Martin Melaver: A Response to the MBA Oath

Posted on Thursday, June 25th, 2009 at 3:36 am by dpacheco

The following post was written by author Martin Melaver (Living Above the Store: Building a Business That Creates Value, Inspires Change, and Restores Land and Community) in response to an NPR story about two Harvard Business School graduates who, in the wake of the Wall Street meltdown and the ensuing financial collapse, created their own version of the Hippocratic Oath: it’s called the “MBA Oath”—and it aims to rein in the excess and greed endemic in the system. (The NPR story can be heard here.)

On Nov. 29, 1961, NASA launched its first attempt to have a capsule orbit the earth. John Glenn wasn’t on board. That wouldn’t happen for another three months. No, the astronaut was a chimp named Enos.

Enos had undergone a year of intensive conditioning prior to the launch. He was rewarded with banana pellets when he got the flight tasks correct, electric shocks when he was mistaken. By the time the Atlas rocket took off, Enos was ready.

But something went badly amiss with the mission, and the ship began to wobble erratically. To make matters worse, every time Enos performed the flight tasks he knew would correct things, the malfunctioning system administered shocks rather than banana pellets. Scientists assumed Enos would change his trained behavior, thereby responding incorrectly to the situation up in space in order to avoid pain and receive the pellets. The scientists were wrong. Enos continued to perform the flight tasks he knew were right, even though he got an electric shock every time he did so.

This story of Enos is largely a story about knowing the right thing to do, despite social conditioning and incentives sending you in the wrong direction.

I’m reminded of Enos’ story in light of a recent news item about a new MBA oath emanating from the Harvard Business School. The Oath calls for (among other things) ethical behavior, accountability to a broad range of stakeholders, and commitment to triple bottom line prosperity (see http://mbaoath.org/take-the-oath/). The oath is very cool. The timing impeccable. And it deserves traction. I’d like to bless it with viral marketing success. Seriously. I do, however, want to pose a few questions and comments surrounding this “Got Ethics?” campaign.

Question #1. What does it say about our MBA programs that we actually need to spell out the need to behave ethically? Enos knew what his job was — even though electric shocks to the system were telling him otherwise.

To put this in a more personal context, I grew up in a small town (Savannah, Georgia), where there were always “eyes on the street,” Jane Jacobs’ well-known phrase that accurately conveyed the sense that if you were up to no good, the whole community was watching. In 1992, when I stepped in to manage my (now) third-generation family business, I could feel the eyes and ears and hearts of the neighborhood pressed against what I would do and not do. My dad’s entire managerial practice manual, one that he handed down to me? “Do the right thing.” That was it. It simply never occurred to me as I took the reins of my real estate company almost 20 years ago that I would conduct business in any other way. That was what everyone in the community expected. As they should. I never realized I had a choice in the matter — and events like Valdez and Bhopal, and Enron, and Madoff simply confirmed basically that father knew best. Business has to do the right thing . . . or it should lose its license to practice.

Question #2. What does it mean for a business to be accountable to a world of stakeholders beyond its immediate shareholders? Don’t get me wrong. I have spent my entire professional career shaping a business that is focused on creating value for an entire community. Living Above the Store, my recently published book, is devoted almost entirely to the proposition that a business separated from the interests of community (and the environment) cannot long endure.

But here’s the rub: at a certain point, a business will always come to these forks in the road where you can enhance value for the community, but you will diminish returns for stockholders. As a privately-held, values-centric business, my colleagues at Melaver, Inc. have few doubts about these forks in the road. We will keep investing and investing up to a point that a minimum return threshold is reached, a return we feel comfortable with as a business. And I believe that for a business to survive over the long haul, such an approach is not only viable but necessary. I wonder, though, if the signatories to the MBA oath realize just what they are signing on to. It’s a wonderful journey, but certainly not the journey many biz graduates are idyllically imagining.

Question #3. This comes from my 15-year-old daughter Dana, who wants to know: “Are MBA grads who sign the oath willing to be dis-barred’ for violating the oath, much like doctors who violate the Hippocratic Oath?”

It’s not an idle question. My company’s reputation, built painstakingly over 70 years, is one that has to do with the nurturing of nature and community. If our talk about our commitment to sustainability exceeds our walk, we can watch a 70-year reputation go up in smoke in a matter of moments. How about these graduates who sign on to the oath? Are they similarly invested? Is there substance beneath the symbolism of the act? Inquiring 15-year-old minds want to know. The Atlantic just came out with a story of a long-term psychological study of 286 Harvard men from the late 1930s and early 1940s. Perhaps we need to begin a similar study of this most recent Harvard Business School class, looking at how their decision to sign (or not sign) the Oath today plays out in the course of their lives for the next 50 years.

I’ve never signed an ethical pledge in my life — at least as it pertains to business practices. And yet for my entire professional career running a real estate business aspiring to sustainable principles and practices, I have felt the expectations of an entire community looking on as my colleagues and I have shaped the way we’ve done business: the pace at which we have grown, the folks we have chosen to partner with, the ways in which we have leveraged particular projects to reform legislation at the local or even state level. Our business is shaped by a sense of deep intimacy with nature and community, a sense of living directly above the store where we ply our trade. It may not be a beautifully-articulated oath — but it is most definitely a bond that links us morally, ethically, and financially to the land we are bound to.

When the chips were down, Enos knew what he needed to do to right his ship, despite all the social conditioning to the contrary. I believe my own colleagues at work have a similar moral compass. And I would hope the same applies to business graduates as well.

 

Martin Melaver is CEO of Melaver, Inc., a third-generation family-owned business devoted to sustainable principles and practices. He is also the author of Living Above the Store: Building a Business that Creates Values, Inspires Change, and Restores Land and Community (Chelsea Green, 2009).

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