Creating Ethical Leaders: Will management education rethink its role?

Two factors are causing a rethink on value systems: environmental degradation and shifts in political power that reflect the voice of the disenfranchised. This new thinking will have to come from new coalitions of social thinkers, practitioners, academics, politicians and corporates

Ajit Rangnekar

[Image by PublicDomainPictures from Pixabay]

This article explores the theme, Creating Ethical Leaders of Tomorrow: Why Management Education Needs to Rethink Its Role, as part of our learning project, MasterClass on TransformingSystems with Arun Maira. The project is based on Maira’s book ‘Transforming Systems: Why the World Needs a New Ethical Toolkit’. The other two themes are: A New Model of Change: Why Complex Global Problems Need Local Systems Solutions, and Building Purpose-Driven Networked Organisations: Why Their Time Has Come.

A note on the theme by Arun Maira: Over the last half century, the idea became ascendant, that not only should the business of business be only business, but countries, governments, and civil society organisations should also be run on business principles. Tools for effective business management taught in business schools and propagated by management consultancies are being applied widely. Concerns about business ethics have been growing at the same time, with egregious failures of governance in respected global companies, and with the global financial crisis caused by insufficient regulation of private financial institutions. Societal pressure is increasing on companies to care for communities and for the environment. Business management schools are being pressed to teach ethics. 

A core ethical principle is to put the needs of others before one’s own. Business schools have two dilemmas. The first is, can one teach ethics in a class, or is ethics a way of thinking and being, that is imbibed from family and social norms? 

The second dilemma is existential. Business schools are also businesses. A fundamental principle of good business is to produce what customers will pay for. Unless business corporations—their largest customers—are willing to pay a premium for ethical graduates who place social needs above shareholder returns (rather than those who excel at finance and marketing and producing profits for the corporation), business schools are reluctant to change themselves. With increasing societal demands for more ethical conduct of business, who will change first? Businesses or business schools?

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How does one value the true net worth of Bharat Biotech, which came up with a vaccine at $1, when the incumbent was selling it at $65, thereby saving the lives of 600,000 poor children each year? How does a cause-agnostic corporate social responsibility (CSR) programme choose between one that feeds mid-day meals to 50,000 children, and another that corrects the eyesight of 5,000?

Management education in the past seventy years has been underpinned solely by economic theories. These theories completely ignore value systems and non-financial impacts. Hence, factors like environment degradation, or social benefits, have routinely been ignored in the computation of returns on investments. Even countries measure their performance on GDP growth, and not on the well-being of their citizens. This focus on financial numbers and benefit to self, versus societal benefit, has distorted values and decision making in corporates, governments and even in some social ventures. The emphasis on bottom line, for example, resulted in governments in developed countries working with corporates to permit large-scale job losses for their citizens. A few attempts, like the Triple Bottom Line, or the Gross Happiness Index, have not been developed further. India’s former Prime Minister Manmohan Singh appealed to the country’s business leaders for inclusive capitalism when he took up the reins of government, but perhaps had to abandon his attempt when faced with their opposition to change in the gung-ho business growth paradigm.

Two factors are now causing a rethink among some top CEOs. The first was the glaring impact of environmental degradation. The second, the impact of the revolution through the ballot box by the hitherto disenfranchised, is a factor only now becoming clear. New governments in India, the US, and the UK have come to power, voicing the desires of those who have not benefited from economic liberalisation. They are seeking new solutions, many of which go against the established economic theories taught in business schools. Unfortunately, the educated elites in these countries, instead of being sensitive to these demands, have, for the most part, treated this new political class with contempt, derision and suspicion. 

It is time to have a genuine, open-minded dialogue, not among ourselves, but with people “not like us”. It is time to understand their expectations, develop new decision models, new criteria, and new metrics that help create an ethical, inclusive growth. Many state governments, for example, want to protect farmers and artisans from poverty and debt traps, but their solutions of loan waivers, free electricity and free water, make economists unhappy. Academics, e-commerce companies, social ventures, agri marketers, education institutions, sanitation and health experts, nutritionists, funders, and local governments are coming together to craft specific solutions for weavers in Sircilla in Telangana and dairy cooperatives in Maval, Maharashtra. How do we learn from such attempts?

This new thinking will have to come from new coalitions of social thinkers, practitioners, academics, politicians and corporates. These academics are more likely to be social and political scientists, than economists, or business researchers. Management education has been elitist, available to a chosen few. The new learning will have to be shared widely, and openly. Different local approaches, but based on common global knowledge, will have to be tried out, measured and adapted to suit local conditions. The role of academics will be to find and codify those that work, and develop the underlying shared values frameworks for educating the next generation of leaders. 

It is unlikely that business schools will willingly embrace the new agenda. Like many established companies who buried their heads in the sand, there is a high chance that business schools will opt for status quo, or incremental changes. Thanks to these demands for new kinds of solutions, and the easy availability of new, innovative technologies that provide programmes online, business school curricula and pedagogies of education are also likely to become redundant, like many old corporates have.

More on this

Local Systems Solutions: A framework for solving urban challenges

By Swati Ramanathan | Challenges such as garbage collection are universal, yet deeply local to each city. And they are the result of many aspects of the city system being broken. A systems approach, adapted to the local context, can help find unique solutions.

Local Systems Solutions: A way for India to provide universal healthcare

By Nachiket Mor | Healthcare in India urgently needs locally appropriate but systemically consistent solutions. There’s much to learn from how other countries and sectors have gone about it.

In the next few days, we will publish more essays by thought leaders on the theme Creating Ethical Leaders of Tomorrow: Why Management Education Needs to Rethink Its Role. And on the third theme in this learning package: Building Purpose-Driven Networks: Why Their Time Has Come.

You can see all the articles in this package here.

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About the author

Ajit Rangnekar
Ajit Rangnekar

Director General of Research and Innovation Circle of Hyderabad

Telangana Government

Ajit Rangnekar is the Director General of Research and Innovation Circle of Hyderabad, a Telangana government initiative to take Innovation in agriculture, health and sustainability to market. He also runs the Hyderabad chapter of Social Venture Partners, an organisation which assists NGOs to scale up their impact.

He retired as the Dean of Indian School of Business, where too he espoused entrepreneurship and innovation in socially important sectors. He has been a member of many global committees in business education, and advises boards of foundations and social ventures.

Prior to ISB, he was in Hong Kong for over 20 years—for the first seven years with KC (HK) Ltd, handling investments and strategy, and then for 14 years with Price Waterhouse Consulting, handling various roles including Country Head, first of PW and then of PwC Consulting practice, and East Asia Head of PwC Telecomm practice and of Learning and Development. 

Prior to going to Hong Kong, he worked with Associated Cement Companies in India, in different roles, including OR Analyst, Financial Planning Manager, and General Manager, Catalysts Plant.

He is a graduate of IIT, Bombay, and did his post graduation in management from IIM, Ahmedabad.

He lives in Hyderabad with his wife, Alka. He has two sons, both UK citizens, who live in London.

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