They didn’t learn from the 2007–08 financial crisis.
The video of physician David Dao being dragged down the aisle of a United Airlines plane, along with recent scandals engulfing Fox News, Wells Fargo, Volkswagen, Theranos, and other firms, highlight the importance of teaching business ethics and law effectively.
We’ve heard this story before. After the 2007–08 financial crisis, the finance world was forced to confront why so many of its own had sold out borrowers, investors, and the general public for personal gain. Yet despite the widespread anger against financial services firms, most survived and the system’s overall structure remains intact today.
If we hope to apply the proper lessons from these scandals, we must change the way businesses behave in a way that is sustainable in the long run.
First, business schools simply must teach more business law and ethics, and less of the economic doctrines that emphasize profits over principle. In the soon-to-be-published The Golden Passport, business journalist Duff McDonald pins corporate greed on a lust instilled at Harvard Business School, according to a preview in the New York Times. Harvard is certainly an inviting target, but most business schools across the country are similarly guilty. Students tend to enter business school believing that the purpose of a corporation is to benefit society, and leave believing that it is to profit shareholders.
Business schools were originally created to provide the economy with professional business leaders whose authority, according to Rakesh Khurana of, ironically, Harvard Business School, was rooted not only in the expertise they would learn in school but also “in their obligation … to see that the corporation contributed to the general welfare.” The unsustainable economic inequality in our economy is just one of the adverse consequences of a business school evolution away from training students to serve a higher purpose.
Psychological literature demonstrates that one of the keys to a happy life is believing that you have made a meaningful contribution to the world. Many students enter business programs with a desire to make the world a better place and not just become millionaires. Business schools should foster that attitude, not douse it.
Second, we must do more to educate our students about how firms’ reputations are increasingly tied to the actions of others, including their suppliers, business partners, and even the cable news shows where they advertise. Think of how much money the Takata airbag scandal, which emerged in 2013, cost car-makers, or how Nike’s reputation suffered due to child labor scandals.
Realizing this ever-present danger, firms have begun inserting provisions in their contracts that require counterparties to establish compliance standards and procedures to ensure that worker safety is protected, governments are not bribed, and other wrongdoing is minimized. Just as U.S. President Donald Trump is retreating from government regulation of questionable business activity, this concern over private-to-private business interaction promises to raise firms’ overall legal and ethical conduct. We should teach business students of the opportunity that private-to-private compliance presents for them to spread best practices across their industries and the economy as a whole.
Finally, we must emphasize the importance of ethical decision-making. Most business students are generally well intentioned, but they are naïve regarding the many social and organizational pressures, cognitive biases, and situational factors that can cause good people to do bad things. The new field of behavioral ethics, which draws from psychology, cognitive science and related research areas, is producing insights that can be translated into the classroom.
We must teach our students that while it is easy to intend to do the right thing while engaged in a hypothetical ethics discussion in a classroom, it is much more difficult to live up to your own ethical standards every day in the workplace. This is especially the case when you are also trying to please your boss, get along with coworkers, and achieve metrics that entitle you to your next bonus. Only if people are aware of their vulnerability to these pressures and biases can they guard against them in the workplace.
People make more ethical decisions if taught to emphasize cooperation over competition, acting honorably over meeting specific performance targets, and legal compliance over legal evasion. We can also teach business students how to create what behavioral scientists call a “choice architecture” in their organizations that naturally inclines employees toward the right decisions.
Behavioral ethics research indicates that there is a strong but often unnoticed emotional component to most ethical decisions. Empathy is the most important of these moral emotions. When we can mentally put ourselves in the position of other people, we are more likely to treat them the way we would want to be treated, which is often the essence of morality.
While it is not impossible, I would have been shocked had David Dao been dragged down the aisle of a Southwest Airlines plane. More than any company I am familiar with, Southwest instills a culture of empathy and caring for passengers and empowers all its employees, not just its supervisors, to act on that empathy.
Instead of dragging passengers down the aisle, we should be dragging legal and ethical education into the 21st century.
Robert Prentice is faculty director of the Ethics Unwrapped Video Series and Educational Program in the Center for Leadership & Ethics, McCombs School of Business, University of Texas at Austin.