Harvard MBA Recruit Goes to Goldman Vowing to Do No Harm
When Larry Estrada graduates from Harvard Business School next week, he’ll begin work at Goldman Sachs Group Inc. He’ll do so only after taking an oath.
Estrada, 30, joined about 150 fellow business school students and faculty worldwide to campaign for the acceptance of an MBA ethics pledge modeled on the Hippocratic Oath taken by doctors. The aim is to get as many as 6,000 graduates at 50 MBA programs to swear they won’t put personal ambitions before the interests of their employers or society.
Created last year by Harvard Business students to counter a growing public mistrust of business, the oath is being championed by Nitin Nohria, the newly appointed dean of the school. After the global financial crisis, Bernard Madoff’s $65 billion Ponzi scheme and scandals at Goldman Sachs, there has never been a better time for managers to rethink their role in society, said Rich Leimsider, director of the Aspen Institute’s Center for Business Education, in New York, which is helping to coordinate the movement.
“One of the things we’re hoping to do is force hundreds of thousands of people in business to talk about and think about their responsibilities,” Leimsider said. “Nitin has given Harvard a huge head start in that direction.”
Last year, 484 new MBAs at Harvard Business School, in Boston, took the pledge, inspired partly by an article by Nohria and Harvard professor Rakesh Khurana, in the October 2008 issue of the Harvard Business Review, calling for a code of ethics for managers. About another 1,500 took it at the Wharton School of the University of Pennsylvania, in Philadelphia, and the Kellogg School of Management of Northwestern University, in Evanston, Illinois, and at other U.S. management schools, Leimsider said.
“For me, it was a stake in the ground, to say here are my values, here’s what I believe in,” said Estrada, who plans to work as an investment manager for Goldman Sachs in Seattle. “When I have a tough decision, I want to be in a position where I have my own personal oath.”
Not all Harvard Business students support the oath. About 45 percent of the graduating class of 886 last year didn’t take it, and a similar share won’t this year, either, Estrada said.
The oath is “the knee-jerk reaction by business apologists to the current financial crisis,” Justin McLeod, 26, a Harvard Business student, wrote in the Harbus, a school publication.
The problem with the oath “is that it is essentially cosmetic,” Krishna Mahesh, a 2005 Harvard Business School graduate, wrote in a February e-mail. “The danger of cosmetic change is that it masks the need for real, structural change. And making that structural change is what businesses (and regulators) should be concentrating on.”
The pledge is “well meaning but in the end, very mushy and not well thought out,” said Steven Kaplan, a professor of entrepreneurship and finance at the University of Chicago Booth School of Business.
All business schools teach students to be ethical, Kaplan said. The pledge ignores the nuances of management, where leaders have to weigh competing interests against each other, he said.
If Goldman Sachs’s leadership had followed the oath’s tenets, the company may not have entered into agreements to sell mortgage-backed securities that another client, New York investment company Paulson & Co., was betting against, said Khurana, the Harvard professor who worked with students in drafting the oath.
“If you have a law against murders, would all murders stop? No,” Khurana said. “But I think the risk of it would be mitigated and there would be more checks at a variety of points.”
The current version of the oath, which has evolved during the last year, consists of seven principles that require its takers to obey the letter and spirit of the law, refrain from corruption, oppose discrimination and exploitation, and protect the right of future generations to enjoy a healthy planet.
“I recognize that my behavior must set an example of integrity, eliciting trust and esteem from those I serve,” the oath states. “I will remain accountable to my peers and to society for my actions and for upholding these standards.”
At the McCombs School of Business at the University of Texas at Austin, 152 of 200 graduates at a banquet May 11 signed the oath, said Hanna Patterson, a first-year student who helped coordinate the effort at Texas. The oath coincides with a new curriculum and an emphasis on personal responsibility at the institution, she said.
“We’re hoping this starts a dialogue and gets people to consider, when they start their careers, what impact they can have,” Patterson, 26, said.
