Business, Capitalism and Corporate Citizenship

A Collection of Seminal Essays

Malcolm McIntosh

• Publisher: Routledge
• Year: 2017
• eBook ISBN: 9781351284189
• Topic: Business
• Subtopic: Business General
• Index: Business

In the first decades of the twenty-first century, the theory and practice of corporate citizenship and responsibility adapted significantly. The pieces in this volume capture the essence of these changes, with illuminating reflections by their preeminent authors on success, failure, learning and progress. Featuring contributions from John Ruggie, Peter Senge, R. Edward Freeman, Jan Aart Scholte and Georg Kell, it charts the rise of corporate citizenship, sustainability and corporate social responsibility.

This title is one of a two-volume set: a collection of seminal and thought-provoking essays, drawn from the Journal of Corporate Citizenship's archive, accompanied by new analysis and reflection from the original authors. Written by some of the most widely recognized academic and business pioneers and leaders of the corporate responsibility and global sustainability movement, the volumes make essential reference texts for anyone interested in the radically awakening new global political economy.

The Journal of Corporate Citizenship was launched in 2001 by Founding Editor Malcolm McIntosh and Greenleaf Publishing. Today, it continues to fulfil its mission to integrate theory and practice and provide a home for enlightened transdisciplinary thinking on the role of business and organizations in society.

What do we talk about when we talk about corporate citizenship, and how do we talk about corporate citizenship when we talk about it?

7
Are Business Schools Silent Partners in Corporate Crime?¹

Diane L. Swanson and William C. Frederick

DURING THE PAST YEAR THE US public has witnessed unprecedented corporate misconduct and crime, with each new scandal pointing to new levels of selfishness, greed and dishonesty in business. The ink was barely dry on the story of Enron’s bogus financial accounting when the announcement of WorldCom’s misrepresentation of US$3.8 billion in expenses hit the media. As if that disclosure were not mind-boggling enough, the public subsequently learned that the miscalculation was more to the tune of US$7.6 billion. Then Enron was back in the news again after Arthur Andersen, an accounting firm that long trumpeted a reputation for high ethical standards, was accused of cooking the books for Enron. Adding insult to injured investors, Martha Stewart, America’s darling of homespun mass consumerism, faced allegations of insider trading (McHutchinson 2002; Solomon and Sandberg 2002).

None of this was lost on the stock market, already battered by 9/11, President Bush’s bellicosity toward Iraq and a shaky economy. The signal to investors was loud and clear: they could neither trust the validity of financial information nor the stock market itself as a level playing field. The value of pension funds plummeted and thousands of employees of scandal-ridden firms lost their jobs. Faith in financial capitalism lost ground as well. Bush hurriedly reacted with comments meant to soothe rattled investors, implying that the scandals were the result of a few bad apples and that most business in the USA was still in good hands. But the stock market plummeted anyway. Wall Street foundations were shaking as the shockwaves of corruption and fraud registered loudly in the American psyche.

An unexplored question is the link between corporate misdeeds and the nation’s business schools. Although policy-makers in Washington have now changed the rules for stock options and 401K plans, they have not yet investigated business schools as possibly unwitting accomplices to corporate crimes. This oversight seems odd, since the executive managers of the scandal-ridden firms and their partners in crime, some holding MBA degrees, may reflect an approach to business education that elevates narrow self-interest above broader values of community and corporate citizenship. This ideology was never very far from the minds of the executive carpetbaggers who stole from their own companies, wiped out employee pensions and made distrust of business a national byword. In the aftermath of this wholesale robbery, members of the Association for the Advancement of Collegiate Schools of Business (AACSB) in the USA have maintained an inexplicable silence. Behind their wall of quietude, these deans of colleges of business who set the standards for business school curricula worldwide are proposing wobbly new accreditation guidelines that will do little to head off a new generation of MBAs who are at risk of Enron-like behaviour.

Knowing that the fellowship of deans will vote on the proposed standards in April, we contacted AACSB and were told that the member deans have acknowledged the crisis in business by putting ethics first among equals in the proposed standards for degree programmes. Big deal. The rub is that the delivery of that ethics content is to be left to each individual business school. The damage that can result from this ‘doctrine of flexibility’ goes way beyond ethics. Topics such as corporate citizenship, public policy and corporate governance can also be ‘flexified’ at a school’s whim.

As news of the proposed standards swept through academic circles in the autumn of 2002, the AACSB office has been inundated with messages of protest from a cross-section of professors in the USA and abroad. Even though these professors teach a variety of management subjects and hold divergent viewpoints, they have spoken with one voice to tell AACSB that its standards for ethics education are patently inadequate. This unanimous demand is truly an extraordinary development, since professors from different backgrounds rarely agree publicly on anything.

