The Case For Changing Business Education

Editor’s Note: This was delivered as the keynote address at the AACSB International Deans Conference October 19-21 in Toronto. It has been lightly edited into essay form. 

If you know anything about me or my work, you know that I don’t shy away from controversy. Years ago, when I spoke about why people reject the science of climate change, I received copious amounts of hate mail. Someone once told me, quoting Winston Churchill, “If you’re not offending anyone, you never took a stand.” So, my goal this morning is to offend you — or at least to provoke you. I want to stir conversation about the state of business schools and the urgent need for them to change. You don’t have to agree with everything I say; I just hope it moves you to question, reflect, and engage.

There’s an endorsement on the back of my latest book that I treasure. You’re supposed to include praise like, “This is the greatest book ever written — everyone should read it.” Instead, Andrew Karolyi, dean at Cornell, wrote, “There is as much in this work with which I disagree, sometimes strongly, as there is with which I agree. I predict it will move your priors as it did mine. This conversation must be had — and now.”

That’s exactly what I’m trying to do here: start the conversation.

BUSINESS SCHOOLS ARE TALKING ABOUT CLIMATE — BUT NOT ENOUGH

Business schools have started to focus on climate change, and that’s good. If we’re going to solve this crisis, it has to come from business. We have to create leaders who understand the issue and have the courage to act. I’ve focused on this throughout my career. But the way business schools are doing it — simply dropping an elective or two into a curriculum that hasn’t changed in 40 or 50 years — won’t work.

The underlying structure of business education remains the same. It still teaches that the purpose of the firm is to make money for shareholders, that government has a limited role in markets, that efficiency is always good, that people are inherently selfish, and that nature has value only as a resource for us to consume. If those assumptions remain embedded in the curriculum, sprinkling in a course on climate change will accomplish little.

THE REAL QUESTION IS ABOUT CAPITALISM

The real question before us is not just about climate — it’s about capitalism itself. The version we have today is faltering. And I’m not the only one saying this. Nobel laureate Joseph Stiglitz argues that capitalism needs to be saved from itself. Paul Polman, former CEO of Unilever, calls it a “damaged ideology” that must be reinvented for the 21st century. And management scholar Peter Goergescu once warned it was “slowly committing suicide.” We have a problem with capitalism. That’s where our attention should be.

Two data points make this clear. First, the natural environment: capitalism is driving greenhouse gas emissions to unsafe levels. But climate change is only one marker among what scientists call the “planetary boundaries.” There are nine of them, and we are crossing seven — from biodiversity loss to freshwater depletion and habitat destruction. These aren’t just environmental issues; they are systemic breakdowns. To fix them, we must fix the system causing them — capitalism.

Second, the social environment: we are witnessing levels of income and wealth inequality not seen since the Gilded Age. Extreme wealth translates into disproportionate political influence. Research shows that as people become richer, they grow more disconnected from ordinary lives — and less empathetic. Remember when David Geffen posted a photo of his $450 million yacht during COVID with the caption, “Hope you’re safe too”? The problem isn’t just the yacht; it’s that he couldn’t see why it would offend people. That’s how detached parts of our system have become.

These are not externalities or unintended consequences — they are the products of capitalism as currently structured. Even the economic logic of shareholder capitalism has failed. Between 1978 and 2022, CEO pay grew eight times faster than shareholder returns. The system isn’t even working as designed.

BUSINESS EDUCATION IS FAILING, TOO

Business schools are part of the problem. We’re still teaching the same model of shareholder capitalism, even as it unravels. The critiques aren’t new. Warren Bennis warned in 2005 that business schools were “losing their way.” A Harvard Business School report later admitted that business education was struggling with questions of purpose and positioning. A Boston University study found that while business schools teach innovation, they rarely innovate themselves — remaining stuck in half-century-old approaches.

We can trace this failure through the input, throughput, and output of our institutions — our students. Historically, business school applicants score high on what psychologists call the “Dark Triad”: narcissism, psychopathy, and Machiavellianism.

When Oliver Stone made Wall Street, he wanted audiences to despise Gordon Gekko, whose “Greed is good” speech was inspired by Ivan Boesky. But Michael Douglas delivered it with such power that people came up to him afterward saying that speech made them want to go to business school. That’s the problem: we’ve glamorized the very mindset that corrodes the system.

A NEW GENERATION IS DEMANDING PURPOSE

And business school doesn’t fix it. Research shows that two years in an MBA program actually increases self-monitoring — students become more concerned with others’ perceptions, like salary — and they become more selfish. Then they go out and do what we taught them to do. A 2022 NBER study compared firms led by business school graduates with those led by non-graduates. Revenues and profits were similar, but in companies run by MBAs, wages fell by six percent. They made the system more “efficient” — by squeezing workers. The authors concluded these were “causal effects of practices and values acquired in business education.”

