More MBA Programs Introduce Ethics Courses : Economics: The scandals of the 1980s have prompted some professors to rethink the way that business is taught.

James W. Kuhn, a business professor at Columbia University, was putting the finishing touches on his latest book recently when he decided to include a few passages from Adam Smith’s “Theory of Moral Sentiments.”

So he went to the business library to browse through Smith’s work, which laid the foundation for the moral implications of the free market. To his astonishment, the library didn’t have the book. But it had 18 copies of Smith’s “Wealth of Nations,” his later book describing the mechanics of capitalism.

How, Kuhn wondered, could the library of one of the leading business schools in the country have one without the other?

Kuhn finally found “Theory of Moral Sentiments” in the university’s Union Theological Seminary library--13 copies, in fact. The seminary had no copy of “Wealth of Nations.”

“The economists never read the ‘Theory of Moral Sentiments’, “ Kuhn said, “and the theologians never read ‘Wealth of Nations.’ ”

And that, say professors such as Kuhn, is a symptom of what’s wrong with graduate business schools today. In an effort to turn the study of economics and finance into a “science” with laws as inviolable and predictable as gravity, scholars have tended to ignore the less definable but equally important moral dimensions of the free market.

“Efficiency has been enshrined as the only value, rather then equity, and as a result we’ve had a very skewed perspective,” said Kirk O. Hanson, a business professor at Stanford University and president of the Business Enterprise Trust, a newly formed organization to recognize business people with outstanding ethical conduct.

In general, Hanson and those of similar views advocate the “stakeholder” theory, which says business people have an obligation not only to their stockholders but to their employees, customers and community as well.

Ethics professors often cite Johnson & Johnson’s decision to temporarily remove Tylenol from the market during the poisoning scare as an example of a business decision that considered more than the bottom line.

The voices for dissent from the ivory tower often belong to a small but growing number of business professors who teach ethics. The financial scandals of the 1980s--the insider-trading convictions of Dennis B. Levine and Ivan F. Boesky, plus Michael Milken’s downfall from the junk bond throne--triggered a wave of new or enhanced ethics classes at MBA programs nationwide. This trend, in turn, has caused many professors to take a new look at the way in which business is taught.

Curtis Tarr, a business professor at Cornell University’s Johnson Graduate School of Management, recently handed students a reading list that looked like something from a Literature class: “King Lear,” “The Great Gatsby,” and “The Scarlet Letter,” to name a few.

But because each book delivered its moral lessons in story form, they were more interesting, and therefore memorable, than most textbooks.

Tarr is also a leader in the field of ethical case studies. He has researched, for examples, the management decisions that led to the disaster in Union Carbide’s Bhopal, India, chemical plant, and the grounding of the oil tanker Amoco Cadiz on the coast of France 12 years ago.

In both cases, Tarr found, the disasters could have been avoided had operators put human safety first and profits second. By studying such real world examples, students are supposed to become familiar with the pitfalls they may encounter after graduation.

One real-life example might be mid-level management setting unrealistic quotas with the tacit understanding that ethics can be ignored in pursuit of the goal. Ethicists say honest employees must be willing to confront their bosses and try to find an alternative that will not compromise their ethics. That may mean quitting. Some ethicists advise setting aside a special savings account for those times when hitting the highway is the only alternative to the low road.

Although MBA programs have offered ethics courses for many years, the trend took off in 1987, when then-SEC chairman John S. R. Shad pledged $20 million to Harvard University’s Graduate School of Business Administration for ethics teaching and research. Today, Harvard is one of the few schools that has mandatory ethics courses. UCLA’s Anderson Graduate School of Management has offered an elective ethics course for the past four years.