Are Business Schools in America to Blame for the Current Financial Woes? - The Intrepid

Wednesday, September 17, 2008

Are Business Schools in America to Blame for the Current Financial Woes?

Wall Street is currently in the midst of facing down the worst crisis in its history since Black Tuesday, October 29, 1929. This week, the continued fallout from sub-prime mortgage crisis in the U.S. sent stocks spiraling and brought long-time investment firms and insurance companies to their knees. The most notable casualties include Merrill Lynch, Lehman Brothers, and most recently A.I.G (American Insurance Group).

To stop A.I.G.’s impending bankruptcy, the Federal Government issued the company an $85 billion loan. In conjunction with the U.S. Treasury’s decision to take over Freddie Mac and Fannie Mae last week, this is the most radical government intervention into the financial sector since the Great Depression. What is even more baffling is that this all took place under a Republican administration that championed the idea of de-regulation. As Robert Sheer said last week on KCRW’s “Left, Right, and Center,” “if the Democrats had proposed this they would have been labeled communists.”

Although the blame for this mess squarely falls on the Bush Administration and various C.E.O.s on Wall Street who supported sub-prime mortgages, is there a systemic problem? Are America’s business schools to blame for the current financial woes?

America’s business schools once turned out responsible business leaders, but today it seems that they focus on turning out hedge fund managers and consultants who bare a stronger resemblance to confidence men than community leaders.

Rakesh Khurana, an associate professor at Harvard Business School, believes that this needs to stop. Khurana argues that America’s business schools are adrift. Where schools once trained society’s leaders, they now train individuals solely interested in maximizing short-term shareholder returns. As Forbes columnist Sramana Mitra writes, “rather than grooming a “leadership” driven value system, Business Schools today are grooming an “avarice” and “opportunism” driven value system.”

While generating profit is obviously important in a capitalist system, business graduates need to be taught more than the importance of money. Although business students at America’s elite institutions are undoubtedly going to be drawn to the lucrative world of hedge funds and private equities, the profit at any cost mentality has to change. American business schools are often considered the best in the world. If these institutions want to maintain that reputation, they need to do better.

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