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For more information on the Business Roundtable Institute for Corporate Ethics, please visit or call Shaping Tomorrow’s Business Leaders: Principles and Practices for a Model Business Ethics Program Business Roundtable Institute for Corporate Ethics 100 Darden Boulevard Charlottesville, Virginia 22903 (434) 982.2323 info@corporate-ethics.org www.corporate-ethics.org © 2007, Business Roundtable Institute for Corporate Ethics www.corporate-ethics.org A PDF version of this document can be found on the Institute Web site at: http://www.corporate-ethics.org/pdf/mbep.pdf Tomorrow’s business leaders will need to be nimble and able to incorporate all aspects of good decision making in an increasingly global and complex business environment. Ethical leadership is vital to the future of American business. Today’s executives should take an active role with business schools to ensure that current students are fully prepared for the responsibility and authority they will take on. In 2004, as part of our overall efforts to build and sustain public confidence in the marketplace, Business Roundtable - an association of chief executive officers of 160 leading U.S. companies with $4.5 trillion in annual revenues and more than 10 million employees - established the Business Roundtable Institute for Corporate Ethics. The Institute brings leaders from business and academia together to renew and enhance the link between ethical behavior and business practice. This report – Shaping Tomorrow’s Business Leaders: Principles and Practices for a Model Business Ethics Program – identifies key principles and leading practices and recommends actions for developing strong ethics programs and building an inspiring vision of the future for tomorrow’s business leaders. As a nation, we need to cultivate our human resources and enhance our educational opportunities. As a business community, we need to support public and private sector efforts to equip our young people with the skills they need to compete in an increasingly demanding global environment. As individual corporate leaders, we need to recognize that success depends not just on our own knowledge and wisdom but also upon our ability to recruit, develop and empower an effective workforce. We also need to model the qualities that we require in our employees – and demonstrate the value of incorporating ethics into everyday business practice and decision making. Our world is rapidly changing – and the changes affect every business, every industry, and every country. The future growth and competitiveness of U.S. business are at stake. The business world eagerly awaits tomorrow’s strong and ethical leaders. Harold McGraw III Chairman, Business Roundtable Chairman, President and CEO, The McGraw-Hill Companies Table of Contents Putting Ethics into Business.............................................................................................1 Putting Business into Ethics.............................................................................................2 Overview............................................................................................................................2 Background.......................................................................................................................3 “A Historical Viewpoint” by Diane Swanson Principles of a Model Business Ethics Program: Course, Curriculum, and Community............................................................................5 Course:...................................................................................................................... ..6 “An Update on Can Ethics Be Taught?” by Thomas R. Piper “Use of Narrative in Class” by Timothy Fort Curriculum:................................................................................................................9 “Giving Voice to Values” by Mary C. Gentile “Business Ethics at Tuck” by Richard S. Shreve Community:.............................................................................................................. 12 “NYU Stern Creates New Business Ethics Faculty Symposium” by Edwin Hartman Considering Effectiveness..............................................................................................14 What’s Next?...................................................................................................................14 “Looking into the Mirror” by Joshua Margolis Recommended Actions...................................................................................................16 Notes.................................................................................................................................17 Shaping Tomorrow’s Business Leaders: Principles and Practices for a Model Business Ethics Program Putting Ethics into Business Many leading businesses no longer debate the legitimacy of the role and importance of ethics; rather, they are forging ahead, finding new ways to put ethics into practice. A few recent examples highlight the acceleration of firms taking initiative in developing ethical business practices: Nestlé releasing the 2006 Water Management Report on sustainable water management and signaling a company commitment to this issue;1 CEOs of 10 industrial companies (including Caterpillar, Inc., Deere & Company, and DuPont) publicly advocating for major reductions in greenhouse emissions;2 GE’s Ecomagination, investing in technology and innovation toward environmentally sustainable business ideas;3 and Business Roundtable’s training program for over 20,000 construction workers in the Gulf Coast states following the 2005 hurricane season.4 This report aims to move beyond questioning the value of integrating ethics into the business school enterprise while moving forward to accelerate academia’s ability to keep pace with the speed of business in developing the next generation of business leaders. Successful and sustained businesses, at their cores, share a universal trait—they are focused