Two years ago, a group of Harvard Business School students, supposedly the most aggressive and cold-hearted of the stereotypically aggressive and cold-hearted MBA types, created an initiative to have all of their graduating class sign an “MBA oath” that would have them pledge to act in ethical ways. It gained momentum- especially in the aftermath of the financial crisis- but has lately lost steam as the sense of urgency to reform has dwindled. An argument against it is that such an ethical oath is naive and inapplicable to the rough-and-tumble world of high-powered corporate battles. But is there a case to be made that the MBA oath would actually help businesses grow?

The idea of a professional ethical oath of conduct is hardly new. The Catholic Church was pushing lawyers to swear an oath against deceit as early as the 11^th century. Nowadays, many state bars such as those in Michigan and Colorado require new licensees to swear an “Attorney’s Oath”. This tradition extends even further back in the medical profession- the Hippocratic oath is, after all, named after an ancient Greek. These professions recognize that their enterprises have more stakeholders than just their own companies- their actions affect patients, hospitals, defendants, plaintiffs, and many others. With the singular focus of modern business and especially finance on shareholder value, such an oath would be a good reminder that stock prices aren’t the only effect of a corporate executive’s actions. That is, if the BP oil spill and subprime financial crisis haven’t made that abundantly clear already.

Of course, the most cited argument against such an oath is that it creates a handicap that reduces a firm’s competitive advantage. Let’s say my Company A decides not to produce our product in a developing country due to concerns over environmental and labor issues. Am I just supposed to watch Company B take that opportunity and lower its costs, driving me out of business? If my company pays its workers a “fair” wage of $15/hour, won’t it be outcompeted against a company that employs workers at minimum wage? If I don’t take every competitive advantage I can, how can my business compete against other, less scrupulous firms? In the face of these pressures, what’s the use of a flimsy promise?

Like I said before, the purpose of the oath is to remind oneself that shareholders are not the end-all-be-all of a firm’s value. While a firm’s financial statements are an important part of its stock value, it is ultimately a firm’s ability to satisfy customer needs that will help it achieve sustainable success. With the growing market and awareness for socially responsible business practices, customers will increasingly gravitate towards firms with such practices and away from firms that don’t follow these standards. For example, even Nike- it of the infamous sneaker sweatshops- has improved worker safety regulations and has (marginally) reduced excessive worker hours and improved pay. Rather than being forced to become more ethical by negative, shareholder-value-decreasing press, companies should take the initiative and introduce ethical best practices in a way that is profitable both for shareholders and society. The marketing potential from such a shift wouldn’t hurt, either.

But ultimately, beyond the numbers, instituting a business oath of honor is a matter of reputation. Talented individuals have chosen medical and legal professions over business careers because it has historically been considered more prestigious. People would accept slightly less pay and more schooling debt to get a J.D. or an M.D. over an MBA, and the same cannot be said the other way around. Part of that prestige stems form that fact that the two occupations are seen as professions rather than careers- implying a standard of integrity and conduct that businesses executives simply do not possess (although some may dispute the lawyer part, going to Harvard Law is still going to elicit less doubt about your conscientiousness than going to Harvard Business). Having a similar code of ethics for businesses will boost its prestige as a creator of social in addition to shareholder value and perhaps attract more bright minds to Goldman Sachs as opposed to the Mayo Clinic or top law firms. As the website MBAoath.org states, “Our long-term goal is to transform the field of management into a true profession, one in which MBAs are respected for their integrity, professionalism, and leadership.” Now that would attract more brainy talents that create most of the business value in our knowledge economy, wouldn’t it?


(Photo: cvilletomorrow)