Essay on Business Ethics, Engineers, and MBAs

MBAs and Ethics

He who holds his State by means of mercenary troops can never be solidly or securely seated. For such troops are disunited, ambitious, insubordinate, treacherous, insolent among friends, cowardly before foes, and without fear of God or faith with man.
Niccolo Machiavelli, The Prince, (1515)

During the 1980s, deindustrialization resulted in the number of engineers graduating from U.S. colleges falling, while graduates from business schools increased.

In 1950, American colleges produced fifty-seven engineers for every MBA; by 2000, the situation had reversed: there were almost two MBAs graduating for every engineer.

Because of the shortage of American engineers, about one-third of the staff of high-tech industries in Silicon Valley were recruited from Asia, working under special visas.

Between 1970 and 2001, about 2.1 million MBAs graduated from business schools. By comparing the number of public corporations with the quantity of MBAs produced, we see that the chances of a new MBA graduate becoming CEO of a major corporation were less than one in three hundred.

If big corporations continue to be guided by 'asset-lite' concepts that result in stock buybacks and staff reductions, while MBA tuitions rise faster than inflation, there may be less and less employers willing to pay salaries high enough to amortize the expense of a business school degree.

By 2004, over-forty MBAs dismissed from good executive jobs by down-sizing found comparable positions hard to find.

By 2003, the high cost of an American MBA degree induced Wall Street firms to contract security analysts in India.

The MBA credential may become a glut on the market, forcing young people to develop alternate career strategies, perhaps even considering self-employment.

Along with the rise in the number of MBAs, there has been a parallel expansion in mercenary motives in the young.

Recruiting brochures of business schools play to avarice and promote the 'net present value' of a MBA, suggesting that high tuition is an 'investment'. Some graduate business schools (such as Wharton) dispense even with an under-graduate degree for admission, as long as a candidate passes a standard test and can pay the tuition.

MBAs vs. Engineers
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Enron, WorldCom and other scandals of the Great Bubble raise legitimate questions about the ethics of American professional managers and, by implication, the usefulness of an MBA degree as an indicator of moral qualifications of corporate leaders.

As the cost of this credential rises faster than the number of job openings, and as the merit of a business degree begins to be questioned, the boom in MBA credentials may come to an end.

This, perhaps, may be good for the capital market.

Credentials Replace Commonsense

Since the U.S. Supreme Court prohibited the use of intelligence test in the employment process, big company human resource departments have had to rely on proxies.

Business colleges are not prohibited from selecting applicants on the basis of intelligence, widely using the GMAT as a gatekeeper.

The more famous business schools, like Harvard and Stanford, can be extremely selective in admissions.

This means that the innate intellectual capacity of their students and the fame of their institutions may actually be of greater value than what is taught in these schools.

Old-Fashioned Liberal Education

There has been a change in American educational philosophy since the days of agricultural and industrial capitalism. In earlier generations, college professors spoke of a 'liberal education' to connote familiarity with the Great Books and an understanding of virtue and the Sermon on the Mount.

Charles W. Elliot, a president of Harvard from that period, once said that, 'All the books needed for a real education could be set on a shelf five feet long,' a remark that led to the publication of the Harvard Classics, a fifty volume set of works from the literature of the world.

Robert Maynard Hutchins, who was president and chancellor of the University of Chicago from 1929 to 1951, wrote that,

'Until recently, the West has regarded it as self-evident that the road to education lay through great books. No man was educated unless he was acquainted with the masterpieces of his tradition.

There never was very much doubt in anybody's mind about which the masterpieces were.

They were the books that had endured and that the common voice of mankind called the finest creations, in writing, of the Western mind.'

('Great Books of the Western World', Robert Maynard Hutchins, Editor in Chief, Volume I, preface., William Benton, Publisher, Encyclopaedia Britannica, Inc., 1952.)

Hutchins selected the fifty-four volume 'Great Books of the Western World', including works from Homer, Aeschylus, and Sophocles, to Saint Augustine, Thomas Aquinas, Adam Smith, Karl Marx, William James, and Freud.

A Credential For The Uneducated

Chancellor Hutchins, a traditional scholar with ideas that may seem outmoded to today's MBAs, decried the 'service-station conception of a university' that pandered to 'passing whims of the public' and that would be so market-oriented that when the public was 'awed by the development of big business' would create 'business schools full of the same reverence.'

Nevertheless, a young person could graduate from Harvard Business School in the year 2000 without any consequential familiarity with history, literature, language, or the works of Montaigne or Cervantes.

In 2004, a Harvard MBA degree could be earned without ever having cracked a "Great Book".

In 2004, it was possible to graduate with a Harvard MBA without ever having cracked a "Great Book", while being almost totally ignorant of history, philosophy, and ethics.

Familiarity with the teachings of the Bible, the Koran, or even the Bhagavad Gita are completely unnecessary for an MBA degree.

The only thing that we can be sure about graduates of leading business schools is that they are extremely smart, exceedingly mercenary, and familiar with some of the teachings of recent Nobel Laureates in Economics.

From the point of view of Charles W. Elliot or Robert Maynard Hutchins, many would be considered uneducated.

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