The world’s great business schools are also feeling the effects of the crisis. Two-thirds of the most prestigious learning centers in the United States, Europe and the rest of the world have seen a drop in MBA applicants in 2011, according to the Graduate Management Admission Council, which administers school admission tests.
The reasons for this decline have a lot to do with the economic crisis itself, which reduces demand for all types of products and services; but discredit also plays a role. Part of society is accusing these elite centers of training unscrupulous executives who have driven the world to its greatest financial crisis in history.
Some of the most prestigious business schools, especially those in the United States, have responded to this climate of public opinion by rolling a few heads: in the last few months, Harvard, Chicago Booth and Stanford have changed deans. But not even this has made up for the blot on their reputation, traditionally one of their greatest assets.
The disrepute has also made a dent in business school accounts, especially at the beginning of the crisis when only a quarter enjoyed rising revenues, according to Michael Malefakis, a member of the board of Unicon (The International University Consortium for Executive Education), which brings together around 100 of these elite centers.
Some schools have already admitted to their share of responsibility in the global financial crisis. Others have made no such concessions, at least not officially. But nearly all of them have embarked on a bout of soul-searching; in their bid to reinvent themselves, they are reaching out for traditional values that had been relegated to the back burner in recent years, such as philosophy and ethics.
This new trend is viewed skeptically by some observers, who suspect that it is not so much a sincere response to the crisis as a mere facelift. One of these skeptics is Florence Noiville, a French journalist, former multinational executive and graduate of the prestigious HEC Paris school. In her book I went to business school and I’m sorry, she says that these centers need to change their image.
“The problem is that they’re completely dependent on the rankings — that is, on the companies that are going to hire their graduate students and who often finance them. In order to obtain financing, they have to rank toward the top of the charts. And to do that, it is necessary for the average salaries at graduation to be as high as possible, which means that students have to be placed in finance jobs. It’s a vicious circle. We would need to create a different classification for schools based on criteria of knowledge and general interest,” says Noiville.
But François Collin, executive director of the Global Alliance in Management Education, disagrees. He says that “business schools have begun a fundamental review of their curriculum and mission and are currently undergoing one of the most important changes in their entire history.”
Collin, who heads a group of around 30 international business schools in partnership with as many corporations, takes the view that “the 2008 crisis was the catalyst for a change in education based on a certain amount of criticism and self-awareness.”
The three essential changes that Collin sees at executive education centers are: less of a focus on quantitative techniques, a greater social role for the corporation, and questioning whether a firm’s sole mission is to create value for shareholders.
Every business school worthy of that name has introduced changes in its curriculum in response to the crisis. Some simply reinforced their existing courses in business ethics, leadership and corporate social responsibility (as in the case of Columbia, MIT Sloan Business School, Wharton and Tuck in the US, IMD in Switzerland, Essec in France or the London Business School). Others decided to go further and invest in corporate social responsibility, like Spain’s IE Business School or Esade, which created the foundations Financieros sin Fronteras (Financiers Without Frontiers) and Instituto de Innovación Social (Institute for Social Innovation), respectively. And then there are schools that encourage oaths of honor or deontology codes in the classroom, in the case of Harvard Business School or Esade.
“The conversations at business schools have changed,” says Ángel Cabrera, president of Thunderbird Business School in Arizona. “The classic vision that markets are the solution to everything and that we have to train people to earn money is giving way to a more humanistic view of the corporation that, until this crisis hit, was only being defended by minority voices in the faculty.”
Since 2004, students at Thunderbird take its Hippocratic oath. A few months ago, the center also created a foundation in partnership with the dean of Harvard Business School (“one of the most critical and influential voices in the change that business schools are undergoing”) and the Aspen Institute, with support from the United Nations and the Davos Forum; this foundation will seek to establish the oath as a deontology code for business leaders at corporations the world over.
“We have to abandon the purely economic vision of the corporation and lean towards a more socially committed position in which the mission is to produce benefits for society as well as for investors. And accounting should not be there simply for makeup purposes,” holds Cabrera.
According to the only Spaniard to lead a US business school, the identity crisis is less deep at European centers than at American ones. This is because “in Europe, schools have always had a more social vision of the company. And in Spain, IESE and Esade have brought a more humanistic approach to business organizations, while IE Business School has been a leader in many areas.”
Some US schools, however, have been working for years on corporate ethics and values. The Tuck School of Business at Dartmouth, New Hampshire, actually brings in white-collar criminals (as the school itself describes them) as guest speakers. The idea is for students to learn what pitfalls to avoid from executives who have done jail time. The lecturers have included celebrity fraudsters such as Fred Shapiro, Don Snede, David Logan and Mark Morze.
Álvaro Martínez-Echevarría, director of Instituto de Estudios Bursátiles (Institute for Stock Exchange Studies) supports the idea of professional deontology codes and feels that besides academic criteria, school rankings should also take into account ethical concerns and initiatives that benefit society. He is also driving the creation of an International Business School Deontology Council. “Business schools need to encourage codes of conduct among future managers so that the irrationality of the markets and overblown salaries do not lead us to another crisis like the current one,” he says.
“From the viewpoint of the welfare economy, it has been demonstrated that the theory of efficient markets destroys corporate value in the medium and long run,” says Antón Costas, a professor of economic policy at Barcelona University.
“The paradigm of indebtedness and short-term thinking as a model no longer works. We need to turn to more subjective principles such as prudence, transparency, good governance... We are going back to the recipes of the 1990s,” says Arturo de las Heras, director general of Centro de Estudios Financieros.
But for Martínez-Echevarría and Cabrera, the truly transformational change that is necessary at executive training centers has to do with their mission and values. “They’ve responded to the student application crisis by making easy changes, like introducing new courses and classes, or changing subjects around… The hard part is changing mentalities. And harder still is incorporating that into the companies,” says the head of Thunderbird. “For years we’ve been training narrow-minded executives. Change will take decades.”
Costas is even more pessimistic. “In the end, those who caused the financial damage are those who came out to fix it. And I don't think they can,” he says. “There is no real, effective questioning of the banking sector that would enable politicians to take forceful action.”