Harvard MBAs first took the oath last year after graduating students wanted to make a statement about their principles. They approached professors Nohria and Khurana for guidance. Nohria, who has spent more than a decade advocating for professional standards in business that mirror those in law and medicine, donated $5,000 to a nonprofit organization Max Anderson and Peter Escher helped establish to spread the oath to other campuses.
With Nohria as dean, Harvard may integrate the principles behind the oath into its curriculum and serve as a model for other institutions, said Escher, 30, now an investment analyst at Liberty Mutual Insurance Co. in Boston.
“For better or worse, we’re a thought leader and we’ve benefited from that platform for the oath,” said Escher, who co-wrote “The MBA Oath: Setting a Higher Standard for Business Leaders” (Portfolio, 2010) with Anderson. “I do think you’ll see other schools following Harvard’s example.”
Other business schools have oaths or pledges as part of their graduation rituals. At the Rotterdam School of Management, part of Erasmus University in the Netherlands, students take a pledge promising to “act honourably, ethically and with integrity in respect to the values and interests of all stakeholders.”
Graduates of the Thunderbird School of Global Management have taken an “Oath of Honor” upon graduation since 2006. Thunderbird, a 64-year-old independent business school in Glendale, Arizona, is ranked No. 1 by U.S. News & World Report for international business programs. Harvard is fifth.
“The time is right” to reposition Harvard and other business schools to have a broader outlook, Khurana said.
“If tomorrow the Harvard Business School disappeared, what would the reaction in society be?” Khurana, 42, said. “Would it be people saying, this is the worst thing that could have happened, where are we going to find our great business leaders, or would they cheer? Unless we can answer the question that this is seen as a socially legitimate, socially positive institution, then that is our project.”
The oath, and the outlook it represents, can help counter the trend in business to focus solely on profits and shareholder value, Khurana said.
“When I talk to my class and use words like ‘fairness’ and ‘is this right?’ and ‘does this help the common good?’ people are at a complete loss, Khurana said. ‘‘Part of the goal of the oath is to reintroduce a language that was at the heart of American experiment, the notion of community and the common good.’’
Goldman Sachs Chairman and Chief Executive Officer Lloyd Blankfein didn’t speak about the consequences of his company’s actions on society when he appeared before the U.S. Congress April 27, Khurana said.
‘‘His field of vision was so narrow that every time we talked about sophisticated investors on the other side, he didn’t realize a lot of those sophisticated investors were proxies for widows and orphans,” Khurana said.
A Goldman Sachs spokeswoman, Gia Morón, didn’t respond to an e-mail requesting comment.
Nohria began thinking about an oath for business students in 1996, inspired partly by the example of his sister, a physician who took the Hippocratic Oath, named after Hippocrates, an ancient Greek considered the father of western medicine, he said.
“All my life I’ve believed that the work I do is no less responsible to society than the work that she does, and the contribution I make is no less than the contribution she makes,” Nohria said in an interview May 3. “When business leaders came under attack, one of the things I wondered was, how can we remind business leaders of the responsibility they have to society? How can we remind them that if they conduct themselves with honor and hold themselves to a high standard there’s no reason for them not to enjoy the respect that other professions do?”
Nohria didn’t respond to an e-mail asking if he intends to make the MBA Oath mandatory when he becomes dean. He takes office on July 1.
Nohria and Khurana serve on the board of the Oath Project, which works with the World Economic Forum’s Young Global Leaders, based in Geneva; the United Nations Global Compact, a New York-based organization for businesses; and the Aspen Institute to spread the idea of the oath beyond U.S. business schools. Those efforts will be enhanced once Nohria is dean of Harvard Business School, Leimsider of the Aspen Institute said.
Business people will benefit personally from taking the oath for the same reasons doctors and lawyers adhere to a code: because those professionals don’t want to be seen as “snake-oil salesmen and ambulance chasers,” Khurana said.
“There’s enlightened self-interest that doing good will simultaneously be a benefit to society but also raise the respect and legitimacy of the institution,” Khurana said.