Let’s Teach as if People and Planet Really Matter

• Business education must move beyond outdated dogma that emphasizes profit maximization to address the social, environmental, and ethical complexities today’s students care deeply about.
• True reform in business education will require more than merely adding electives—it will demand rethinking capitalism, corporate purpose, and the role of business in society.
• Only by equipping future leaders with wisdom and the ability to apply systems thinking will we contribute to turning business into a force for societal good.

 
Twenty years ago, students who wanted to make a difference in the world gravitated toward schools of government or nonprofit management. Today, increasing numbers are turning to schools of business. And they are bringing with them a desire to explore their roles as leaders, as well as the will to reshape the economic, social, and environmental purpose of the corporation.

Surveys show that 60 percent of Gen Zers and millennials are alarmed or concerned about climate change. A 2022 article in the Financial Times cites the statistic that 70 percent of Gen Z business students want educational content that responds to the climate crisis.

In 2019, business ethics entered the list of the top-five most popular business subjects for the first time, according to data gathered by research firm CarringtonCrisp. According to its survey, 25 percent of incoming students want jobs focused on societal impact after graduating, and nearly 50 percent aspire to such jobs later in their careers. A recent survey found that 71 percent of professionals rank purpose as very or extremely important when evaluating career choices, while 66 percent would leave their current positions for an opportunity that better reflects their sense of purpose.

But There Is a Disconnect…

Despite so many surveys highlighting students’ search for purpose, it’s clear that students are feeling underserved by their business programs. As one business student put it in the 2022 FT article referenced above, Gen Z wants business schools to “be the grown-ups” and take the lead, rather than simply respond to student demands.

“It’s the responsibility of the teachers to tell us what we should know,” she said. “I’ve only graduated and yet I’m being consulted as an expert on an issue like sustainability. That shouldn’t be the norm.” And yet it is.

Too many business schools are simply dropping a small number of electives into curricula that are still based on outmoded, even discredited ideas that are not suited to the challenges future leaders will face.

For example, most business schools still teach that the overriding purpose of business is to maximize shareholder wealth as measured by stock price. This doctrine—now dogma—lacks any basis in corporate law. Moreover, it leads companies to succumb to market pathologies, through which they maintain a myopic focus on short-term earnings reports at the expense of long-term performance. Executive compensation packages have grown so large that the CEO-to-typical-worker pay ratio has increased from 20-to-1 in 1965 to 399-to-1 in 2021.

Adherence to this doctrine has nudged companies into reckless and socially irresponsible behaviors. In the words of corporate attorney James Gamble, today’s business leaders are compelled to run their companies as “textbook case[s] of antisocial personality disorder” in which each company “is obligated to care only about itself and to define what is good as what makes it more money.” This is the dominant belief in much of business education and continues to be drummed into much of the business student population.

The doctrine that the purpose of business is to maximize shareholder wealth leads companies to maintain a myopic focus on short-term earnings reports at the expense of long-term performance.

This dogma is accompanied by further unquestioned beliefs, which hold that the endless pursuit of economic growth is possible despite the obvious physical, environmental, and economic limitations on such a goal; and that nature is a limitless source of materials and a bottomless sink for waste. The curriculum also perpetuates the belief that people are inherently selfish, motivated by avarice and greed; that monetary gain is the most important measure of value; and that the pursuit of efficiency is an unquestioned good, regardless of the social and environmental impact.

All in all, most business schools avoid any critical examination of the consumption that drives the market. Meanwhile, the role of government in the market and the role of business in policymaking receive very limited coverage.

It is time for a radical rethink of these foundational precepts. In my new book, Business School and the Noble Purpose of the Market: Correcting the Systemic Failures of Shareholder Capitalism, I make the case for a rejuvenation of the intellectual and moral training of our future business leaders. I highlight a few of my arguments below.

It Is Time for Change

To start, schools must not only invite students to examine the how of business, but also instill in them a deeper sense of the why. Schools must help future business leaders develop and cultivate wisdom, character, and integrity along with business savvy.

In fact, as artificial intelligence continues its intrusion into education, business schools will find that developing students’ character is a growing imperative. Students can increasingly find “information” on their own, but they will need more assistance to become more discerning in how they consume that information and wiser in what they do with it.