on providing value to and sharing values with the societies in which they operate. In many cases, the members of these societies are directly involved with the companies as customers, employees, suppliers, and shareholders. Fundamentally, business is about creating value for stakeholders. Companies also embed ethics into business in a very basic way by adding value to people’s lives. Examples of this include developing products that make life more enjoyable like Apple’s iPod or offering progressive employment practices like PepsiCo’s flexible work programs.5 The interests of companies and their stakeholders are, and should be, inextricably linked. Partly due to these links, business is being called upon to play an increasingly significant role in addressing our most pressing social issues, some of which include education, health care, and the environment. In a 2006 McKinsey Quarterly survey, 59% of business executives surveyed agreed that their peers play “some” role but not a “leadership” role in addressing public issues.6 When that group was asked, however, what role executives should play, 44% promoted taking on a leadership role. Preparing future business leaders to take on a leadership role can have a significant impact not only moving society forward on some of the most pressing and difficult issues of today, but also in further tapping the creative and entrepreneurial potential of business. Addressing the growing challenges of business and the expected role that future business leaders will be called upon to fulfill is part of the academic imperative confronting business educators. In particular, business schools must provide a foundation by introducing and preparing tomorrow’s organizational leaders for the interconnectivity of business, ethics, and society. Shaping Tomorrow’s Business Leaders: Principles and Practices of a Model Business Ethics Program draws from the collective expertise of business ethics academics and current business leaders to provide actionable recommendations for stakeholders interested in implementing a successful business ethics program. Shaping Tomorrow’s Business Leaders  Putting Business into Ethics The Business Roundtable Institute for Corporate Ethics’s (the Institute) approach toward envisioning a model business ethics program in business schools reflects the larger and more prominent mindset necessary for envisioning the critical role of business schools themselves. Large and small corporations from around the globe draw much of their leadership and management talent from business schools, not only by educating individual leaders and managers, but also by serving as a prime resource for innovative management thinking. To successfully incorporate ethics at the core, business schools must clear substantial hurdles. Among the major obstacles to success are: the magnitude of the task such that there needs to be a broad-based enterprise ethics approach; the challenge of achieving wide support and participation of faculty across other core disciplines; and the lack of recognition for the urgency needed in this effort.7 Business schools have made a great deal of progress in these areas over the past decade. The number and quality of required and elective business ethics courses has grown, as have the extra-curricular offerings and the recognition by other faculty that ethics is a core business discipline. A 2007 study of ethics, sustainability, and corporate social responsibility programs from the Financial Times top 50 business schools found an increase in the number of stand-alone ethics courses offered to 25% of respondents, up from 5% in a 1988 study.8 In a 2006 Institute survey9 conducted for this report, 59% of respondents rated their own school’s program as either excellent or good for its effectiveness in embedding ethics into the decisionmaking of tomorrow’s business leaders. When asked to assess changes in the past three to five years, 75% responded that the attitudes of faculty from other areas of the business curriculum had grown increasingly positive towards the ethics curriculum. The Shaping Tomorrow’s Business Leaders report acknowledges not only the significant constraints and barriers to achieving success, but also the effort and progress achieved by business schools. The report offers a new framework and set of principles and practices for further developing, evaluating, and enhancing business ethics programs that will meet the needs of tomorrow’s business leaders. Today’s call to action is to determine how future managers can be better equipped to meet rising financial and ethical expectations.10 Overview The Institute has engaged a number of business and academic perspectives in order to develop a model business ethics program. In July 2006, the Institute surveyed members of the Society for Business Ethics11 (SBE), a professional organization of over 700 business ethics academics from more than 40 countries, on a number of topics related to business ethics programs. In a standingroom-only session with over 100 business ethics educators, the Institute hosted a panel on this topic during the August 2006 SBE annual meeting led by Institute Academic Advisors George Brenkert, Joshua Margolis, and Diana Robertson. Other academic and business thought leaders also contributed to the report. This report is structured around the three-level framework—Course, Curriculum, and Community—which emerged from the group discussion. Combining perspectives from a number of experts, the report’s principles for a model business ethics program represent the group’s collective aspirations. The report specifies common principles,    Business Roundtable Institute for Corporate Ethics objectives, and themes for MBA programs; isolates leading practices as well as the major challenges and areas for improvement; and moves the conversation around envisioning a model ethics program forward from theory to implementation. Background While the business ethics discipline has matured over the past several decades, a number of issues concerning