Incubating Corporate Wrongdoers: Catch ’em Young

Luigi Zingales asks, ‘Do Business Schools Incubate Criminals?,’ in response to news that continues the depressing ticker-tape of scandal emanating from our financial and business communities, wonders how so many business executives show little ethical sensibility given that business schools offer instruction in ethics, suggests the classes offered are flawed, and eventually prescribes that:

[E]thics should become an integral part of the so- called core classes — such as accounting, corporate finance, macroeconomics and microeconomics — that tend to be taught by the most respected professors. These teachers should make their students aware of the reputational (and often legal) costs of violating ethical norms in real business settings, as well as the broader social downsides of acting solely in one’s individual best interest.

Zingales’ critique and diagnosis is largely fair. There is a larger problem though, one that is not so easily amenable to solutions such as offering instruction in ethics in core business school classes: these lessons might arrive too late. The indoctrination of students–our fellow citizens–into the idea that business is a morality-free zone begins early; it is a notion that permeates our culture quite  comprehensively, leading to a student populace that is more often than not, puzzled by the idea that ethics and morality have anything to do with the business of making money. The shading of activities then, that, while not illegal, might be immoral or at least not the most socially responsible, into actions that are clearly criminal, takes place quite smoothly in such a context.

Here is the most common response I get–in various classes I have taught over the years where the question of corporate or business ethics has come up–when attempting to mount a morally-inflected critique of a corporation’s actions–on any ground–privacy violations, monopolistic behavior for instance–that are not clearly criminal:

 I don’t get it. It’s a business; it’s supposed to make money. What do you want them to do? Go out of business?

The rough argument goes like this: A corporation’s raison d’être is to make money for its shareholders.  That, and that alone, is what its managers and employees should be concerned with. Anything else is a distraction, an abdication of the responsibility that they bear to the shareholders–folks that float the business’ boat. If the market indicates–by whatever signal it chooses–to the corporation that its practices are counterproductive to that end, then the corporation may adjust its behavior. But the idea that an action should be taken because its primary end is to meet some vaguely defined individual or social goal is deeply inimical to a business and indeed, may even be counterproductive to the ethical or social end desired. Better then, to let the market speak. Roughly.

The problem with this view, as all too many have pointed out, is that it is a remarkably impoverished portrait of the relationship of a business to society: it is acutely non-ecological. (This lack of an ecological perspective is what Zingales is trying to address in his prescription above.) Because there is so much reliance on the oracular pronouncements of The Market[tm]–‘It will let you know when something is wrong’–it makes all too easy, the utter refusal to even try to cock an ear and listen to anything else.

An average business student, by the time he arrives at business school, has already been subjected to far too many years of a discourse opposed to Zingales’ prescription. This is not to say that the idea is wrong-headed; it is just that–to fool around with clichés for a bit–the horse has bolted, the bird has flown the coop.

12 comments on “Incubating Corporate Wrongdoers: Catch ’em Young

  1. Jason Zevin says:

    Nice! I just finished reading “Debt,” in which David Graeber notes the roots of this worldview in periods of conquest and colonization. If you haven’t seen it, the first chapter (with beautiful illustrations) is here:

  2. Samir Chopra says:


    Thanks for the comment and the link. I still have not read ‘Debt’ – perhaps reading what you’ve sent me will get me off my arse.

  3. JR says:

    Interesting post. I did read the article early this morning, it’s making a splash. I fundamentally disagree with some of the premise of this, but I do understand that perspective.

    If I had no actual business experience, I think that I might have precisely the same feelings, so it’s entirely reasonable, in my opinion. Having said that, much of my experience does inform me to believe that there is a lack of understanding in some cases. (obviously not unusual.)

    Let’s look at your last paragraph. Have you gone to business school? I’m just trying to figure out how you are under the impression that business students take ethics courses way too late and that they are already miscreants or potential miscreants. What do you base that on? your years in business school? Is there any reputable data to support this claim, or is it off the cuff? I want to a business college, and have double graduate degrees in finance and economics, but took business ethics all along. (High school classes really aren’t business classes, and I did go to Jesuit school, so it was more morality in general that we addressed.)

    Herein lies the issue to me. It has nothing to do with business. Some people are not good people. This is in every walk of life. Yes, in business, more malfeasance comes to light when the markets turn sour, no surprise. (You don’t know who is swimming naked until the tide goes out.)

    In terms of the free market working it out, I don’t think that we’ve had a free market in decades. This particular runup was largely pushed by Fed Policy. (You should really listen to Charles Calomiris on There was so much money in the system that it chased bad assets, you have bubble, malinvestment, crash. This was largely fed policy. Lest you think that this is something new, I’d recommend “Manias, Panics, and Crashes,” by Charles Kindleberger. Examples abound, to the 1700s.

    I think of myself. I have been transacting in financial markets for about 20 years. There is nothing that is more important to me than my word, and my reputation. In fact, those are the assets most important to success in my business, but that is not the only reason that I value them. Almost everyone that I have ever worked with feels the same way. I daresay, the vast majority of business people are very good, forthright, honest people. To believe otherwise just shows that one doesn’t know these people very well.

