Schools With The Happiest MBAs


Study: Star CEOs With MBAs Tend to Be More Self-Serving

It’s the chicken-and-the-egg debate all over again. Does an MBA make executives more apt to think short-term and for their own personal benefit? Or, are MBA programs more likely to attract students with this mindset? A recent study doesn’t necessarily side with one side or another. But it does confirm one point in this debate: There is most assuredly a chicken and an egg.

Sarcasm aside, the findings of “A Fleeting Glory: Self-Serving Behavior Among Celebrated MBA CEOs” is a wake up call for anyone who thinks ethics courses are luxuries in the b-school curriculum. Authored by Danny Miller, who teaches at HEC Montreal and the University of Montreal, and Xiaowei Xu, a professor at California State University in Monterey Bay, the paper offers some discomforting data about celebrity CEOs, particularly those who hold MBAs. In particular, the paper notes, MBA were more prone to engage in “self-serving” behaviors that would benefit them personally to the detriment of their firms.

“It seems that among CEOs with positive cover stories in major business journals,” the report reads, “the MBA degree is associated with expedients to achieve growth via acquisitions. The costs of these CEOs’ initiatives show up in the form of reduced cash flows and inferior returns on assets. Moreover, consistent with the view that MBAs fail to sustain performance, we found that the firms of our cover MBA CEOs decline in performance more quickly than their non-MBA counterparts. The performance gap remained significant even 7 years after the cover story appeared.”

And then the authors delivered the most damning statement of all: “Paradoxically, [MBAs] also reaped more in compensation benefits after the cover event.”

What do Miller and Xu mean by “cover event?” Here’s how the study worked. The study sampled 444 “star” CEOs who’d been featured on the covers of Businessweek, Forbes, and Fortune from 1970-2008. To be included, the CEOs must have received positive press coverage. Overall, roughly a fourth of the CEOs possessed MBAs.

Mind you, there are some holes in the study, which the authors readily admit. For example, the study zeroes in on larger companies that would get the attention of mainstream business press – leaving smaller companies out of the loop. It is also a lagging indicator, as it covers a 28 year period that only goes back to 2008 – a period when business education was inured to shareholder value with little thought to larger social accountability.

Still, the study may have exposed some warning signs for boards to heed. “The managerial implications of our findings are fairly clear,” the authors conclude. “Rapid growth by acquisition may be an effective strategy at times—but it may also be a sign that an impatient CEO is working more for himself or herself than for the business. Another warning sign may be unusually large increases in compensation that follow publicity and growth. Indeed, CEO publicity which emphasizes the CEO more than the company may be a signal that boards should be alert in ensuring a longer term orientation for the company.”

At the same time, the study admitted that it couldn’t establish a correlation on whether “current MBA programs actually promote self-serving behavior in subsequent careers or whether those with a selfish bent seek out MBA educations.” That said, the study does a call for business schools to remain diligent in focusing on ethical decision-making in their curriculum.

“Indeed, the curriculum can be critical in exposing students to more socially responsible options for their careers. There has been an increase in the number of business ethics and corporate social responsibility courses offered in recent years. However, the danger is that these represent rather superficial overlays on an otherwise bottom line driven program. Presenting modules that deal with social and moral issues in courses in finance, economics, strategy, and even accounting might serve as recurrent and subject-specific reminders of the dangers of narrow opportunism and the rewards from avoiding it. It may even be that a more serious dose of social science and humanities is in order in MBA programs—one tailored to social and philosophical as well as fundamental moral concerns.”

Even more, the authors add that the findings are a nod to the importance of weeding out narcissists who will ultimately become poor stewards for their firms. “On the educational front, it would appear that more needs to be done to establish selection criteria that probe for more than a facility with words, numbers, and concepts, and to attempt, for all of its challenges, to examine the proven, enacted values of candidates. Although this is unlikely to be reflected in responses to a superficial survey, the essays an applicant writes and the social and personal initiatives he or she lists on an application might provide some clues.”

Most important, it is a reminder to everyone of how frail we all are – and to never forget who they are and why they entered business. In the words of Raymond Carver: “You never start out in life with the intention of becoming a bankrupt or an alcoholic or a cheat and a thief. Or a liar.”

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To read the full study, click here.

Source: Washington Post

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