Mendoza School of Business

Graduate schools must provide a firm basis

Published: October 21, 2005 / Author: Elspeth Donovan

Business needs an ethical compass 

Transparency International revealed this week that out of 44 African nations covered in its 2005 Corruption Perceptions Index (CPI), 31 scored less than three on a scale of zero to 10, “a sign of rampant corruption”.

This somewhat disturbing picture begs the question, why is corruption – or at least the perception of corruption – so out of control, particularly in the developing world? Recent experience in South Africa has shown us that at least part of the answer to this is that there is a lack of clarity around what constitutes a corrupt act or unethical behaviour.

Recent research by Associate Professor C Gopinath from Suffolk University in the United States has started to unpack some of these issues. He examined how business students view ethical issues in general and bribery in particular. Worryingly, many of them had no clarity in their ability to recognise an ethical issue or not – despite the fact that many of them had actually taken a course in ethics as part of their studies.

Gopinath – who referred to this in a paper presented at the 11th international Eastern Academy of Management conference hosted by the UCT Graduate School of Business last month – says the results raise questions about the kind of teaching about ethics that is taking place in business schools around the world.

“There is a great need to think beyond coursework when it comes to preparing students to be ethical executives,” he said.

According to Gopinath, part of the problem is that there has always been an uneasy co-existence between ethics and business. Where, at a personal level, a person’s ethical behaviour is guided by religion, culture and societal norms, when it comes to business there is no such guiding code.

Morality appears to take a back seat and the transactions are often guided by minimum legal requirements instead.

But, increasingly, business is being called to account on these matters. Society is starting to demand that business behaves, not just in a legally acceptable way, but in a way that demonstrates good corporate citizenship.

According to Oliver Williams, visiting professor at the UCT Graduate School of Business and academic director of the University of Notre Dame Centre for Ethics and Religious Values in Business, public trust in business is at a low point, and that, in the long term, this is damaging to the bottom line.

“In the corporate world, the cost of trust lost can be financially significant. It most often results in public pressure for additional regulation and legislation to control business, what economists call ‘transaction costs’,” says Williams.

Thus there is an urgent need to re-educate business leaders – past and future – about ethics. A logical place to start is in the classroom – specifically in the classrooms of business schools where tomorrow’s managers and leaders are likely to be found.

In the US, AACSB (Association to Advance Collegiate Schools of Business) International, the business school accrediting body, has for a long time required that ethics education be included in the curriculum leading to a management degree. This has strengthened the focus on ethics in the classroom, but Gopinath’s research has raised the question: Is this enough?

In his experiment, a group of 100 business students were given a questionnaire depicting a hypothetical scenario where a manager of a company visiting his partner organisation in India is confronted by a clerk in the Indian organisation who requests an “overtime” fee in order to process papers needed for important clearance.

Students were invited to decide if they would or would not pay the bribe in order to expedite the work. Half the sample were told that the manager believed the request for payment was illegal. The other half were left to decide for themselves.

Of the students who had not been told the request was illegal, 54% said they did not think it was an illegal request and 41% said they would pay. A further 17% who said that they thought it was illegal said that they would probably pay anyway. Of the sample who had been told that the request was illegal, 42% still said they would still pay.

Most disturbingly, despite the fact that many of the students had taken an ethics course as part of their studies, this appeared to make little difference to their ability to judge the scenario.

The reasons given by the students regarding their decisions reveal that there is a lack of clarity about bribery and corruption.

In most cases, the reasons advanced were based on legality and business expediency: “It is a harmless bribe” or “It is not illegal, it is a facilitation payment” and “Such a payment is a cost of doing business”.

Some justifications also honed in on the fact that the transaction took place in India. Like South Africa, India is a developing country that ranks high in the corruption scales and that this justified the payment.

These reasons suggest a lack of knowledge of the moral arguments on the basis of which the decision is arrived at.

“The ability to recognise ethical issues is a fundamental skill that should be a part of ethical preparation for the workplace. Ethical issues are often not obvious and it requires a sophisticated understanding of moral concepts to recognise an ethical issue,” says Gopinath.

And while ethics courses can provide the theories of moral reasoning, they may not provide the students sufficient opportunities to practise them.

It is also crucial that ethics is not compartmentalised in a single add-on course. Rather, it should be integrated across the curriculum so that students are invited to consider all business issues in an ethical light.

Currently AACSB International is pushing for an increased emphasis on ethics in the curriculum.

Its 2004 Task Force found that “we must not fall into the trap of assuming the majority of students are adequately prepared to meet the ethical challenges of the modern workplace”.

Similar calls should follow from accrediting bodies elsewhere in the world. It is in all of our best interests for our business schools to be turning out more ethically aware managers and leaders.

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· Donovan is director of the MBA programme at the UCT Graduate School of Business.


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