Instilling Boardroom Ethics, Starting in the Classroom
Ethics, one of those soft words that few people believe business really cares about, is suddenly a growth industry.
The study of behavior -- right and wrong -- has become the focus of curricula at leading business schools around the country and a source of full employment for lawyers and business consultants in the wake of legislation that followed the corporate scandals of two years ago.
It would be a stretch, of course, to say that virtue will shine in every corporate boardroom as a result of these efforts. And it’s easy for cynics to dismiss much of what is being taught as little more than platitudes. But programs in social responsibility, ethics and legal compliance are so widespread that attitudes about what is proper in business could, in fact, change for the better.
Doing good to do well is the theme from coast to coast.
The Haas School of Business at UC Berkeley was urged by Levi Strauss & Co. (itself accused by two former employees of accounting irregularities -- charges it denies), Hewlett-Packard Co. and other prominent firms to start a Center for Responsible Business.
“Executives backing the program said they never got ethical training when they studied for their MBAs,” says professor Kellie McElhaney, who heads the center.
Columbia University’s School of Business in New York is opening the Center for Business Ethics with backing from Sanford C. Bernstein & Co., a Wall Street research firm often held out as a model of probity in an industry better known for attracting federal probes.
The University of Michigan Business School is launching a Global Citizenship Initiative with support from General Electric Co. and Procter & Gamble Co., each of which is delegating a senior executive to work directly with the students on a part-time basis.
Yes, such programs are partly a reaction to the Enron Corp. debacle and other scandals. “But it’s deeper than that,” says professor Noel Tichy, who heads the Michigan program. These new courses stressing corporate responsibility “can raise expectations and try to instill a code of conduct that global companies can use” with employees, suppliers and customers in places far and wide.
Indeed, the worldwide marketplace has complicated the arena of law and ethics for Americans doing business. In other countries, people “might challenge us with: ‘Is it ethical that you have monopolies? You are gouging us,’ ” says Randolph Westerfield, dean of the Marshall School of Business at USC. The Marshall program therefore makes sure to send its students overseas to grapple with such thorny issues.
Teaching ethics is not new. At UCLA, for example, ethics and directors’ responsibility have been course-book staples for more than eight years.
“Business is a fiduciary activity; it is a public trust,” says Alfred Osborne, senior associate dean of UCLA’s Anderson School. The problem at Enron and others was that “people at the top forgot the trust and saw business only as a way to increase their own wealth.”
So now, Osborne explains, UCLA is requiring a two-week orientation for new students “to teach them what is expected of them as business leaders.”
Outside the confines of college campuses, corporate America also has its mind on ethics. In the year since the passage of the Sarbanes-Oxley Act, which sets regulations on corporate practices and spells out the responsibilities of top executives and directors, a thriving industry in counseling and legal advice has mushroomed.
“We’re seeing a whole new level of attention on corporate governance,” says Steven Madison, head of the white-collar crime unit at Los Angeles law firm Quinn Emanuel Urquhart Oliver & Hedges.
“To avoid misstating $500,000 of revenues,” Madison says, “a company might spend $5 million in staff work, counseling and legal fees.”
Jon Goodman, longtime business professor at USC and author of the forthcoming “Handbook of Corporate Governance,” sees the same trend. Executives from all sectors “are being brought under the same kind of compliance restrictions that have applied to the defense and pharmaceutical industries for years,” she says. “The executive brass has lost some independence of action because of their betrayal of trust.”
Meanwhile, some are turning the ethics drive into opportunity.
An Internet search yields the names of dozens of companies vying to provide their services in the wake of Sarbanes-Oxley. Among them: LRN Co., a 10-year-old Los Angeles firm that sells online training courses in law and regulation.
To be sure, this is still an imperfect world. Many companies are giving lip service, not a real commitment, to ethics.
But we should not lose sight of the fact that some real changes are being made, from the halls of the academy to the corporate boardroom -- and all of us, from Wall Street to Main Street, stand to benefit as a result.
James Flanigan can be reached at jim.flanigan@latimes.com.
