While it may be nerdy to admit, the Enron documentary entitled “The Smartest Guys in the Room” is one of my favorite movies. While the downfall of Enron was indeed a direct result of greedy executives, a woman interviewed in the documentary states that it is “a portrait of human nature”. Even when being questioned by members of Congress after the collapse of the company, Jeff Skilling swore under oath that he “always did what was best for the company and its shareholders” (I still get chills when I watch that part). I could talk for hours about the ins and outs of the Enron scandal, but I want to focus on the lack of integrity that seems to be an increasing presence in business executives who lead the financial services industry.
Some individuals blame capitalism as the cause of the recent economic downturn, which is a valid argument. The strength of capitalism is also its inherent weakness; while it grants freedom and flexibility to the users of financial markets, it also falls prey to the downfalls of human nature, allowing manipulation and fraud to run rampant. While increasing regulation of the economy may fix some of the problems, there is still the issue of ethics and integrity in business (or lack thereof). Since I am a huge advocate for education as a means of bringing about change, I believe the problem lies in the lack of education about ethics in schools.
I would not feel so strongly about this if I hadn’t experienced ethics education firsthand my sophomore year of college. The class was a required business class entitled “Business Communication for Accounting Majors”, and focused on teaching nerdy accountants how to be good communicators with things other than numbers. The class incorporated labs on Fridays (who doesn’t like class on Fridays?) featuring simulations and guest speakers, which students enjoyed more than they liked to admit. On one Friday morning, my fellow classmate (who had attended lab earlier that day) called me and said “You have to go to lab today. It will absolutely blow your mind.” Without prying further, I walked to class and couldn’t wait to figure out what my friend was referring to. The lab started out with a case in which a business analyst had gotten wrapped up in a Ponzi scheme while working at UBS. The interesting twist of the case was that it wasn’t blatantly immoral. This wasn’t a Bernie Madoff-type Ponzi scheme—the analyst was unaware of the fraud until late in the case, and then tried to fix the damage that had already been done by his colleagues before the client found out.
When the case had been fully presented, my professor asked the class, “Now tell me: what would YOU have done in this situation?” Of course some of the typical answers were thrown out-“I would have called the fraud hotline!” (yeah right) or “Gone straight to the Board of Directors of UBS” (also highly unlikely). It became very clear that there was no obvious, moral answer. Our class became lost in the “gray area” that comprises ethics, and couldn’t all agree on an answer that seemed appropriate.
Without missing a beat, my Professor said “I have someone in the classroom that I would like you to meet.” A fashionably dressed, 35-year-old looking man steps in front of the class and states to a group of naïve undergrads, “Hi. My name is Justin Paperny. I graduated from USC about ten years ago, and I’m the analyst in the case who was sent to jail for fraud.”
I’m certain everyone in the class gasped at that very moment. This man did not look like a man who had been to jail-- he even graduated from USC! For the next hour of the lab, we all listened intently to the story of his ethical downfall. He had been on the USC baseball team, a stellar business student, and had an impressive career as a financial analyst up until the scandal in 2008. The harsh reality that we all learned that day is that this man was not a bad person. He had grown up in a very good home with great parents, and attended the best universities that money could buy. But education failed to teach him how to make ethical decisions when business temptations arise.
Not one student walked out of the accounting building unaffected by what had transpired during the lab. It wasn’t the facts of the case that had the profound impact-it was the harsh reality that what happened to Justin could happen to any of us. Most students are aware of what is considered right and wrong, but in ethical dilemmas like the one presented in Justin’s case, the moral answer is not obvious. This lack of knowledge about the principles of ethics highlights an area of weakness in education. Schools need to incorporate courses that simulate ethical dilemmas and teach strategies to find ethical solutions when the answer is not clearly evident. While undergraduate and graduate business schools emphasize leadership in their curriculum, they fail to integrate ethics as a component of leadership. This fatal flaw causes students entering the working world to disassociate being a good leader and acting ethically, when in reality the two go hand in hand.
While incorporating ethics into education is a viable option, there are obstacles that will make integration slow. When asked why ethics are not already incorporated into curriculum, business school professors commonly reply “[Business] students are grown people -- we can't teach them ethics”(Business Week). This argument is the most prevalent response amongst opponents of incorporating ethics in schools, who claim that teaching ethics in college is useless because moral character has already been formed by that point in a person’s life. However, if educators believe that courses cannot teach students how to change behavior, what is the point of sending kids to colleges and graduate schools? According to an article that highlights the weaknesses in arguments against teaching business ethics, the author states “ The opponent of ethics education presumably concedes that finance, marketing, and operations courses change behavior, but insists that an ethics course does not. Why is ethics class, the one class that deals directly with how one should behave, incapable of changing behavior, when all the other classes in the building have practical effect?”.
Which brings me to a solution I propose: if some professors don’t see the value in teaching ethics, provide incentives for those that do. Business schools need to reward educators who bring in guest speakers to lecture on ethics--like my professor did-- or discuss ethics cases with their students. With a multitude of examples to pick from (Enron, Arthur Andersen, WorldCom, Lehman Bros, etc…), there is definitely not a lack of examples of poor ethics in the business world to be discussed openly with students. Whether through monetary incentives or recognition amongst colleagues, schools should create reward systems that honor professors that incorporate ethical components into required curriculum.
One student replied to a Businessweek article on the need for ethics education and said, “I obtained knowledge and tools that have helped me avoid, resist, and discourage unethical behavior in all business dealings, something that has greatly helped my career in corporate finance. It's clear to me (and to many Notre Dame MBAs) that ethical decision-making isn't just the right thing to do but also adds great value to shareholders.” I’m not saying that ethics education will be the cure-all for the Jeff Skillings and Bernie Madoffs of the world—However, I do trust that preparing students for complex ethical dilemmas in school can only positively impact the business world.
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