best approaches continue to be debated. Some notable and well-documented discussions have covered a wide spectrum of perspectives (Figure 1). These viewpoints have come from academics, accreditation agencies, reports analyzing business school rankings data, media groups, society, and business. Some of the leading viewpoints are described herein. Figure 1. Selected perspectives in thinking on business ethics programs. Can Ethics Be Taught? (1993) AACSB Accreditation Review (2003) Report on Ethics at FT Top 50 Programs (2007) Report on Shaping Tomorrow’s Business Leaders (2007) •5-year effort at HBS to •Decision not to require •Review of ethics programs •Offers framework for •Numerous studies, •Sparked debate among •Looks separately at ethics, •Proposes principles for fully integrate ethics into curriculum including Mary Gentile’s “Barriers Report” •Furthered discussion on how to prepare future business leaders ethics course for accreditation academics on the “gold standard” for business ethics programs in leading business schools CSR, and sustainability •Highlights leading thinking about ethics in business schools model business ethics program practices In 1993, Can Ethics Be Taught? authors Thomas Piper, Mary Gentile, and Sharon Daloz Parks detailed one academic view of the challenges involved in Harvard Business School’s five-year effort of institutionalizing ethics into the first-year MBA curriculum. Part of this effort, Gentile’s “Barriers Report,”12 distilled a list of challenges, or barriers, for faculty attempting to integrate ethics into the first-year MBA curriculum. Gentile identifies levers for working through the barrier issues and for working toward success in these efforts. A decade later, after a review of its accreditation standards, the Association to Advance Collegiate Schools of Business (AACSB) recommended that business school programs incorporate ethics content into the curriculum by choice. It did not specifically recommend that business schools require a stand-alone ethics course. The decision was controversial and openly opposed by many members of the Society for Business Ethics and the Social Issues in Management Division of the Academy of Management. A group of scholars requested additional dialogue on the issue of mandating “a required, stand-alone business ethics course as a requirement for achieving accreditation.”13 This faculty group generally argued for a required, broad foundational course in business, ethics, and society, taught early in the program by trained ethics professionals and supported by systematic integration throughout the rest of the school’s curriculum, along with other available ethics electives.14 Dr. Milton R. Blood, Managing Director of Accreditation Services for AACSB International, responded to the group of scholars saying, “Though we disagree on the one issue of a mandated course, I hope you will concur that there is much more on which we agree concerning the importance of ethics in education.”15 Shaping Tomorrow’s Business Leaders  The 2007 report “Ethics, CSR, and Sustainability Education in the Financial Times Top 50 Global Business Schools: Baseline Data and Future Research Directions” examined the coverage and inclusion of these topics in this group of leading business schools. The study aimed to identify current practices in MBA education; to examine trends in the topics of ethics, CSR, and sustainability; and to determine areas where additional research is needed. Findings indicated that one-third of the top 50 Financial Times business schools mandate inclusion of all three subjects in their curriculum, while 84% require mandatory courses in at least one of the topics.16 A Historical Viewpoint – Diane Swanson In the early 1990s, the Association to Advance Collegiate Schools of Business (AACSB) modified its previously stronger policy on teaching ethics in the business curriculum by adopting more flexible, mission-driven accreditation standards. The new standards effectively allowed stand-alone coursework to be dismantled in favor of distributing ethics across the curriculum. In 2003, as news of corporate scandals hit the media, Bill Frederick and I led a petition campaign in support of Duane Windsor’s Open Letter on Business School Responsibility.17 The campaign’s intent was to encourage the AACSB, which was in the process of revising accreditation standards, to accept the recommendation made by hundreds of ethics professionals that at least one ethics course be required for accreditation. AACSB rejected our recommendation in favor of a more flexible standard. We feel a required, stand-alone, foundational ethics course in the business school curriculum helps prepare students for fast-growing careers in ethics, compliance, and corporate social responsibility. The three-part benchmark standard for business ethics education is quite straightforward: 1. A required, foundational ethics course is necessary. 2. Efforts to integrate ethics across curriculum should be a goal. 3. Extra-curricular initiatives, such as offering service learning projects, are highly desirable. The three-part benchmark standard, taught by ethics-trained faculty who give priority to the subject of ethics, allows for coherent and in-depth coverage across the curriculum. Signaling to students that ethics has a high priority, this practice 1) counterbalances the amoral subtext that dominates much of business education, 2) offers the conceptual building blocks needed to make integration effective and life-learning possible, and 3) renders an accurate assessment of learning outcomes possible. By using the more flexible standard, two assessment errors are inevitable. First, diluted, trivialized, and scattered ethics coverage may be mistaken for comprehensive, substantive ethics content. Second, acceptable ethics coverage may be equated with the language, but not the substance, of ethics integration. The first step toward remedying these problems is to require a stand-alone, foundational ethics course in the business curriculum. Diane Swanson is the von Waaden Professor of Business Administration at Kansas State University where she teaches undergraduate and graduate courses in Business and Society and Professional Ethics and serves as the Founding Chair of Kansas State’s Business Ethics Education Initiative.    