For most of American history, businesses were run to provide livelihoods and “reasonable” profit. In the last few decades, though, business and society in general have moved toward emphasizing profit maximization and individual self-interest. The shift from “reasonable profit” to profit maximization has significant implications for corporate behavior and government regulation. Moreover, how society views the purpose of the corporation has significant implications not only for business, but also for the perceived responsibilities of its citizens, their interactions with each other, and their obligation to their fellow countrymen.
Today, it is common for corporations to direct their attention to serving shareholder and management interests, and to achieving the highest short-term financial return. Not only has this view become commonplace in society and the economy, it has permeated educational institutions and affected how young people see the role of corporations.
Lost in this orientation, though, is a sense of the corporation as a creature of the state, created and given special powers and privileges by the state. The historic balance between “we” versus “me” has shifted dramatically toward a focus on self-interest at the expense of societal interest. The result has been a decline in broad social and economic values in favor of viewing the corporation solely as a vehicle for personal financial enrichment. That view represents a significant shift from the historical – where the grant of corporate privilege was to advance public purposes such as building roads, bridges, and canals.
In this paper, I examine law and business school curricula to determine which perspectives are taught in professional education, and student perceptions about business schools based on surveys at leading business programs over the past decade. I focus on business and law schools because they train the leaders of tomorrow. For example, 38 percent of current House members and 55 percent of Senators hold law degrees.[i] And of the top 50 “best performing” CEOs, 58 percent of the Americans had an MBA.[ii]
With this type of credentialing, the manner in which future leaders are taught will shape society in the decades ahead. Management science tells us that leaders need to be clear about the purpose of their organizations. As the training ground for future legislators, policymakers, corporate directors, and chief executive officers, it would seem that the purpose of the corporation should occupy an important place in law and business school curricula.
Yet what I found was troubling. Using an analysis of curricula, review of course syllabi, interviews with faculty members, and survey data on student perceptions, I find four important results:
- Many law or business schools do not require stand-alone courses that provide broad conceptions on the purpose of the corporation in society, although a number offer electives dealing in whole or part with this subject;
- Of classes that do focus on the purpose of the corporation, many emphasize the goal of maximizing shareholder value, especially in law schools;
- Instruction affects views of the world because business school surveys show that after completing school, students are more likely to see shareholder value as the most important goal of the corporation, and;
- The relative paucity of required instructional materials on broad conceptions of the purpose of the corporation has important ramifications for business, government, and society.
[i] Jennifer E. Manning “Membership of the 112th Congress: A Profile,” Congressional Research Service, March 1, 2011.
[ii] Morten T. Hansen, Herminia Ibarra, and Urs Peyer. “The Best Performing CEOs in the World,” Harvard Business Review, Volume 88, Number 1; pp. 104-113, 2010.
Leo Pasvolsky Senior Fellow - Global Economy and Development, Brookings Global – CERES Economic and Social Policy in Latin America Initiative