But fixing the business curriculum, in ways that open students’ eyes to a different view of business, requires more than the addition of a few electives. It requires schools to return to fundamentals, re-examine 21st-century business realities, and make concerted efforts to bring the whole student into the education process. This can happen only if schools make substantial changes to their curricula. These changes could include:

Train stewards of the market. Today’s young people are becoming increasingly disenchanted with capitalism. And yet, I find that students have trouble even defining the term—it’s a concept that gets surprisingly little coverage in the curriculum.

With that in mind, we need to teach the foundations of capitalism, the structures of multiple capitalist systems around the world, and the underlying models on which those systems are based. In our courses, we must explore how capitalism has evolved into the form we know today, where it has failed, and what multiple forms it might take in the future, so that students can develop a critical understanding of what capitalism is.

Re-examine the purpose of the corporation. The era of strict adherence to shareholder primacy is coming to an end.  In 2019, Larry Fink, the CEO of the asset management firm BlackRock, made news when in his annual letter to investors he linked purpose and profit. Groups such as the Business Roundtable and World Economic Forum also have offered their own redefinitions of corporate purpose (though some scholars question the sincerity or effectiveness of these statements). Business students must be brought into this debate.

Offer more coverage of the role of government. Far too many business students harbor naïve ideas that government has only a limited role to play in the market and that corporate lobbying is inherently corrupt. But what they might not fully understand is that government must set and enforce the rules of the market—and that business can offer policymakers valuable input in developing effective policies.

At a time when governments are increasingly using industrial policy to address market challenges, we need to move away from stale debates about the pros and cons of more or less government intervention. Instead, we must teach students about the proper balance of government and business in the market.

Teach new metrics and models. Some of the metrics used for economic calculations can lead to actions that worsen our social and environmental problems. When we emphasize those metrics in our programs, we discourage students from critically examining the limitations of gross domestic product, discount rates, efficiency, the excessive use of money as the ultimate measure of value, and more. We must apply new metrics and models in their place.

The business curriculum must de-emphasize self-interest as the dominant motivator of human action. Otherwise, schools will only make their students less concerned about the common good.

Put homo economicus to rest. The business curriculum must de-emphasize self-interest as the dominant motivator of human action. If business schools do not take this step, then they will only make their students more selfish and less concerned about the common good.

Integrate more physical, social, and political sciences into business education. The curriculum needs an infusion of courses that help business leaders understand how their decisions affect the natural and social environments. Students must see the environmental impact of resource extraction, supply chain management, manufacturing, consumption, and waste disposal, as well as the societal impact of wage levels, benefits packages, political donations, and government lobbying.

Teach students to think in systems. If students are to understand and address 21st-century problems, they must understand complex multifaceted business enterprises, as Peter Senge emphasizes in his book The Fifth Discipline. Additionally, students must be familiar with the social, economic, political, and environmental systems in which those enterprises operate.

Teach management as a vocation that serves society. Business schools must encourage students to consider management as a calling, similar to the spirit of service that inspires the medical profession. We must ask students to view a business career as a vocation based on a higher set of values about leading commerce and serving society, not simply as the means to pursue personal gain.

Signs of Hope—and the Need for More

Faith in the “magic of the market” remains mainstream in business education, but the realities of today’s world call for a reinvention of both business and business education. The stakes are high and the pressures for change are growing. For instance, AACSB has embedded societal impact into its accreditation standards for business schools, and the Financial Times has been using its rankings clout to encourage business schools to change.

Some schools are using United Nations Sustainable Development Goals as a framework for their programs, some are adopting the Positive Impact Rating, and others are focusing on conscious capitalism and social leadership. The Responsible Research in Business and Management network (RRBM) is trying to bring this sensibility into the management research domain. These are all signs that change in business education is at the beginning of the adoption S-curve. The hope is that these ideas will diffuse across the business school ecosystem.

In the end, businesses will continue to play a role in addressing humanity’s challenges—but it’s not yet clear whether that role will be a positive one.

To be sure, businesses wield enormous power when it comes to the ideation, production, and distribution of solutions to society’s problems at the scale we need them. But as author Joel Bakan stresses in his book The New Corporation, they also have the potential to multiply the effects of the darkest of human impulses, acting in ways that support exploitation, materialism, and greed. To tip the scale in the right direction, business schools must nurture a new breed of leaders who view business not only as a vehicle for making a profit, but also as a means for serving society.