Business Roundtable Institute for Corporate Ethics Principles of a Model Business Ethics Program: Course, Curriculum, and Community To outline a model business ethics program, this report employs a framework based on three interconnected dimensions: Course, Curriculum, and Community. The framework starts with suggested principles for the individual ethics foundational course, set within the full business school curriculum, comprised of all courses of various disciplines, and nested in the context of the overall academic community. It is important to consider not only the effect of a single course, but also the combination of courses and how ethics is integrated throughout to form a curriculum. The stand-alone course is critical, but if ethics is not integrated into other courses, then it is much less effective. Additionally, it is essential to analyze the culture of the school or of the department. Stakeholders need to think in terms of the particular course within the context of the entire curriculum and embedded within that entire community or culture. All three components are necessary and work together to support a model business ethics program. Course An ethics course should be: 1. Grounded in the leading thinking and practice about ethics and moral philosophy from academia, business, and other organizations; 2. Connected deeply to all other disciplines of business, including management, leadership, strategy, finance, business law and organizational behavior, based on a belief that business ethics is inherently interdisciplinary; 3. Required as a foundational course placed early in the curriculum, taught by ethics-trained faculty or a multi-discipline faculty team including ethics-trained faculty; 4. Designed to promote highly-engaged student participation through a variety of teaching tools and techniques such as small class size, outside speakers, experiential components, case studies, etc.; 5. Aimed at preparing students for understanding their roles as ethical leaders, managers, and followers. Curriculum As an integral part of the curriculum: 1. Ethics should be a core and fundamental business discipline; 2. Ethics content should be integrated into all other business disciplines, and other business content should be integrated into the ethics discipline; 3. Ethics content should be equally weighted and valued with other disciplines through early semester introduction, required, graded content, the offering of ethics electives, etc. Community The entire academic community (students, faculty, administration, and business partners) should: 1. Demonstrate commitment to ethical practices; 2. Support ethics programs through an active research process that produces leading-edge field research, practice aids, published works, and teaching materials; 3. Collaborate on issues such as recruiting, role models, and relevant research. Shaping Tomorrow’s Business Leaders  Course Principles An ethics course should be: 1. Grounded in the leading thinking and practice about ethics and moral philosophy from academia, business, and other organizations; 2. Connected deeply to all other disciplines of business, including management, leadership, strategy, finance, business law and organizational behavior, based on a belief that business ethics is inherently interdisciplinary; 3. Required as a foundational course placed early in the curriculum, taught by ethics-trained faculty or a multi-discipline faculty team including ethics-trained faculty; 4. Designed to promote highly-engaged student participation through a variety of teaching tools and techniques such as small class size, outside speakers, experiential components, case studies, etc. 5. Aimed at preparing students for understanding their roles as ethical leaders, managers, and followers. A course is a group of classes designed by a professor or professors to be taught to a set of students in a series during a semester. Three overall goals and objectives for the course are: imparting concrete knowledge to students about ethical theory and frameworks for analysis; helping students develop a set of skills for integrating ethical concepts into business decision-making and management practices; and moving students to greater self-awareness by encouraging personal reflection and values clarification—on individual, organizational, and societal levels. Addressing the first objective of imparting concrete knowledge is like explaining the rules of the game. The foundational ethics course should include key ideas such as: analytical frameworks, alternative models of business, capitalism and value creation, shareholders and other stakeholders, social responsibility and sustainability, how to treat people, business in a global context, fiduciary duties, and fraud. The second objective is to help students develop a set of concrete skills. One of these skills is having the courage to speak up. This might occur through a required course where students test their beliefs and argue with one another using a case discussion method. Aspen Institute’s Business and Society Program is developing materials through the “Giving Voice to Values” project, which will provide specific tools for teaching this skill.18 It is crucial to help students see themselves as future managers who will have power and responsibilities or as future leaders who will be able to influence their organization and community. The ability to apply frameworks is another valuable skill to be fostered in a foundational ethics course. Regardless of the particular framework specific to a given course, students can understand the need to apply an analytical framework when they are making management decisions, rather than assuming intuition is sufficient.    Business Roundtable Institute for Corporate Ethics