    It begins at home. I would caution anyone against counting on a class or any group of classes, to teach people to be ethical or moral. That’s not to say that it’s not important, but rather, it’s so important that it should not be left to school alone. It begins at home, practically from birth! I am the way that I am because of how I was raised, not because of my business ethics class. (which were common sense to me.)

    In terms of businesses and their association with society, in a free market, a truly free market, I think that it does work. How many people that don’t like banks have zero credit card balances? have no mortgage? People do not have to become indebted if they don’t want to, that is a choice. (I have had zero debt for at least a decade, after I paid off my student loans.)

    You may not like this system, but you ought to be able to propose a better, more practical one, that has some chance of being implemented, and it’s highly unlikely.

    The owners of a public company are shareholders. (Think about your pension fund. You are an owner. The fund managers of your money receive proxy statements, and are able to vote. ) The employees of a company work for the owners. The owners want return on equity. It’s always been about return on equity. It’s all about the numbers, it always has been.

    There shouldn’t be conflict between a return on equity and morality. A good person should not be unethical or immoral under any circumstances. These are non-negotiables. There are bad people out there who do bad things, of every stripe, in every field.

    In the academic world, it’s plagiarism, etc. Think of the falsifying of data for global warming. I happen to think global warming is a legitimate issue. Those scientist were unethical, and it set the issue back. Hit with friendly fire. That’s a free market. Hopefully next time they won’t do it. Does that mean that we are incubating criminal scientists? I think not.

    I don’t see anybody writing about the problems in academia that led these people to do that. I would hope that I don’t see it. If someone steals, I wouldn’t wonder where their 3rd grade teacher went wrong, I would wonder what happened at home.

    Luigi Gonzales is slightly ad hominem (as usual) in his attack on business people. I for one, feel that he hasn’t met people like me.

    I have been sickened by the news of teachers having inappropriate relationships with their students, it’s been all over the news lately. I certainly would never propose that it’s something that we need to handle more, in classes(!) at an earlier stage, because by college, we are incubating a bunch of future perverts.

    That would be ridiculous and offensive to a man who takes his job seriously, like yourself, would it not? I would never tar you with that same brush. Can you imagine if people started to say that all teachers are incubating perverts? It’s outrageous, to say the least. How is this post and its referenced article any different?

    We all have people in our industries that shame us, but it doesn’t tell the whole story. This goes back to how I think we should seek out people of different views, to have a more complete and informed perspective. This is exactly why I read your blog, and comment. I hope that it’s ok. I’d love to hear your thoughts.

    • Samir Chopra says:


      Thanks for the comment. The point I was trying to make yesterday was quite simple actually. I’ve been teaching full-time for ten years now. (I’ve taught part-time for many more years.) In that time, I’ve noticed that too many students parrot the line I’ve quoted. So, it seems to me that somehow, the idea–one that you would find problematic too–has come about that it’s OK for businesses to do anything–even things that might affect their communities negatively–in order to make a profit. It seems to me that this has been transmitted to them by a culture that values profit over integrity. That seems to me to encourage playing fast and loose with ethical behavior, contributes to a get-rich-quick mentality (without worrying who you are stepping over) and so on. In pointing this out, I think I’m only espousing a conservative point: that the broader culture needs to work harder to emphasize the virtues of doing business in a way that is ethically sensitive, that prioritizes profit-making appropriately. In a culture where this point loses out to profit-at-any-costs, ethics classes in business school might come too late; patterns of thinking and behavior might be too ingrained by that point.

      • JR says:

        Samir, if you really are hearing that it’s anything at any cost, that is in fact disturbing. I do wonder if that is really what people are saying or mean. If it is what they are saying, I don’t think that the solution is more classes earlier, I really do think it’s a family values issue. If kids don’t learn that it’s not ok to lie cheat and steal from their parents, how will a teacher change that? in terms of cost benefit analysis, there should be certain things off the table. There is nothing more important to me than teaching my sons the importance of the value of their word. Character, integrity, reliability. There is no cost-benefit analysis. When I see people fall short of the mark on this, it’s not because they aren’t learning it in school. I think that too many people leave the job to teachers. Even the best teacher only gets an hour a day, if that. It won’t make up the shortfall.

        This is more of a societal issue to me, than a business class one. I can tell you that I would say free markets work these things out (as I say, TRUE free markets, something that we haven’t had) but the underlying assumption there is that I would NEVER sully my good name by bad business dealings.

        I really think that this trancends business. How do I handle myself with a trainer at the gym, how do I keep my word, people that know me, what do they think of my word? what is my reputation, it goes way beyond business to me.

        I agree with you. Bad actors have certainly made my life more difficult. I do not defend them. I can’t. You’ve got to purge the bad to protect the good.

      • Samir Chopra says:


        Sorry for the late reply. Indeed, that is what bothers me. Where does the ‘get-rich-at-any-cost’ idea come from? And yes, classes are not going to help as much as a cultural change will. We are in agreement here. My worry is that when kids see business leaders be dishonest and get off scot-free, they get the wrong kinds of lessons too.

