Cliques are not just part of the torture chamber, more commonly known as high school. A disproportionate number of our nation’s CEOs and board members hail from one place: The Harvard Business School.
According to “Book Pins Corporate Greed on a Lust Bred at Harvard,” by Andrew Ross Sorkin, “An M.B.A. from H.B.S., as those in the know refer to it, has long been the ultimate Good Housekeeping stamp of approval on any résumé. Jamie Dimon of JPMorgan Chase, Jeffrey Immelt of General Electric, Sheryl Sandberg of Facebook — and the list goes on and on.”
Is this a good thing? The answer is a resounding NO, according to business journalist, Duff McDonald. He has written a book called The Golden Passport which is a scathing indictment of this esteemed institution (coincidentally, Barry Ritholtz interviewed him last week on a great podcast.)
While the above are respected leaders in their fields, McDonald believes they are not seeing the forest through the trees due to the misplaced and conflicted business values they were taught in Cambridge.
McDonald states, “The Harvard Business School became (and remains) so intoxicated with its own importance that it blithely assumed away one of the most important questions it could ask, which was whether the capitalist system it was uniquely positioned to help improve was designed properly for the long term.”
He then poses his own theory, “With economic inequality at a hundred-year high and meaningful progress on climate change and other social and environmental issues embarrassingly paltry, the answer to that question is obvious. It is not.”
McDonald senses the main culprit was the school’s switch from its original focus on the corporate manager to the concept of maximizing shareholder value. This idea emphasizes rewarding shareholders over stakeholders. In other words, anything goes as long as it increases profits and dividends. This includes firing workers, slashing benefits/salaries, and vandalizing the environment.
This pivot toward “the principal agent theory,” which states investors should have paramount interest in the corporation, is the root of many of the frustrations we see today regarding so many of our social problems.
Just like our conflict-infested financial services industry, McDonald believes Harvard is manipulated by those who are selfishly looking out for their own best interests.
He states, “For a whole semester, for example, the school is basically bought and paid for by the consulting firms.”
In other words, they are just like the politicians and lobbyists who shill for some of our largest financial firms. Instead, at Harvard, many professors are on corporate payrolls as “consultants.”
This obviously gives them a great incentive to spread the gospel of their masters’ devotion to shareholder value over the needs of everything else.
McDonald also blames Harvard for the skyrocketing discrepancy of CEO pay compared with average workers’ wages. The average CEO makes almost four hundred times the salary of their typical employee. Many rightly question this enormous chasm and the dubious value of those who receive it. Harvard seems to have played a role in this lopsided relationship.
This is due to the direct connection of the cost of attending Harvard to the pay students can expect to receive when they get out. Harvard can keep increasing its tuition as long as the CEO pay gap continues to widen. It is a virtuous cycle for the school and the future managers, but not so good for everybody else.
The issues of wealth inequality in our country are complicated and have many causes. That being said it is hard to make a case that Harvard’s Business School is not exacerbating them with its curriculum that ignores the needs of stakeholders while shifting all influence to the single-minded demands of shareholders.
While no one expects Harvard’s Lords of Business to be encouraging the “workers of the world to unite,” they can do a lot better.
Though my sample size is small, I have found the best business leaders have these three qualities:
- An abundant supply of empathy;
- A “share the wealth” attitude, with praise and profits; and
- A strict policy against public humiliation.
Humanism and a high stock price are not mutually exclusive.
Harvard’s Business School should inject the first law of the enlightened book, The Go-Giver into their curriculum.
“Your true worth is determined by how much more you give in value than you take in payment.”
This beats “just in time employee scheduling.” It is also preferable to obliterating research and development budgets to increase the dividend by a few pennies.
Capitalism is the main cause of our nation’s amazing progress. The more people who embrace it and benefit from it, the better off we will all be.
It is sad when our country’s monument to the free market is compared to a bordello.
Our political system is little different from the world’s oldest profession. Hopefully, shifting away from a curriculum centered on increasing shareholder value will spare our most famous business school the same fate.
Sources: “Book Pins Corporate Greed on a Lust Bred at Harvard,” Andrew Ross Sorkin; The Go-Giver, Bob Burg and John David Mann.