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Caveat Emptor, Congress!

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Caveat Emptor, Congress!

The roll call of dishonest and unethical corporate officers who violate the law on behalf of their corporate employers is well illustrated by five recent examples:

  • Boeing executives jailed for illicit acquisition of competitors' bid data;
  • Enron and Arthur Anderson officers convicted of criminal accounting fraud;
  • Cease and Desist judgments against Global Crossings officers for lying to shareholders;
  • American Airlines raiding its employees' pension fund for current expenses;
  • Hewlett-Packard's CEO and Board members charged with criminal surveillance activities.

Does this litany of theft, fraud, and deliberate defalcation constitute aberrant behavior?  Or is it simply "Business as usual?"  Reflecting on an epiphany that happened to me in graduate school suggests that a significant portion of today's corporate scandals may have germinated in a graduate school of business.  This is how I came to believe that graduate business schools (MBA programs) may be inadvertently teaching this type of behavior

The University of Washington (UW) Graduate School of Business ranks #34 in the 2008 U.S. News & World Report's survey, the edge of the top third of the nation's MBA/DBA schools.  When I attended graduate school at the UW the Business School was ranked similarly, though U.S. News had not yet introduced its survey.

The UW Masters of Health Administration & Planning (MHA) Program in which I was enrolled was then ranked high in the top 5 MHA programs nationally (and remains so today).  Our capstone course, a seminar offered by Program Director Bill Dowling, Ph.D., surveyed management and strategic issues for health care CEOs.  Every year during that seminar Professor Dowling would say to those about to graduate, "Most of you will resign once during your career over a principle on which you and your Board disagree.  A few of you may need to resign twice in your careers.  You should look deep within yourself before offering a third such resignation." Discussions regarding ethical practice and management behavior occurred routinely in our health administration courses.

We MHA students took core business courses (e.g., finance and accounting, marketing, business economics) in the UW Graduate School of Business; our health policy, health care law, and advanced management classes were taught by the MHA faculty.  In this manner, MHA students gained a valuable perspective on two "cultures" within the University.

Do MBA Schools Teach Unethical Business Practices?

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The MBA course which epitomized the corporate business culture I later observed in my management career was Collective Bargaining, offered in the UW Graduate School of Business and taught by a highly respected senior professor, whom I will call Richard Wildon, Ph.D.  Professor Wildon combined lecture, library research and simulated labor negotiation cases to present the course materials.  As an MHA candidate, I was the only "outsider" in one MBA Collective Bargaining section.

Our Collective Bargaining class was divided into paired negotiation groups.  My group included a "City" team and its counterpart, the "Police" negotiating team.  Students in other groups assumed parallel roles in manufacturing, construction, public school systems, etc.

Professor Wildon emphasized that collective bargaining agreements were rigidly based on precedent and statute, so our mock contract proposals needed to reflect current labor settlements within our assigned industries.  Our course grades would be determined primarily by how closely our team's contract terms approximated those of actual recent collective bargaining agreements.  Wildon warned that offering false documentation would constitute bargaining "in bad faith," and that such behavior-considered both illegal and unethical-would adversely affect our grades.  He also hinted that teams with stronger-than-expected outcomes would reap better grades than their counterparts who conceded too much.

As the quarter progressed, our "Police" team assembled extensive data on current public safety contracts in similar metropolitan areas.  Despite the rigorous external discipline of publically available wage and benefit information from the Bureau of Labor Statistics, negotiations for my simulation group reached an impasse two weeks before finals.  My team-all typical graduate student over-achievers-had full confidence in the validity of our proposal. The "City" team insisted that our wage proposal was too high even after we showed them our supporting data.  They claimed they had seen contradictory information but had temporarily lost the source data.  My team discussed the possibility that our adversaries were bluffing, but rejected that idea because of Professor Wildon's strong admonition against using false or unsupported data.

Consequently, my "Police" team spent inordinate amounts of time on additional research and on repetitious, unproductive negotiating sessions with our "City" counterparts.  The day before the class deadline, the "City" team accepted our proposal with a laugh and admitted they never had the conflicting data they claimed to have seen.

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During the last class, Professor Wildon strutted about the room, soliciting comments on the grueling negotiating experience and fishing for testimonials on his masterful course method.  After hearing several obsequious observations from my classmates I raised a hand to speak.  "Our team wasted 20 hours of valuable time while our counterparts admitted falsely maintaining that they could produce conflicting data," I said.  "If our assignment was to simulate real-time collective bargaining practice, then the "City" team should be sanctioned for bargaining "in bad faith."

The response was a sudden, absolute silence, as if I had spoken a racial epithet or made a crude remark about a physically impaired classmate. Wildon's grunted response was unintelligible.  No one challenged my statement.  During Professor Wildon's long silence I realized that he had no intention of addressing to my comment; that he had seen this phenomenon before, and that he fully expected students to behave unethically to procure a better grade. 

In a devastating flash of insight, I saw that I was the only person in the room who was troubled by this win-at-any-cost culture.  Patently unethical behavior, which would have resulted in ostracism by my MHA colleagues, was-in this highly-ranked MBA Graduate Business School culture-an accepted technique, one that could even be rewarded by better grades and thus better job placements.

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I am a progressive activist. After 28 years in health care management I left in disgust at the mess that commercial health insurance companies have created. I must work to live (self-employed) and enjoy performing with several classical & jazz (more...)

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