Roger Lowenstein, Investment Banker, Mansplains Elizabeth Warren

Roger Lowenstein, a director of the Sequoia Fund–the flagship fund of Ruane, Cuniff & Goldfarb–wants to explain how regulation works to Elizabeth Warren, who he describes as “the nation’s unelected regulatory czar” and someone who–dear, oh dear–paints “bankers with as broad a brush as Donald J. Trump uses to demean Muslims.” He does so in an Op-Ed that is destined to be used as a prime example of mansplaining at its worst. Continue reading

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.