 In September 2003,
Value Based Management.net
(www.valuebasedmanagement.net)
conducted an anonymous visitors survey
on Business Ethics.
Participants were asked who according to them is primarily to blame for the
accounting crisis.
- 57%
blamed primarily Management
- 19%
blamed primarily Shareholders
- 12%
blamed primarily Accountants
- 5%
blamed primarily Analysts
-
Another 5% blamed primarily the Media
- And
finally 2% blamed primarily the Government
A
little later we heard about the article below.
Business Schools share the blame for
Enronitis
(Financial Times, July
18th, 2003)
Sumantra Ghoshal, professor of strategy and
international management at London Business School, writes that despite the
post-Enron rush to teach business
ethics and
corporate social
responsibility to
MBA students, business schools "need to own up to their own role in creating
Enronitis."
Ghoshal notes that
agency theory, created by Michael Jensen at
Harvard, taught MBA students that managers could not be trusted to maximize
shareholder value and therefore managers' and shareholders' interests had to
be aligned through incentives such as stock options.
At Berkeley and
Stanford, students were taught
transaction cost economics, developed by Oliver Williamson,
which argues that the only reason companies exist is because managers can
exercise authority to ensure all employees do what they are told. As a
result, managers must ensure that staff are tightly monitored and controlled
while creating individual performance incentives.
Michael Porter
has argued that to
be profitable, a company must actively compete not only with its competitors
but also with its suppliers, customers, regulators and employees, striving
to restrict or distort competition, "bad though this may be for society."
Ghoshal concludes that "by
incorporating negative and highly pessimistic assumptions about people and
institutions, pseudo-scientific theories of management have done much to
reinforce, if not create, pathological behavior on the part of managers and
companies. It is time the academics who propose these theories and the
business school and universities that employ them acknowledged the
consequences."
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