We even produced the people who caused the 2008 financial crisis. Have any business schools said, “Oops — we’ll do better next time”? We haven’t. We’ve avoided accountability.

Yet I see hope. The new generation of students entering our classrooms is different. They want purpose. They want to make a difference. They see business as a force for good — and they’re speaking up. Recently, Poets&Quants published a three-part series featuring Stanford students saying, “We’re not learning anything. Where’s the rigor?” I’m hearing the same at Michigan and Berkeley. If it’s happening there, it’s happening everywhere. These students are calling us out, and we owe them a better education.

Listen to Andy’s insights during AACSB’s 2025 Deans Conference on the AACSB Pulse podcast.

WHAT BUSINESS SCHOOLS SHOULD TEACH

So what should we teach? Here are some ideas.

First, we must examine the future of shareholder capitalism. Everyone in this room — and every one of my students — has only ever lived under one variant of capitalism. But there were versions before it, and there will be versions after. We are in flux right now. What’s next? We should be researching and teaching that — yet we’re not, because there’s no “theoretical contribution” for our journals. Our research has become incremental, not disruptive.

Second, we must return to fundamentals and teach students what capitalism actually is. In my course, Reexamining Capitalism, I begin by asking students to define capitalism. Most can’t. That’s astonishing. Data show that young people — even business students — are increasingly disenchanted with capitalism, yet they can’t define it. They treat it like a law of nature. We need to show them that capitalism is a human system that can evolve.

Third, we must expose students to the diversity of capitalism around the world. Most think there’s only one model. They’re shocked when I explain Nordic capitalism — high GDP, but also high equality. They’re even more startled by China’s variant. These systems reflect the values of their societies. We must ask: what kind of capitalism do we want?

Fourth, we must rethink the purpose of the firm. Ask anyone on the street to finish the sentence “The purpose of the firm is…” and they’ll say, “to make money for shareholders.” But as Lynn Stout showed, there’s no legal or practical basis for that. I prefer Peter Drucker’s view: “The purpose of a firm is to identify and serve a market. How much money it makes is a measure of how well it does that.” Put the cart before the horse, and you end up with Boeing — once a quality company, now in freefall. Kenneth Mason, former president of Quaker Oats, put it best: “Making money is no more the purpose of a corporation than getting enough to eat is the purpose of life.”

Fifth, we must reexamine the corporation as a “natural person.” In the U.S., corporations enjoy rights to due process and equal protection — but should they have free speech? Is spending money an exercise of that right? The Supreme Court says yes. Should they have freedom of religion? The Court said yes in the Hobby Lobby decision. The Founding Fathers feared this — artificial entities with perpetual life dominating society — and here we are.

Sixth, we must teach the relationship between business and government. Too many students think all lobbying is evil and all regulation is interference. I started a course called Business and Democracy, bringing together students from business and public policy. Midway through, I ask what their peers think. The business students say, “Why take a course on government? What does that have to do with business?” The policy students say, “You actually went in that building? They’re the enemy.” Both sides are astonishingly naïve. Very few business schools teach lobbying. That needs to change.

Seventh, we must ask whether we’re feeding the problem. Sumantra Ghoshal wrote, “Bad management theories are destroying good management practices.” He was right. Too many values embedded in our curriculum make things worse. When colleagues tell me they’re uncomfortable bringing “values” into the classroom, I say, “You already are. If you don’t see it, that’s the problem.”

Finally, we must rethink the purpose of the business leader. When business schools were first proposed in the early 1900s, they were meant to teach industry leaders to run commerce in service to society — like doctors serving patients. Rakesh Khurana’s From Higher Aims to Hired Hands chronicles how we lost that vision. We must bring back the idea that business is a vocation — a calling to serve society.

OUR CALLING

David Brooks recently said that some schools are recognizable not just by what their graduates know, but by their outlook on the world and their place in it. How many business schools can say that? We can tell when someone has an MBA — but can we tell where it’s from, beyond school colors and slogans? We need to create that kind of moral identity.

Brooks calls for “a coherent moral culture” — an environment that shapes character. We need to bring character formation back to the center of business education. We must teach not just the how of business, but the why. Not just the head, but the heart. The world needs leaders with character, wisdom, and judgment. It’s our responsibility to provide them.

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Andrew Hoffman is the Holcim (U.S.) professor of sustainable enterprise at the Stephen M. Ross School of Business and the School for Environment & Sustainability at the University of Michigan.

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