Business schools teach students the skills needed to analyze economic and other issues dispassionately. A key ingredient in our ability to perform objective analysis involves the minimization of emotion in the calculation. The idea is to remove our biases so we can look at a decision deliberately and objectively.
Our accepted approach works well if all of the factors related to a decision are included or assumed in our calculations. The approach is less effective when our calculus relies on public goods or ignores externalities or issues that are important to people affected by our decision.
Three recent events illustrate how passion or emotion can create situations demanding alternative analytical approaches. Powerful emotions have emerged in response to the recent Amtrak derailment near Philadelphia, the public response to the death of Freddie Gray, a black man who died in police custody in Baltimore, and the desire to help overcome the devastation resulting from the major earthquake in Nepal. Each of the situations is different and the nature of the emergent emotion varies, but each has the potential to influence institutions and business schools.
The Amtrak disaster raises questions, including why key safety equipment controlling a train’s speed had not been installed on the stretch of track in question. There will be much discussion of inadequate funding for Amtrak, the lack of investment in public transportation more generally in the U.S. and the intrusion of politics into the operation of many critical national systems. Regardless of whether or not a projectile hit the windshield of the train prior to the crash, the safety equipment would have likely prevented a derailment. While this Amtrak question is a business question, the questions raised in response to the events in Baltimore and Kathmandu will seem removed from the operation of businesses. They may reflect views about family stability, economic security or failure of government policies (ranging from providing proper training to police and maintaining appropriate building codes). Business deans may take solace in the fact that business practices – especially those recommended in business school – are seemingly not being questioned.
But the reality is that businesses are being affected by the passions arising here in America and abroad. What responsibility, if any, do business schools have in the face of the recent tragic events?
Carolyn Woo, president of Catholic Relief Services and a former b-school dean, suggested in an address at the 2015 AACSB Annual Meeting that many people see business as a necessary evil. That is, business is an amoral institution. By amoral, I mean that business is rational, self-interested and focused on generating profitable outcomes, and not laden with obligations related to societal circumstances. Dr. Woo suggested that it would be so much better if business were viewed as a necessary good.
Colorado Lt. Gov. Joe Garcia went a step further in an address at the 2015 Partners in Business Ethics Conference when he asked why so many students come into business school seeking to do good and leave seeking to do well. His statement challenged whether business schools were contributing to the problem. Does our standard approach break students of their youthful idealism in the name of objective and rigorous analysis? And while we’ve assumed that the world is better off because of our approach to business, the view is not uniformly embraced. Massachusetts Sen. Elizabeth Warren, for example, recently observed that “when the top 10 percent gets 100 percent of the income growth over the course of a generation, then the America of opportunity is vanishing.” As people question our assumptions or become cynical to the current situation, they are more likely to embrace the passions that say we should teach something else instead. There are three lessons for business schools to remember in the face of the passions generated by the Amtrak, Baltimore and Kathmandu tragedies.
First, business educators have an obligation to make social responsibility a core part of the curriculum. Students need to understand that they have obligations that extend beyond the free market, which gives them the absolution to focus only on themselves. This duty exists in the form of corporate social responsibility (CSR), which is usually taught in business school. Ironically, while there continues to be much debate among academics (and some practitioners) about CSR, the inability of government to solve many societal problems has increased expectations that business must step in and create solutions. The increasing expectation of business will lead to ad hoc approaches and decisions regarding exactly what a firm should do. It will be better for business schools to provide guidance on what obligations companies should reasonably accept.
Second, while the Amtrak, Baltimore and Kathmandu examples seem to be very different, they are related in their connection to aspects of business or commerce. Amtrak did not install speed controls on the section of track where the crash occurred, in part because there was a view that excess speed could not occur for trains traveling north. Regardless of the judgment’s sincerity, it is also likely that the lack of resources available to the company contributed to the judgements. Funding for Amtrak has been greatly affected by political viewpoints about the value of supporting mass transportation and infrastructure. Business decisions, as we know, are regularly made in a resource-deficient environment.
The issues in Baltimore are more complex. It is likely, however, that the instances of the brutal transportation of prisoners, as widely reported in the media, is related to the lack of economic opportunities for segments of the population. The opportunity gap is clearly affected by government policy and business decisions. A solution will require some compact between political authorities and business organizations, for inadequate education and training limit the opportunities for many individuals in poorer parts of Baltimore and the broader U.S. At some point, businesses will be forced to take responsibility for providing the education and training that the government has neglected, or businesses will choose to abandon such locations. But firms will have few other choices than to take responsibility. And this will be especially true for small- and medium-size firms, as well as entrepreneurial organizations, health care and educational institutions. In turn, the community will develop strong expectations regarding what firms should do to aid people who are less well off.
Third, business often has special expertise that can be leveraged during crises. Companies with logistical strengths and organizations with health care emphases provide great value during recovery efforts, such as the one ongoing in Nepal. The outpouring of generosity from people across the world must be coordinated and managed. Governments will play a critical role, but it is inevitable that firms will be expected to pick up responsibilities, especially as foreign governments withdraw resources over the course of the recovery and rebuilding effort. The availability of the business expertise will fuel expectations (likely voiced in social and other media) for firms to orchestrate a better recovery effort. At a minimum, the expectation for business involvement in creating solutions will make it difficult for firms to disclaim interest in helping. Confidence in business efforts means that firms must engage in social responsibility efforts or risk alienating customers and clients.
Business obligations to society have grown, even as some firms and many academics have denied the connection. The underlying lesson is that business needs a strategy to manage society’s new expectations and that few organizations will get a free pass, particularly as social media and information transparency broadcast tragedies graphically to people who in turn react emotionally. Even if some of the expectations placed on business are unfair or unwarranted, the uneven response of firms means that pressure will exist for more systematic and consistent approaches. Although people know that future tragedies cannot be eliminated, they seek competent responses and have more confidence in business to provide them than the government. To business schools this can mean only one thing: CSR anyone?