  4. Cody says:

    JR, let’s not kid ourselves, it’s an empirical truth that all teachers are incubating perverts, but as for climatologists falsifying global warming data, that one’s been debunked. Boom.

    Samir, I thought back to your post this evening as I read on in Covey’s “The 7 Habits of Highly Effective People” (roll your eyes, everyone does). If you’re unfamiliar, it’s one of a series of successful pop-psych/business how-to primers (Dale Carnegie’s “How to Win Friends” being the MVP in this league) that preaches the gospel that ethical behavior in business actually boosts profits, typically through increased customer and worker loyalty, while the cynical pursuit of short-term gains ostensibly leads to the opposite. These books have sold millions touting a very un-Randian message, but I wonder if they (or their academic counterparts) are taken seriously at all by modern business schools. It seems like once you reach a certain level of influence, it’s much easier to rebrand oneself after you’re busted than to actually behave ethically (just ask the CEO of “Academi”). I can’t help but feel like these books I’m reading are just “chicken soup for the soul” for wannabe over-achievers.

    • Samir Chopra says:


      Thanks for the comment – good to see you here.

      No eye-roll here. I’ve heard of the book but have never read it. (A friend of mine, who worked as a consultant for PW, had a shelf-full of books like that). I think business schools do pay lip-service to the message but I suspect it cannot compete with the broader signals emanating from elsewhere. Like you, I’m inclined to think business captains prefer the slogan ‘better to rebrand post-facto rather than behave ethically at the cost of diminished profits and salaries.’

  5. JR says:

    Cody, that’s a disreputable source on the subject, to say the least. I am not poo-pooing global warming, it was just an example. I read 7 habits, and a lot of the others. They didn’t do much for me, but I did read them. As I said before, it begins at home, in the family. Anyone who thinks otherwise is lending far too much credence to “someone else,” and abdicating their personal responsibility to raising children.

    ” It seems like once you reach a certain level of influence, it’s much easier to rebrand oneself after you’re busted than to actually behave ethically”

    What is this based on? Just your gut? a whim? a couple of bad apples? How do you draw this conclusion? It’s so unfair to so many hardworking, successful people. and “wannabe over-achievers” LOL. How insulting. You mean people who pursue the American dream? Who try to succeed? I’m a wanna be over-achiever, and I sure hope that my children are. You should hope that they are too. SOMEONE has to foot the bill.

    • Cody says:

      JR – by “wannabe overachievers,” I meant myself, and other readers of the self-improvement genre; it was attempt at being self-deprecating. But yes, I feel that these books espouse a vision of corporate America that seems to be very at odds with present realities. I base that on, um, Mitt Romney.

      Out of curiosity, which is the disreputable source? The NYT blog, or the Independent Climate Change Email Review from which it quotes? Would you suggest a more reliable source? My understanding is that “Climategate” was the result of gross, bad-faith manipulations of fact by climate deniers like Rush Limbaugh, designed to instill public doubt about the existence of manmade climate change. Sorry man, I wasn’t trying to troll ya, but here we are.

  6. JR says:

    Hey Cody, sorry if I misunderstood. I would say that the nytimes is not reputable on the subject, but maybe you are right, maybe it has been debunked. I am by no means saying that climate change doesn’t exist, it was simply an example. I’d be happy to swap it out for the “journolist” scandal, where liberal writers conspired to call people against obamacare as racist. I don’t think that one’s been debunked. That’s another great example. It doesn’t make all jounralists bad.

    Rush Limbaugh is a terrible human being. end of discussion.

    “I base that on, um, Mitt Romney” what does that exactly mean? Is this the whole private equity is bad thing? job killing? If so, I highly recommend that you read Kessler in yesterday’s WSJ op ed. If that is your angle, and I am not sure that it is, it simply is bereft of any economic reality.

    I’m frankly more of a Ron Paul guy, live and let live, teach a man to fish, all of that good stuff. But I’ll tell you this. I’d vote for a stuffed animal before I vote for Barack Obama again. That was one of the biggest mistakes that I have ever made in my life. Romney is my least bad option. If it was between Obama and a ventriloquist dummy, I’d vote for the ventriloquist dummy.

    In terms of present realities being at odds with what you are reading, I won’t dispute that, you’re right. That’s what happens when bubbles burst. That Kindleberger book that I recommended is really good, and this is one of the best synopses that I have ever heard. Fed policy, the setting of interest rates is really key.

    I don’t think we disagree as much as maybe I thought. But I really disagree that Romney in some way was a bad or immoral business man. I simply don’t see it. at all. Not even a little bit. He might not be a great candidate, but I’ll take the Staples story over Solyndra all day long.

  7. […] finance, get to work, make ‘good money’–or rather, as much as money as you can, your money-making endeavors unrestricted by any kind of moral impulse. Disdain art and the humanities and all else as not being the real world, as useless and […]

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