Ethics Pledges and Buy Local: Efforts to Revive the Economy

Being immersed in the financial turmoil with daily news that failed to show any signs of comfort, I wish to extract from the community, efforts that would bring hope and encouragement. In this entry, I examined a post entitled “Kudos to Dove for its Campaign to Real Beauty” by Lauren Bloom, founder and CEO of Elegant Solutions Consulting. Bloom drew attention to how Dove shed beauty stereotypes through its campaign. In response, I discussed on “ethics pledges”, a growing phenomenon in the United States, which added onto Bloom’s discussion of Dove’s ethical business practices. Next, I responded to a post entitled “Ethics of Supporting Your Local Economy” by Chris MacDonald, Ph.D., professor at Saint Mary’s University in Halifax. MacDonald criticized on the public’s “buying local” actions in response to the economic crisis with sound arguments, which I did not fully agree with. My responses to the posts and links to the two blogs can be found below.

Kudos to Dove for its Campaign to Real Beauty
Comment

With no doubt, I am as sick of the whole financial crisis as you are. News on the minimal progress (or not) of acts to help revive the economy is getting on my nerves and I am glad that you brought up the actions of a company that walked the ethical path. Dove’s self-esteem fund, Campaign for Real Beauty (see left), definitely injected a positive note into the business realm. I agree perfectly to your description of a particular beauty ideal, “a swizzle stick with foot-long lashes, artificially bronzed skin, a perpetually windblown mop of hair, kamikaze nails and teeth that look like well-glazed sugar cubes. Even professional models don’t really look ‘like that’ until they’ve been worked over for hours by a small army of stylists, then digitally edited, airbrushed and distorted into ‘perfection’.” Dove made a bold move to free ladies out of beauty stereotypes and promoted the idea to embrace all definitions of beauty.

In fact, adding on to your encouraging discussion as well as relating to a recent post on my blog about the inattention to ethics and social responsibility in many MBA programs, I would like to bring up evidence on the escalating awareness society has on corporate social responsibility issues. A growing phenomenon known as the “ethics pledge” had drawn society’s notice on the subject. The Graduation Pledge of Social and Environmental Responsibility originally from Bentley University, Massachusetts, advocates the idea “to explore and take into account the social and environmental consequences of any job one consider and will try to improve these aspects of any organizations for which one works.” The organization provides materials and resources to teach students how to set up on-campus campaigns and helps students navigate tough choices that might come across during their careers, while keeping in mind commitments to ethics and social responsibility. More than a hundred schools and colleges are using the pledge.

Another pledge which is catered to business leaders, the Business Ethics Pledge, founded by Shel Horowitz, begins with “I pledge allegiance, in my heart and soul, to the concepts of honesty, integrity, and quality in business.” It allows leaders to sign electronically and advertise their businesses online by making the ethical vow. The pledge was established based on the belief that “businesses are more likely to succeed when they base themselves in ethics—in honesty, integrity and quality.” It is about changing the world and creating a climate where businesses are expected to behave ethically, and the fact that executives who try to drag their companies into the unethical swamplands will find that nobody is willing to carry out their orders. Of course, these ethics pledges are not and will not be the cure to economic turmoil. However, by encouraging pledge of allegiance to change the culture of doing business may not be such a bad idea. Just like Dove’s Campaign for Real Beauty, it has to start somewhere.

Ethics of Supporting Your Local Economy
Comment

Your post brought about sound arguments against encouraging the public to support local small businesses instead of contributing to national corporations’ economic activities, with response to an article in the Wall Street Journal: How the Locals are Trying to Save Small Businesses. However, I am hesitant to concur in your reasoning. First, you assumed the idea of supporting local businesses to be people’s notion that “economic benefit to own community is more important than economic benefit to other people’s communities,” and that “stores and factories and jobs in your own community might well be more important to you than stores and factories and jobs in other people’s communities.” It seemed unfair to presume that was the attitude behind the public’s campaign of “buying local” (see right). Helping local small businesses contributes to the national budget just as it would if the money goes to national corporations. In addition, I believe the campaign could even boost national spending in the sense that it arouses the public’s emotional connection with its own community, hence more willing to spend in support of local businesses.

Second, you suggested if every community engages in “buying local”, there will be “little change in net purchasing, but there could be serious reductions in efficiency and hence net decrease in total utility.” Yet in fact, I would say the campaign serves as a means to encourage and promote purchasing from local merchants, not by any means forcing people to do so. Using the example in your post, yes, the campaign suggested people in Town A gets good shirts and lousy pants, while people in Town B gets good pants and lousy shirts. However, it did not impose a rule saying people in Town A cannot buy pants from Town B and vice versa. If there is a need, people are free to spend their money however they desire. I believe the campaign acts as a medium to draw people’s awareness to locally produced products and encourages merchants to learn from each other to increase their products’ competitiveness in the market. For the sake of illustration, going along with your example, the campaign allows people in Town A to recognize the existence of businesses that produce pants locally as well as gave an opportunity for those merchants to learn from Town B’s quality pants production. All in all, I definitely understand your concerns, however, I do see a lot of positives that come along with “buying local”.

MBA Programs: Source of Financial Crisis?

