MBA Code of Ethics

Before yesterday's graduation, half of the Harvard MBA class signed an oath, promising "to create value responsibly and ethically." I've copied the short version of the pledge the students made. I'm especially interested in the effort to balance Milton Friedman's teaching that the manager's role is to (a) maximize profits while (b) obeying the law with (c) social justice/communitarian values, and I put comments of my own into the oath in bold capitals:

As a manager, my purpose is to serve the greater good by bringing people and resources together to create value that no single individual can build alone. Therefore I will seek a course that enhances the value my enterprise can create for society over the long term. [FRIEDMANITES BELIEVE THAT A SYSTEM OF PROFIT-MAXIMIZING ENTERPRISES WILL PRODUCE MAXIMUM BENEFIT FOR SOCIETY. THE OATH REFLECTS A GROWING LOSS OF FAITH THAT THE INVISIBLE HAND OF THE MARKET CAN BE COUNTED ON TO DO GOD'S WORK!] I recognize my decisions can have far-reaching consequences that affect the well-being of individuals inside and outside my enterprise, today and in the future. As I reconcile the interests of different constituencies, I will face difficult choices.

Therefore, I promise:

• I will act with utmost integrity and pursue my work in an ethical manner. [THIS PROMISE IS CONFUSED. SOCIOPATHS ARE TRULY INDIFFERENT TO MORAL CONSIDERATIONS, BUT IN ALL LIKELIHOOD MANY PROFIT MAXIMIZERS, INCLUDING THOSE WHO BUNDLED SUB-PRIME MORTGAGES INTO ULTIMATELY TOXIC ASSETS, CONDUCTED A REASONING PROCESS ABOUT VALUES. THEY DIDN'T INTEND TO BE UNETHICAL - BUT THEY GAVE THE WRONG VALUES TOO MUCH WEIGHT! ]

• I will safeguard the interests of my shareholders, co-workers, customers, and the society in which we operate. [THIS IS IMPORTANT. THE MBAs ARE PLEDGING TO CONSIDER SOCIAL BENEFIT, NOT SIMPLY TO PURSUE MAXIMUM PROFIT AND SIMPLY ASSUME ON FAITH THAT THE INVISIBLE HAND WILL PERFORM ALCHEMY ON PROFIT MAXIMIZATION AND TURN IT INTO SOCIAL BENEFIT!]

• I will manage my enterprise in good faith, guarding against decisions and behavior that advance my own narrow ambitions but harm the enterprise and the societies it serves.

• I will understand and uphold, both in letter and in spirit, the laws and contracts governing my own conduct and that of my enterprise. [UPHOLDING THE LETTER OF THE LAW IS COMPLIANCE. UPHOLDING ITS SPIRIT AS WELL IS ETHICS. COMPLIANCE WITHOUT ETHICS MEANS WE (a) WON'T GO TO JAIL BUT (b) WON'T GO TO HEAVEN EITHER.]

• I will take responsibility for my actions, and I will represent the performance and risks of my enterprise accurately and honestly.

• I will develop both myself and other managers under my supervision so that the profession continues to grow and contribute to the well-being of society.

• I will strive to create sustainable economic, social, and environmental prosperity worldwide.

• I will be accountable to my peers and they will be accountable to me for living by this oath.

This oath I make freely, and upon my honor.

The Preamble to the AMA Principles of Medical Ethics also grapples with the challenge of helping a profession recognize more than one value. It is clear that a physician's primary commitment is to the patient. But in medicine failure to give adequate weight to population health - as through universal insurance, wide access to primary care, and restraint in overall spending - has led to societal harms in the same way that Friedman's faith in profit maximization has. The Preamble tries to give at least some encouragement to considering a wider range of values:

The medical profession has long subscribed to a body of ethical statements developed primarily for the benefit of the patient. As a member of this profession, a physician must recognize responsibility to patients first and foremost, as well as to society, to other health professionals, and to self.

Cynics have scoffed at the MBA code, but I think they're wrong. Clearly the code has no teeth. Medical societies have ethics committees that can sanction erring physicians, and state medical boards respond to complaints about moral lapses. The management profession has no analogue.

But a movement in which a large number of young entrants into the profession look at their elders and conclude that the emperor has no clothes makes a difference. It's high time that we in the U.S. challenge our faith that the market's invisible hand allows each individual and each enterprise to pursue its own narrow interests without considering other societal values except for the letter of the laws we've passed.

(See today's Economist for an interesting article about the oath.)