Reform of Capitalism Should be the Underlying Message of OWS

We’ve heard it all before. Corporations have no soul. Critics complain that those with a Master of Business Administration (MBA) degree act out of self-interest and not those of employees who work for them, the community affected by its actions, and society as a whole. The bottom line is that corporate social responsibility has been relegated to a secondary role far behind maximize corporate profits and shareholder wealth as the guiding principles of corporate behavior. The problem is these goals are achieved at the same time the wealthy become wealthier, the middle class, poorer, and more and more low income Americans fall into poverty. Does it sound right to you that top corporate officials earn as much as $16,000 per hour, while workers earn well below $16 per hour. Is it right that the average corporate executive earns 350 times the average worker? When is enough, enough?

So I ask in this blog: What role should business schools and MBA students play in the OWS movement? We can draw parallel to the anti-Vietnam War experience when peace movements consisted largely of college and graduate students, and mothers, as well as anti-establishment "hippies".  The first major student demonstration against the Vietnam War took place on May 2, 1964 when hundreds of students marched through Times Square in New York City, while another 700 marched in San Francisco. Smaller numbers also protested in New York; Seattle; and Madison, Wisconsin. Sound familiar?

On October 21 the invasion of The Wharton School’s Huntsman Hall at the prestigious University of Pennsylvania by Occupy Wall Street protestors opened the door to MBA bashers who chided the students for trying to shout down the protesters who were airing their grievances against corporate America and Wall Street investment firms. Wharton students taunted protesters with chants of "Get A Job!" and a banner which read "Get Into Our Bracket" a take-off from the slogan of the protesters that they are in the 99 percent majority.

A posting on "Think Progress" about the 99% movement  includes the following evaluation of what happened at Wharton: “While the students who jeered the protesters certainly do not necessarily represent all Wharton students, it’s important to understand the context of the elite status they likely either come from or graduate into,” the writer of the article noted. “Wharton graduates much of the nation’s corporate elite, with the median starting salary for an MBA graduate being $145,000 — six times the poverty level for a family of four. The school’s Board of Overseers is staffed with multiple Goldman Sachs executives and high-ranking employees of a wide variety of financial firms. Meanwhile, its Graduate Executive Board is staffed with senior employees of Bank of America, Blackstone Financial Management, and PMC Bank. Wharton’s endowment is $888 million, greater than that of many large public universities. Essentially, the students jeering the protesters represented the future financial elite.”

The Occupy Wall Street protests have grown into one of the most powerful grassroots social movements since the Great Depression and has gone international fueled by the power of social media. It seems the movement is picking up steam as Democrats use it for political gain and Republicans brandish the protesters as those who “hate America”. I believe the message of the movement must remain loud and clear that our free market capitalistic system is failing us and must be reformed before it is too late.

Corporate greed, fraudulent financial statements, and Ponzi schemers have wiped out vast amounts of wealth for the average American through job layoffs, massive losses in stock and retirement accounts, and plunging home values fueled by greed driven home mortgage lending practices that shift the risk of homeowner default to outside investors through the packaging and sale of collateralized debt obligations.  

There is no doubt that some individuals and groups have tagged along with the OWS movement to get their message across. The theme of their protest seems to be to rant against income inequality in America. However, this is a symptom and not the crime and it fails to get to the root cause of the problems facing America. We need to reform our capitalist system. It is important to remember that Adam Smith connected ethics to economics. Smith came to his philosophy of economic behavior described in The Wealth of Nations through his view of moral behavior espoused in his first book, The Theory of Moral Sentiments. Smith, who is generally regarded to be the founder of free market economics, posited that rational self-interest informed by moral judgments based on fairness and justice would lead to promoting the best interests of society guided by the invisible hand of the marketplace. What is missing from the calculation of recent economic decision making is ethical decision making. We must ask: What are the rights of shareholders and other stakeholders and what are the obligations of CEOs and boards of directors to those parties? How is it in the best interest of shareholders for CEOs to walk away with multi-million severance packages even after leaving a failed firm?

The bottom line is ethical behavior cannot be legislated. It comes from within and a desire to do what is right for society and not to act solely in one’s own self-interests. This is where graduate business schools that train tomorrow’s corporate leaders have an important role to play. The curriculum of every business school should include courses in ethics, leadership, and corporate social responsibility. Even today some of the best schools follow the historical model of teaching the technical skills while shying away from the “touchy-feely” material. Yet it is the latter that plays an integral role in returning America to its core role of promoting economic welfare for all.

The nature of the present economic crisis and Wall Street protests illustrates the need for departures from uncontrolled self-dealing that has infected corporate America and Wall Street. As they say in Texas, “That Dog Won’t Hunt.”

Blog posted by Steven Mintz, aka Ethics Sage, on November 4, 2011