Luigi Zingales, a Chicago Booth School business professor, recently commented on the ongoing decline in business ethics, even among incoming business students:

“The recent scandals at Barclays Plc, JPMorgan Chase & Co., Goldman Sachs Group Inc. and other banks might give the impression that the financial sector has some serious morality problems.  Unfortunately, it’s worse than that:  We are dealing with a drop in ethical standards throughout the business world, and our graduate schools are partly to blame.”

I appreciate Zingales’ observations.  I share the same concerns.

Zingales suggests most business schools do a good job in helping the students to identify and explore ethical dilemmas.  But that is where they stop, and that is the problem.  Apparently, some students interpret this approach to mean, do the cost/benefit analysis, and then choose whatever you feel like choosing.

Zingales calls for a more in-depth exploration as a mandatory component of every ethical dilemma.  Otherwise, some students may misinterpret what is expected.  Indeed, I cannot comprehend how one addresses an ethical dilemma without a more in-depth exploration.  Zingales elaborates:

“My colleague Gary Becker pioneered the economic study of crime.  Employing a basic utilitarian approach, he compared the benefits of a crime with the expected cost of punishment (that is, the cost of punishment times the probability of receiving that punishment).  While very insightful, Becker’s model, which had no intention of telling people how they should behave, had some unintended consequences.  A former student of Becker’s told me that he found many of his classmates to be remarkably amoral, a fact he took as a sign that they interpreted Becker’s descriptive model of crime as prescriptive.  They perceived any failure to commit a high-benefit crime with a low expected cost as a failure to act rationally, almost a proof of stupidity.”

Zingales’ observations cause me grave concern.  They remind us how important it is to integrate ethics and morality into all aspects of our business.  If the instructor does not offer some kind of noble example, some students will apparently go in the wrong direction.

By definition, ethical dilemmas do not have easy solutions.  Nevertheless, while it is one thing to present an ethical dilemma to the class in a nonpresumptuous manner, it is something else entirely to imply any solution will do.  This behavior may subtly reinforce criminal activity.  Zingales explains:

“If teachers pretend to be agnostic, they subtly encourage amoral behavior without taking any responsibility.  True, economists are not moral philosophers, and we have no particular competence to determine what is ethical and what is not.  We are, though, able to identify behavior that makes people better off.  When a theater catches fire, the individual incentive is to rush to the exit as fast as possible.  Yet if everyone in the audience rushed at once, the crowd near the door would allow fewer people to escape—indeed, many could die.  Not surprisingly, there are social norms against this behavior.  People who violate those norms are judged rude, egotistical, ill-behaved, or in certain cases even criminally negligent.”

Instructors have tremendous responsibility and influence.  To fail to use that wisely and conscientiously is to be as guilty as the white-collar criminals we continue to read about in the news.  I agree with Zingales in that the solution, to a large measure, must begin in the classroom:

“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.”

We carefully evaluate our personal decisions ethically and morally.  We should treat our business decisions the very same way.  Business ethics should not be an oxymoron.

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About James Meadows

Currently I serve as a training team manager for Tyco Integrated Security at a customer-care center in Kansas City. Additionally, I am a business consultant, a freelance corporate writer, an Assembly of God ordained minister, a Civil Air Patrol chaplain, and a blogger. I believe we are living in the most fascinating times of human history. To maximize the opportunities these times present, I have a passionate interest in leadership development and organizational success, both of which I view as inextricably linked.

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