Posted on September 12, 2014
Fifty years ago, when I received my MBA and doctoral degrees at Columbia University Business School, MBA programs were not yet popular. Since that time offers have grown like mushrooms after the rain, especially in Eastern Europe and the developing countries. In India, I have noticed Business Schools are everywhere, and the US business schools are making fortunes essentially franchising their programs.
What is wrong with that?
Economics and business schools teach that the purpose of business is to produce profits. Finance theory and micro-economic theory preach that the goal of business is to increase earnings per share. So do all other courses in marketing and even human resources. The profit motivation is always there as the measuring rod of success.
Granted, here and there you can find a course devoted to social responsibility, but it functions as a fig leaf for the real program, which is clearly oriented around profit: market domination for profit orientation, etc.
What is wrong with it? It legitimizes greed.
Making profit, the purpose and goal for which a business exists, validates and justifies greed. If there were no greed, profit motivation as a goal would not be as attractive.
So what, one may ask?
To make profits, companies have to create needs so they can increase revenues. Just look at the variety of products being provided just in a supermarket. We promote meat consumption and never in the history of mankind has so much meat been consumed per capita. And what is the meat consumption doing to our environment? Do you know how much water and land use is necessary for one pound of cow meat? And how much pollution of our water resources the dairy business causes?
The result is that companies are profitable while the environment is increasingly getting destroyed. Our standard of living is going up while our quality of life is going down.
To increase profits, companies seek global sourcing of products and go where the costs are the lowest. That creates unemployment at home.
We preach democracy, go to war and sacrifice our children’s lives supposedly to bring democracy to far-away lands, only to turn around and franchise or promote business schools who teach anything but democracy in how corporations should be managed.
Representing owners, corporate governance is not democracy. Workers who are managed have no say in who their leaders will be. The reality is that we teach that benevolent dictatorship is the most-desired leadership model of corporations. That is the reality of our management education.
The search for economic returns is impacting how top managers behave, too. The gap in salaries between top management and workers is the highest it’s been since the era of the robber barons in the late nineteenth century.
The result is that we legitimize greed and then condemn it, live in a galloping consumer society that is wasteful beyond comprehension, and preach democracy but promote non-democracy in our corporate life.
Overall I would say the system, as we know it now, is producing unexpected, undesired collateral damage. Profit-seeking as the preeminent goal is a force of disintegration, which is hurting us and will hurt future generations even more. Business Schools are the swamps that breed the malaria carrying mosquitoes.
The efforts to make business leaders more socially conscious is like swimming against a tsunami. After a year of indoctrination that profits are the goal to be focused on and the basis of which we grant rewards, coupled with the natural desire to accumulate wealth, developing social consciousness is like an aspirin for cancer. It might relieve the pain (i.e. sense of guilt) for a short-time, but the damage will continue to happen.
What about the theory that leadership of business organizations should have a host of stakeholders to consider in their decision-making? The community, workers, and needs of the environment are not to be ignored.
Nice in theory. In practice, if your competition produces better profits than you, your position as a leader of the corporation might be in jeopardy.
What about the claim that socially conscious corporations are more profitable? Maybe, but note how the profit motive is driving even social consciousness as a measure of justification for the effort.
But responsible businesses practice philanthropy, you might say.
I find it ironic that Coca Cola Company, for instance, finances a chair for social responsibility at a business school. A company that is feeding sugar millions of people with dire health consequences. The same goes for McDonald’s and Kentucky Fried Chicken (KFC).
Fig leaf efforts.
A new theory of management and economics is being called for. One that provides new goals to be followed; where profits are not the goal, but a by-product of reaching the desired goal.
Ichak Kalderon Adizes