The cat is out of the bag. The professors who voted their dissatisfaction so openly did so because of their experience to date with the failed doctrine of flexibility. A relatively recent innovation, the gospel of flexibility effectively absolves schools from requiring any courses in ethics. Deans can claim that ethics is incorporated into curriculum overall, meaning that professors from disciplines such as marketing, finance, operations management, accounting and strategic management can claim to teach a smattering of ethics topics in their courses. In reality, however, these professors find it burdensome to try to integrate well-developed variants of ethics across the curriculum, particularly given their understandable desire to teach their own areas of expertise first and foremost. Additionally, members of the AACSB teams who visit schools to judge accreditation status find it difficult if not impossible to assess the quality of ethics coverage in such a system. We know of a case where an accrediting team spent an entire day poring over a school’s course offerings, looking as if through a magnifying glass for just enough ethics content to ‘pass’ the school. The listing of ethics on various syllabi does not qualify as satisfying any particular standard. At best, such ad hoc coverage is superficial and uninformed. At worst, it is inaccurate and woefully inadequate. There is simply no substitute for ethics delivered as a dedicated course by a knowledgeable faculty.

To compound issues of accountability and transparency in curricular standards, members of AACSB accrediting teams sometimes have long-standing professional relationships or personal friendships with the deans of the schools they visit, calling into question the arm’s-length relationship expected of accreditation judgements. One might as well ask Arthur Andersen to audit Enron, where cronyism reigned.

An AACSB official points out that seeking accreditation is voluntary, and that no one forces schools to accept AACSB standards.² But this response begs the question for schools bearing AACSB’s seal of approval. An association that accredits professional degree programmes should take the high road on ethics standards, especially in the aftermath of what are arguably the worst corporate scandals in the history of financial capitalism. Moreover, it is disheartening to hear the rhetoric of ‘free to choose’ from AACSB, given that this same refrain has been a long-standing chorus of free-market pundits who argue vociferously that corporate managers should not consciously try to fulfil moral obligations to society. Such invocation of freedom is misguided when it functions as a cover for the right to act selfishly and irresponsibly in business or for an educational approach that denigrates a broad sense of ethical and moral responsibility to society.

We urge AACSB officials not to quest for institutional autonomy at the expense of more laudable citizenship goals. We are reminded that the executive managers of Enron, WorldCom, Global Crossing and others have literally cashed in by autonomously setting their own standards of gross misconduct. In drawing this parallel, we do not question the sincerity of deans or the AACSB. Nor do we cast aspersions on most practising managers. To do so would be to sidestep the real issue, which is that large-scale organisations are chain-of-command structures that encourage policies and behaviour that narrowly serve the status quo. This state of affairs puts dissenting managers and other employees in harm’s way, especially if they dare to blow the whistle on superiors who exhibit dubious behaviour. In the absence of countervailing forces, whole organisations and perhaps even industrial sectors easily become self-serving, inert and out of step with environmental imperatives.

Ironically, AACSB deans have more than a passing acquaintance with these well-known and critical insights from contemporary management theory. The crux of the matter is that the proposed AACSB standards do not speak to the experience of practising managers, leading us to believe that AACSB needs to solicit more input from its corporate constituents.

Perhaps the most distressing aspect of this whole situation is that it represents ground covered before (Frederick 1977). This is yet another characteristic of the status quo—its agents do not necessarily learn from history, especially when accreditation is reinforced by a school’s internal politics. AACSB’s doctrine of flexibility can contribute directly to reducing or eliminating the number of professors teaching ethics in business schools. Here is the way it works. In spite of a stacked political deck, some schools have developed excellent programmes in ethics, corporate social responsibility and, more recently, corporate citizenship. Yet, as Professor Duane Windsor (2002) attested in an open letter to AACSB, these gains are easily wiped out by faculty attrition, especially when key senior professors retire and are not replaced. This happened at the University of Pittsburgh, according to Professor Donna Wood’s recent correspondence with AACSB (Wood 2002). As a result, Pitt’s Katz School has quickly earned a dubious reputation for dismantling a long-standing and distinguished programme in ethics and corporate social responsibility. Amazingly, the axe fell on this programme in August 2002, even as sensational news of the corporate scandals was still unfolding. Such folly is permitted or even encouraged by flexible ethics guidelines, loosely enforced.

Not that flexibility should be ruled out completely. A certain amount is called for, given the plurality of AACSB constituents. The issue is one of scope. As proposed in 1977, the existence of one required threshold course in ethics and corporate social responsibility need not dampen other curricular initiatives. Nor does it dictate the design or placement of individual courses in a curriculum (Frederick 1977: 2). Moreover, the requirement for one threshold course does not preclude professors from addressing ethical and environmental issues across the curriculum. Potentially everyone gains by keeping the material on ethics and social responsibility intact as a required threshold course. By design, this approach encourages cross-fertilisation of ideas within other business courses. It is an eminently ‘flexible’ base for any and all schools to infuse greater ethical awareness in their students.