With all the heated discussion of greedy bankers and guilty fraudsters, some people have been looking to business schools as a potential culprit of the current financial mess. A recent article in the New York Times, entitled "Is It Time to Retrain B-Schools?", published a stinging criticism which highlighted the failure of schools, in particular MBA programs, to focus their students' skills and attention on nothing more than short term shareholder value. Not surprisingly, the publication aroused a lot of debates, not only from the business school community, but also among the broader readership of the paper. Most comments agreed the financial environment we are emerged in now is traceable to MBA programs’ neglecting the topic of ethics in their curriculum, drawing from the fact that the CEOs of corporations who brought their companies down in the recent crisis all attained an MBA degree from a well-known institution. While I do acknowledge the fact that the MBA programs suffer from “an over-emphasis on the rigor and an under-emphasis on relevance,” according to Warren Bennis, a professor of management at the University of Southern California, I believe the inappropriate decisions those CEOs made should primarily be accredited to their own personal judgment.

The arguments towards why MBA programs are responsible for the current financial mess all began by short-listing a bunch of company CEOs who owned a MBA degree, yet failed to save their companies with their expertise during this critical environment. Then the line of reasoning continued by criticizing the education encouraged a scientific approach to business, assuming that the business profession could be nailed down in a textbook. By preaching a set series of formulas, schools encouraged students to believe that running a company could be mastered by anyone. Yet, in reality, management is a skill that is acquired through experience, judgment and flair. In addition, the intellectual tools that led us into the financial meltdown were largely invented within academia. Ken Starkey, a management professor at Britain's Nottingham University School of Management, pointed out that the economic models developed by business-school faculty were crucial to the massive trading of complex financial products that now are crippling banks. “They've been absolutely at the forefront of delivering a new financial system which was relatively untested, a financial system which has taken us into uncharted waters,” he said. The business schools neglected to address the issue of risk management. By doing so, they encouraged a whole generation of young men and women to go into investment banking armed with the belief that either they had mastered risk or worse yet, not acknowledging the factor at all. The truth, of course, turned out to be hugely different.

The reasoning continued by stating the schools created a managerial elite that acted like a caste apart. One reason the bonus culture ran out of control, with news of top executives running away with large sums of money when their companies are at a dire state, was that many of the people involved were engaged in a mindset: they thought guaranteed bonuses, private jets and multimillion-dollar compensations were normal. This thought-process began with assumptions that an MBA degree would guarantee a fabulous career and financial return. A survey done by CNNMoney.com in 2008 illustrated where MBA students expect themselves to go into after graduation, all of which are multi-billion corporations. Another survey compiled in the same year investigated on the expected salary of MBA students upon graduation. There were two interesting aspects in the results: one, there was an increase in salary expectation from 2007 to 2008 (see right); second, students expected their salary to double five years into their career.

While I agree to a great extent the criticisms in the New York Times article, I believe it is unfair to assign all the blame to business schools and their MBA programs. For all it matters, an MBA degree is simply another qualification, a stepping-stone for one to land a good, well-paid career on Wall Street. "People don't behave like jerks just because they spend two years in business school," said Matthew Stewart in his article. True, companies who did not survive in this crisis all seemed to have a CEO who graduated from a renowned MBA program. However, correlation does not necessarily mean causation. Go through the records, and we would probably find that most of them also did finger painting in kindergarten. My point here is: it is unfair to point the responsibility solely to MBA programs and condemn their value. In fact, I would say the general MBA curriculum has made the necessary efforts to incorporate the issue of ethics. All in all, there are limitations to courses in an MBA program consisting simply of professors lecturing students in a classroom setting. While professors try to bring in real life case studies into their class discussion, there are infinite amount of factors that could not be predetermined in a situation which could perhaps drastically affect one’s decision making. As Dwight Crane, Professor of Business Administration, Harvard Business School expressed in an interview, “Students need to gain an understanding of the real-world implications of their own professional actions, something that can seem highly abstract.” There is knowledge that could only be attained through real-life in-person experience. A random example would be a CEO’s decision of whether or not to fire an unproductive manager who has, however, serviced the company for a long period of time. Schools would definitely teach students firing the manager is the right thing to do. Yet, external factors were not considered in the discussion. Due to the fact that he has been with the company for quite some time, the manager’s dismissal would cause discontent among workers and possibly even a labor strike. In addition, firing the manager could hold up the company’s operations; send a sense of restlessness amongst employees; encourage buyers to switch out because of management instability, and so on. As a CEO, one has to be attentive of how his decision affects the different departments and operations of the company. Hence, the CEO has no choice, in a way, than to retain the unproductive manager.

I believe with regards to ethics, business schools are in the role of promoting awareness on the issue, and not guarantee every MBA student who graduates is equipped with the ability and desire to make the perfect choices as a leader in a corporation. As Alan Morrison, a finance professor at Oxford University’s Said Business School said, “I could teach you how to use a gun for good or for ill, and I can teach you how to create a financial product. How you use that skill is down to you.” Business schools for sure drew those CEOs’ attention to the issue of ethics and advocated the importance of upholding it when making business decisions, yet the desire to adhere to that still lies within the CEOs themselves. "We cannot take credit for their success one day and then the next day pretend we are devoid of responsibility when we witness such widespread failure of leadership."suggested Dr. Angel Cabrera, president of Thunderbird School of Global Management , As much as we criticize the CEOs' responsibility for the financial turmoil, we should be fair in recognizing their contributions to corporations, and efforts of trying to prevent the situation from happening. Instead of putting the blame on business schools, CEOs should take the initiative to evaluate themselves and revisit the values that came with the MBA degrees attained.