The MBA Oath Debate
After months of glowing press accounts, the MBA Oath, a voluntary HBS student-crafted pledge that asks graduating MBAs to commit to the creation of value “responsibly and ethically,” has hit a media rough patch. Critics now see little value and much potential harm in the well-meaning oath.
In a recent opinion piece in the Financial Times, HBS student Andrew Sridhar (MBA ’10) cited what he calls “troubling” aspects of the oath. For example, he doesn’t buy the professionalization analogy with oaths in law, medicine, or the clergy. “Your liberty, your life, or your soul may be at risk in (these) cases, but rarely are the stakes so dire in business.”
Sridhar also contends that the oath’s commitment to social well-being is “uncapitalist.” “The oath is a reaction to the public furor over the financial crisis, but legitimizing antibusiness rhetoric will never improve business’s stature. … A few words on a piece of paper will not stop unethical behavior, where steep fines and prison have failed to do so.”
Writing in BusinessWeek.com’s online debate over the oath, INSEAD finance professor Theo Vermaelen warned that signing it was not a good idea. “First, the oath invites violation of fiduciary responsibilities. In many countries, board members and, as a consequence, managers have a fiduciary duty to maximize the wealth of the shareholders. None of them would accept that managers promote ‘social and environmental prosperity worldwide’ as the HBS oath does.”
“Second, the oath is a misplaced response to the financial crisis. It assumes that the financial crisis was caused by unethical MBAs gambling with other people’s money,” a point Vermaelen contests.
He concludes: “Rather than focusing on pledges, businesses should make sure that managers comply with their fiduciary and ethical responsibility to maximize the wealth of the people who pay their salaries, i.e., the shareholders.”
At HBS, roughly half of last spring’s graduating MBAs signed the oath, and hundreds more at dozens of business schools around the globe also have taken the pledge. With another spring graduation season quickly approaching, it will be interesting to see whether students’ embrace of oath remains high, or whether, as Sridhar contends, “Momentum has stalled.”
Your Comments
It all (MBA Oath) looks good except that Oath 2 needs one essential qualifier as below - FYI
I will safeguard the ethical interests of my shareholders, co-workers, customers and the society in which we operate.
Chandra.
I am appalled that promoting "social and environmental prosperity worldwide" is considered "uncapitalist". It is this type of short-term, self-centered thinking that got us into trouble in the first place. Nor do I believe the Oath is reactionary but a proactive effort to inject some conscience into our business leaders. My read is that shareholders are not ignored in the Oath, in fact, their interests are specifically safeguarded...just within an ethical and sustainable context.
Jane touches on what this debate is really about. I find the logic of those against the oath funny in that they doubt any impact of the oath, while saying it could invite violation of fiduciary responsibilities and then proposing their own oath. Are we more worried about managers acting to protect social value OVER shareholder value or managers unethically maximizing profit. I would say the later, independent of our current situation. I feel MBAs, even those from Harvard, likely already find it difficult to raise their voices on the negative social impact of their employer's business practices, to say nothing of actually implementing any mitigation plans. Any oath has limited real impact, so let these MBAs remember their decisions can have social consequences. Maybe a Board Oath would be more fitting.