[nasional_list] [ppiindia] Teaching ethics: How Wall Street learns to look the other way
- From: sidqy suyitno <sidqy_suyitno@xxxxxxxxx>
- To: cinta bappenas <cintabappenas@xxxxxxxxxxx>
- Date: Wed, 9 Feb 2005 01:56:16 -0800 (PST)
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Teaching ethics: How Wall Street learns to look the other way[1]
Robert J. Shiller[2]
NEW HAVEN, Connecticut The New York Stock Exchange's report on the pay package
given to its former chairman, Dick Grasso, made clear the excessiveness of the
compensation and the ineffectiveness of the safety controls that failed to stop
it.
What the report didn't provide, however, was an answer to an obvious question:
Why did nobody on the exchange's board look at that astronomical sum and feel
some personal responsibility to find out what was happening?
I can't read minds, but I think it's fair to say that to some extent the
players in this drama - as well as those in the ones now being played out in
courtrooms and starring former executives of Tyco, WorldCom and HealthSouth -
have been shaped by the broader business culture they have worked in for so
long.
And, as with any situation in which we are puzzled by how a group of people can
think in a seemingly odd way, it helps to look back to how they were educated.
Education molds not just individuals but also common assumptions and
conventional wisdom. And when it comes to the business world, our universities
- and especially their graduate business schools - are powerful shapers of the
culture.
That said, the view of the world that one gets in a modern business curriculum
can lead to an ethical disconnect. The courses often encourage a view of human
nature that does not inspire high-mindedness.
Consider financial theory, the cornerstone of modern business education. The
mathematical theory that has developed over the decades has proved extremely
valuable in general. But when it comes to individuals, the theory runs into
some problems.
In effect, it portrays people as nothing more than "maximizers" of their own
"expected utility." This means that people are expected to be totally selfish,
constantly calculating their own advantage, with no thought of others.
If the premise is that everyone would steal the silverware if he knew he could
get away with it, and if we spend the entire semester developing the
implications of this assumption, then it is hard to know where to begin to talk
about ethics.
Modern business education often encourages excessive respect for anything that
can be considered a result of the free market. Many business schools now offer
a course in business ethics, and some even try to integrate business ethics
into their other courses. But nowhere is ethics seen as a centerpiece or even
an integral part of the curriculum. And even when business students do take an
ethics course, the theoretical framework of the core courses tends to be so
devoid of moral content that the discussions of ethics must seem like a side
order of some overcooked vegetable.
I like to assign my finance students "Take On the Street," an account by Arthur
Levitt of his efforts, as chairman of the SEC in the 1990s, to clean up the
sleazy side of Wall Street. I wish more professors assigned it. But most of my
colleagues tell me they do not have time for it; too many formulas to cover.
Ultimately, the problem at the university level is a tendency toward
overspecialization. Business ethics is just another academic specialty, and can
seem as remote as microbiology to those studying financial theory.
Whatever happens with Grasso - and with Dennis Kozlowski of Tyco and the other
avatars of corporate misconduct in the headlines these days - we should be
reminded that ethical behavior for many business people must involve overcoming
their learned biases.
Perhaps these scandals would be a little less likely, and the rationalizations
for them a little less tenable, if more of us professors integrated business
education into a broader historical and psychological context.
Would our students really fail to understand the economic models if we treated
the subject matter not as an arcane specialty, but as part of a larger liberal
arts education?
---------------------------------
[1] The New York Times, February 8, 2005
http://www.nytimes.com/2005/02/08/opinion/08shiller.html?
[2] Robert J. Shiller, the author of ??Irrational Exuberance,?? has taught
Economics 252, Financial Markets, at Yale College since 1985.
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