“Do Business Schools Incubate Criminals?”

Yves Smith
Naked Capitalism

Luigi Zingales, who teaches at the University of Chicago’s business school, had an op-ed in Bloomberg provocatively titled “Do Business Schools Incubate Criminals?” He argues that business schools are “partly to blame” for the decline in ethical standards in the business world, and urges that ethics not be taught as a separate course by lightweight profs, but integrated into all courses.

This piece is so backwards I don’t quite know where to begin. It’s telling that it blames former McKinsey partner, now convicted insider traders Rajat Gupta’s and Anil Kumar’s crimes on the failure get ethical training in business school. I’m not making this up: “Where did Gupta, Kumar and others get the idea that this kind of behavior might be OK? Most business schools do offer ethics classes” but contends they are unserious. No other possible explanation is explored. Gee, they both went to the Indian Institute of Technology. Why isn’t their education at a more formative stage under scrutiny as well?

Mind you, I’m not saying business schools deserve a free pass. Far from it. But business schools are a combination of finishing school and employment agency. They live in, and my sense is they are lagging indicators of broad cultural shifts in norms. In case Zingales has missed it, American elites are openly corrupt. You can see it with the revolving doors between regulators and top industry jobs, the way CEOs and top politicians tell astonishing lies whenever they are in trouble,the weird combination of precision on inconsequential details versus the carefully coached combinations of misleading but not untruthful answers and “I don’t recall” when you sure as hell know they do remember, the way the press is so thick with propaganda that it takes an Enigma machine to pull out any real messages. So with those role models, why should we expect business school graduates to be paragons of virtue? The are aspiring Masters of the Universe. They are smart enough to see what the real game is, and the message conveyed by the business press and who rises to the top in large organizations today is far more powerful than any lecture, no matter how well or frequently delivered.

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