services and housing devel-
opment/mortgage sectors have an
MBA or a business degree.
In the absence of hard evi-
dence, it could well be pos-
sible that most of the deci-
sion-makers who precipi-
tated the financial crisis did
not have an MBA and per-
haps could have benefited from one.
We also need to recognize that there
are bad apples in every profession and it
would be unfair to tar an entire profes-
sion based on the actions of a few indi-
viduals. During the financial and hous-
ing crisis, most other industries have
continued to function efficiently and eth-
ically.

Regardless of the arguments presented above, MBA programs in general have responded less than admirably to the ethical, societal and sustainability challenges that the business world has faced over the last couple of decades. For the most part, most programs have responded by adding courses in ethics or corporate social responsibility, or recently during the current crisis, courses in understanding the reasons for the economic meltdown. Courses on the interface between business and society have been around for around three decades. Since most MBA programs have included such courses as electives, the implicit assumption is that it is critical for all MBA graduates to understand that business is embedded in, and inseparable from, society.

The reactive response of most business schools is evident if we trace the history of ethics courses. Revelations of several accounting frauds in the 1980s and Michael Milken’s indictment on 98 counts of racketeering and securities fraud in 1989 led to a rash of business ethics courses in MBA programs. The

SANJAY SHARMA

pressure to launch ethics courses declined during the economic exuberance of the late 1990s and was revived, once again, after the Enron and World Com scandals in the early 2000s. Environmental disasters such as the Exxon Valdez oil spill in Alaska and the Union Carbide tragedy in Bhopal led to MBA programs adding elective courses in environmental management or business sustainability. Since these courses are electives, students who opt for them self-select into these topics. These are precisely the students who do not need these courses in the first instance. This also sends the signal that only a few MBA students need to be ethical, socially responsible, and concerned about the sustainability of the operations of their companies.

Global environmental problems such
as climate change make it evident that
solutions to these problems involve radi-
cal innovations, the transfer of new tech-
nologies to developing countries, reverse
knowledge flows from the developing
world to the developed, and the facilita-
tion of grassroots economic capacity
building. Social equity, environmental
protection, and economic growth are
intertwined. For example, marginalized
and poor societies often survive by burn-
ing wood for fuel and via slash and burn
cultivation, all of which exacerbate cli-
mate change. The need for a holistic
examination of the social and ecolog-
ical impacts of business has been
magnified by globalization and trade
liberalization. Just as globalization is
criticized for several negative envi-
ronmental impacts, it is also criti-
cized for the uneven distribution of
economic benefits, with some seg-
ments of society experiencing a
reduction in quality of life, loss of cul-
ture and heritage, reduced social wel-
fare, and erosion of economic securi-
ty.