Why Management Needs a Code of Conduct

The financial meltdown of 2008 and the ensuing global economic crisis have ignited a vigorous debate on the responsibilities of businesses and those who manage them and have raised the question of whether managers ought to be required to adopt the equivalent of a "Hippocratic oath." The pressure is indeed mounting, as public trust towards business leaders has hit historically low levels and questions about business ethics have become a central topic in the media. Even the leaders of the Group of 20 nations, in their most recent meeting in Pittsburgh, singled out "reckless behavior and a lack of responsibility" among the root causes of the crisis.

The idea that business managers should be held to the same standards of professional conduct that are expected of other professions is at least as old as business schools. Yet, practitioners and academics have stubbornly refused to explicitly accept any other responsibility for managers than maximizing shareholder returns, and any code of conduct beyond simply obeying the law.

In the early 2000s, in the wake of the Enron and WorldCom scandals, I was part of a group of young global leaders convened by the World Economic Forum who proposed the establishment of a professional code of conduct that would articulate management's commitment to the public interest. But the subject proved too controversial for its time, in both the corporate and academic sectors.

Oath of HonorIn 2005, the faculty and trustees of Thunderbird (Thunderbird Full-Time MBA Profile) nevertheless agreed to adopt a "Professional Oath of Honor," which had emerged from a student-led initiative. The Thunderbird oath, which included a commitment to act with honesty and integrity, respect basic human rights, combat corruption, and create real, sustainable value, was incorporated in the admissions process, the curriculum, and the graduation ceremonies. It remained, however, an isolated curiosity among mostly skeptical business schools.

Unfortunately, it would take a collapse of the global financial system for the idea to gain wider traction. In the latter part of 2008, as the world began to reexamine the causes leading up to the financial crisis, the finger of blame turned, in part, to business schools who were accused of perpetuating a narrow view of value creation and managerial responsibility. And influential thought leaders such as World Economic Forum founder Klaus Schwab and Harvard professors Rakesh Khurana and Nitin Nohria argued for the need to establish a "Hippocratic oath" for business.

At the 2009 annual meeting of the World Economic Forum in Davos, the community of Young Global Leaders agreed to produce and adopt an oath for business leaders that would serve as a guide when facing difficult trade-offs. A few months later, a group of students at Harvard Business School (Harvard Full-Time MBA Profile) asked MBA graduates to sign a voluntary pledge "to serve the greater good" and to "create sustainable economic, social, and environmental prosperity worldwide." Over half of the graduating class signed an "MBA Oath," which has since spread to dozens of business schools worldwide.

The time seems ripe for the establishment of a global code of conduct for business that will cover the most critical areas of value creation and potential social harm associated with management as a profession. If such a code is going to succeed, though, it will have to be rooted and grown in business schools throughout the globe. It is there that new young managers first develop their value systems, and it is there where we can instill a more responsible approach to management—one that emphasizes sustainable value creation over short-term greed.

Not Incompatible GoalsOther professional disciplines have long adopted codes of professional conduct defining how they serve the greater good and how they avoid potential harm. Management may be younger than medicine or law, but it is mature enough to have produced collegiate schools of business in universities around the world, well established academic disciplines and journals, professional associations, and a degree, the MBA, that is widely accepted as a professional qualification by many business corporations.

As educators, we need to come to terms with the fact that management is indeed a true profession. A profession that, like the most honorable of professions, exists to improve the lives of our fellow human beings through the creative application of technical knowledge and personal skill to complex social problems. As management educators, we are responsible for advancing, transmitting and perpetuating not just the technical knowledge, but also the values and service attitudes that should be driving this profession.

It is time that we reject the fallacy that being a steward of the greater good is incompatible with creating competitive returns for shareholders. Or that the values of professionalism and social responsibility are inconsistent with innovation and entrepreneurship. And it is time for the business community and business schools worldwide to step up and work collaboratively to develop and adopt a professional code of conduct that will help restore the management profession the respect and recognition it deserves.

Ángel Cabrera is president of Thunderbird School of Global Management. He is also a member of the Young Global Leaders of the World Economic Forum, an Aspen Institute H. Crown Fellow, and a senior adviser to the U.N. Global Compact for academic matters.

Before it's here, it's on the Bloomberg Terminal.