For MBAs, Soul-Searching 101

Now, B-schools are emphasizing ethics and responsibility

For the first time anyone can remember, the incoming MBA class at the University of Michigan Business School had an assignment before students even arrived in Ann Arbor. The homework: to write a case study on the most challenging ethical dilemma each person had ever faced. All but three of the 438 members of the Class of 2004 submitted something, from the technical consultant who discovered that a manager had pushed through a defective product to the analyst who was forced to write a lucrative consulting proposal--copied from one stolen from a competitor. "We really wanted them to think--we wanted to push ethics to the front from Day One," says Noel M. Tichy, a Michigan professor and architect of the four-day orientation.

It's a new lesson plan for business schools across the country, where corporate scandals and a waning MBA job market have touched off a wave of self-reflection and reform. Opinion polls now place businesspeople in lower esteem than politicians. Just two years ago, campuses were aflutter with talk of the next big e-idea and over-the-top starting salaries. Now as the school year begins, ethics, values, corporate responsibility, and integrity are the new watchwords.

The sober climate is forcing a shift at B-schools, just as it has in the corporate world. The days of going to B-school to get rich quick, arrogantly showing up at interviews in wrinkled khakis, or skipping "useless" ethics classes appear to be over. Grads spoiled by the boom's largesse are giving way to MBAs preoccupied with learning business law and studying hard. "The next fad is no fads, and the next new thing isn't new at all--it's back to fundamentals," says Patrick T. Harker, dean of University of Pennsylvania's Wharton School. "We all got carried away in the gold rush."

Despite the mood swing on campus, applications for the Class of 2004 were up about 10% at top schools, after increases of 20% or more the year before. For some, it's a pragmatic choice--with few job openings, why not go for the MBA now and hope the economy picks up?

Others fancy themselves as reformers who say they believe in business and want to do something about the crisis. "A lot of us feel that in 10 to 15 years, we will not make the same mistakes," says Shelly Edlund, a former health-care consultant starting her MBA at Northwestern University's Kellogg Graduate School of Management. "I think we might be able to renew some confidence in Corporate America by setting a good example." Adds Patrick DeFreitas, a first-year MBA at University of California at Berkeley's Haas School of Business: "I want to have the necessary tools and qualifications to take the reins and hopefully make the right decisions." A former online marketing manager at a startup, he says he didn't have enough business knowhow in the past to speak up when faced with gray areas.

Of course, if the market picks up and the headlines feature fewer scandals, the newfound religion could fade. But for now, students in the classes of 2003 and 2004 show signs of being ultra-serious, with a greater penchant for pursuing dual degrees in areas like law, public policy, and education. Some 30% of first-year MBAs at Wharton say they'll sign up for the double master degrees, vs. the typical 20%. Wharton ethics guru and professor Thomas Donaldson says the two current classes are asking him to "help them see what they need to see in a gray situation." You can't necessarily teach morality, he admits, but it's possible to point out behavior that's over the line. "Your mother didn't teach you about off-balance-sheet entities and how to grapple with them," he contends.

It's not just students who are adjusting to a new era. Faculty from Berkeley to Wharton are revisiting their courses and beefing up curriculum. At Michigan, accounting professors retooled required courses to include detecting accounting tricks and weighing the pros and cons of operating within the rules but at the edge of ethics. Says William G. Christie, dean of Vanderbilt University's Owen Graduate School of Management: "If courses in ethics and moral leadership are not already part of the curriculum, they had better be" soon.

Meanwhile, recruiters, whose companies are being held up to higher standards, are becoming choosier. They say they're looking not just for skills but also trustworthiness. Some Wall Street banks, particularly vulnerable to charges of conflict of interest, have taken to drawing up psychological profiles to weed out candidates who might play fast and loose with rules, says Joan DiFuria of the Money, Meaning & Choices Institute in Kentfield, Calif., which studies the effects of money on workers. Accenture Ltd. partner Warren Watkins, who recruits and hires MBAs, says B-schools have some responsibility to impart leadership values and ethical thinking, along with the expected lessons on financial analysis and strategy. In interviews, he frames questions to gauge a candidate's gut reaction to difficult situations. It's not foolproof, but the answers still count and help him decide from which schools he'll recruit.

Some B-school leaders charge that the angst on campus is overdone, and that ethics haven't exactly gone AWOL in business education. "Intelligent people recognize schools are not nurseries for felons," says Richard Schmalensee, dean at the Sloan School of Management at Massachusetts Institute of Technology. But he admits that these days, students want to be reassured that the school is committed to turning out business leaders "who aim to make a positive difference in the world, not just own many houses." If Sloan and others don't get that message across, applications to B-schools could fall back to pre-boom levels--or one-third fewer, says Schmalensee.

It's all adding up to something of a watershed moment for business schools, which already face growing questions about their relevance. Stanford University business professor Jeffrey Pfeffer stirred things up this summer with a study scrutinizing whether those with MBAs get any further, any faster--or earn more--than those with only a bachelor's degree. Results were mixed, but plenty of B-school administrators shuddered. "It's an important moment in the life of business schools," says Michigan's dean, Robert J. Dolan. And with Corporate America looking to restore its tarnished reputation, the burden on B-schools has gotten heavier.

By Jennifer Merritt in Ann Arbor, Mich.

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