Is this too much to ask and expect of business schools and their accrediting agency, given the dark cloud of disrepute and failed trust that now shrouds the management profession and, by association, management education? Peter Drucker (1969: 210) summed up the legitimacy of institutional aims long ago when he stated:

To satisfy their members is not and can never be the first task or the test of the pluralist organisations of our society. They must satisfy people outside, must serve a purpose outside, must achieve results outside.

The AACSB’s ethics standard and accreditation guidelines do not meet Drucker’s test of serving ‘outside purposes’. Even worse, they signal that business schools and their leaders will not be summoned to work conscientiously and collectively to prevent the next assault of corporate criminality on society.

Notes

1 This paper first appeared in the Journal of Corporate Citizenship 9 (Spring 2003): 24-27.

2 Personal communication with an AACSB accreditation official, 16 October 2002.

References

Drucker, P.F. (1969) The Age of Discontinuity (New York: Harper & Row).

Frederick, W.C. (1977) ‘Business and Society Curriculum: Suggested Guidelines for Accreditation’, AACSB Bulletin 13.3.

McHutchinson, J. (2002) ‘Corporate Scandals’, CBC News Online, 26 June 2002: 1-4.

Solomon, D., and J. Sandberg (2002) ‘WorldCom’s False Profits Climb’, Wall Street Journal, 6 November 2002: A3.

Windsor, D. (2002) ‘An Open Letter on Business School Responsibility’, addressed to the Association for the Advancement of Collegiate Schools of Business (AACSB) Blue Ribbon Committee on Accreditation Quality, 9 October 2002.

Wood, D. (2002) Personal Endorsement of Windsor’s Open Letter to the Association for the Advancement of Collegiate Schools of Business (AACSB) Blue Ribbon Committee on Accreditation Quality, 14 October 2002.

Diane L. Swanson is Professor of Management and Edgerley Family Chair of Distinction at Kansas State University where she chairs the Business Ethics Education Initiative. She is also a Distinguished Visiting Scholar at Benedictine University where she teaches executive managers. She received her PhD in Business Administration from the University of Pittsburgh in 1996. An award-winning author and educator, Dr Swanson is recognised in several Who’s Who bibliographical indices and has published widely on business ethics and corporate social responsibility. Her newest book, Embedding CSR into Corporate Culture: Challenging the Executive Mind, was published in 2014 by Palgrave Macmillan.

William C. Frederick is Professor Emeritus, Katz Graduate School of Business, University of Pittsburgh, Pittsburgh, Pennsylvania, USA. His primary teaching and research interest is understanding the relationships between business and society, including corporate social responsibility and business ethics. His books on these topics are Values, Nature, and Culture in the American Corporation (1995); Corporation, Be Good!: The Story of Corporate Social Responsibility (2006); and Natural Corporate Management: From the Big Bang to Wall Street (2012). An online book, Judging the Business Corporation: Cultural, Natural, and Cosmic Foundations (2014), is available at www.williamcfrederick.com.

2015 Update

In the wake of Enron-like scandals in 2003, member deans of the Association to Advance Collegiate Schools of Business (AACSB), the agency that accredits business schools worldwide, voted on standards that excluded a stand-alone ethics course as a condition of accreditation. This decision seemed at odds with a survey in 2003 indicating that an overwhelming percentage of AACSB deans polled agreed that an ethics course should be required of all undergraduate and graduate business students (Evans and Marcal 2008: 54). After the 2003 decision, Bloomberg Press reported that only one-third of business schools offered a course dedicated to ethics (Willen 2004) and presumably fewer required one. Seven years later, Diane Swanson asked an AACSB administrator to provide an updated statistic and was told that the agency does not track ethics coursework (Swanson and Fisher 2012).

Given the meltdown in financial markets in 2008, it is timely to reflect on the accrediting agency’s policy toward ethics. In our view, it condones the status quo, which is that a majority of business schools do not deliver robust ethics education, even as recurrent scandals underscore the need for it. In contrast, some schools have broken ranks with this myopia by bolstering socially and environmentally responsible coursework and have been favourably ranked by the Aspen Institute for doing so. That the Aspen Institute suspended this ranking in 2012 speaks to the fragility of business ethics education. Indeed, a survey in 2006 showed that many business schools were dropping their ethics courses, even while continuing professional education programmes were adding them (Fisher et al. 2007). How many more schools will axe ethics courses in the face of faculty attrition, budget cutbacks and competition for curriculum space remains to be seen, given that accrediting standards allow it.

The schools that do so will lag practice. Thousands of organisations now use Global Reporting Initiative standards to report on their triple bottom line of environmental, social and economic performance. Senior- and mid-level jobs in social and environmental ...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Contents
• Acknowledgements
• Introduction
• Business, capitalism and corporate citizenship
• What do we talk about when we talk about corporate citizenship, and how do we talk about corporate citizenship when we talk about it?
• Corporate citizenship engagement
• Corporate citizenship engagement and the UN Global Compact
• About the editor