A View From the Bridge: Curing MBA syndrome

Recently, an OpEd piece in The New York Times discussed the proposition that graduate business schools are fundamentally failing society. The author contended that these institutions prioritize profit maximization and shareholder value over ethics, sustainability, and the public good. In doing so, they produce graduates who contribute to corporate misconduct and inequality. Rather than simply teaching the mechanics of capitalism, business schools should incorporate social responsibility and a critical examination of capitalism’s broader costs into their curricula.

Back in 1980, after completing a master’s degree in engineering and becoming licensed as a professional engineer, I found myself afflicted with what I came to call “MBA Syndrome”: the notion that my professional future somehow hinged on obtaining such a degree. Having been accepted into all the graduate MBA programs to which I applied, I opted for NYU’s Graduate School of Business, eventually known as the Stern School of Business. Since I would be attending part time, the school’s proximity to the PATH station beneath the old World Trade Center made it a convenient choice for someone commuting daily.

Now, let me diverge for a few moments and fast forward to June 9 of this year. On that date, the United States Coast Guard (USCG) issued a marine safety alert following the failure of a prototype component used in a propeller shaft mechanical sealing system aboard a USCG-inspected, U.S.-flagged crude oil tanker transiting near Delaware Bay. The failure resulted in significant engine room flooding, which the crew managed to control, averting the loss of the vessel.

The incident occurred on the ship’s first voyage following completion of work during dry dock. Propeller shaft sealing systems are subject to USCG approval through various agencies known as “Recognized Organizations” (ROs). It turns out that the manufacturer of the sealing system had elected to begin using new, unapproved material within an otherwise approved system without notifying the RO of the change. That material failed, resulting in the flooding. The USCG has not made public the manufacturer’s rationale for the change, but one can speculate that perceived cost savings may have played a role.

Returning to my “MBA Syndrome,” I was completing the final three credits of the 33 required for the initial portion of the graduate business program, before moving on to the coursework for my chosen major. Those final credits involved a course in “Business Ethics,” which relied on case studies presented to student groups. My group was assigned a case modeled on the Dalkon Shield, an intrauterine contraceptive device manufactured by A.H. Robins. The device was implicated in injuries to thousands of women over a period of years because of design flaws that contributed to serious infections. In our case study, company officials, portrayed by members of our group, were informed of the defect and asked to decide what to do, given that thousands of the devices remained in warehouses awaiting distribution and sale.

After evaluating the available options, most of my group concluded that selling the defective inventory in Third World countries, far removed from U.S. government oversight, was the best course of action. Their reasoning was that the company had an ethical responsibility to its stockholders to preserve corporate value and maintain dividends. I held the minority view, best summarized by what I said to my fellow group members: “You guys are out of your minds. You are the folks who will ruin the country once you assume corporate leadership roles.”

With that experience, I concluded that I had acquired sufficient groundwork to understand the business world and had no need to complete a finance major. I withdrew from the program and never looked back.

More than 40 years later, we have the story of an oil tanker equipped with a critical component containing a part of questionable integrity. Apparently, the manufacturer found a way to circumvent the regulatory approval process governing shipboard components, allowing a substandard part to enter the maritime environment. Catastrophe was averted, but it was a close call.

Although decades have separated these two events, both involve the deliberate concealment of a potentially damaging defect. We can only speculate about the precise motivations behind the seal manufacturer’s decision, but in the case presented to my business ethics group, profitability was clearly the overriding consideration. The fact that such reasoning emerged unquestioned in an academic setting specifically intended to acquaint students with business ethics says something about the educational environment itself.

There are other aspects of these incidents worth examining, including the responsibility of regulatory organizations and other gatekeepers to identify and prevent such failures. But I can’t escape the callous position taken by my fellow students: that circumventing U.S. regulatory oversight to sell a potentially deadly product in less-regulated countries was somehow an acceptable business decision.

The maritime incident provides a contemporary, real-world example of the same institutional weakness in ethical judgment that I encountered as an MBA student nearly five decades ago. The circumstances differ, but the underlying concern remains remarkably consistent: when financial considerations are allowed to displace ethical responsibility, the consequences can extend well beyond a company’s balance sheet.

Perhaps this is the lesson business schools, corporate executives, manufacturers, and regulators alike need to understand. Ethical responsibility cannot be an academic exercise, a regulatory hurdle to be circumvented, or a consideration subordinate to profitability. Proactive ethical oversight must be an essential guiding principle in everything we do.