Corporate responsibility in business schools

AUTHOR: Rob McLean   DATE: 08.12.05   ISSUE 3, 2005

Paying attention to safety and occupational health fit into conventional notions of duty of care. What’s new are initiatives such as HIV/AIDS. Anglo estimate that 34,000 of its 145,000 employees are HIV positive. They have a voluntary counselling and testing initiative, which has a 21% uptake. They have 2,100 employees on Anti Retroviral Therapy, with over 90% adherence.²

"Recruiters are attracted to students who have the ability to solve problems and get things done, especially where they have demonstrated capability in a social context." Rob McLean

Is Anglo playing this role to serve shareholder interests? I believe it would say yes because of the lack of public health resources and the impact of a pandemic on the availability and productivity of its workforce. I suspect Anglo would also say that it is seeking to fulfill what Ian Davis of McKinsey calls a ‘social contract’ for its presence in the community.³

What’s happening at Anglo American and other global companies in their relationship with communities is shaping our understanding of the role of corporations in society. As such it has particular importance to business schools. There is a strong orientation to shareholder value in the MBA experience that comes through courses in corporate finance and strategy.

This is complemented by a focus on what makes for the long-term success of organisations in terms of the way they set values, rewards and incentives. Students get to work through issues of business ethics and to see ‘business as a social system of responsibilities, commitments, relationships and purposes’, as an AGSM course outline explains it.

Besides the course content, students have the opportunity to meet with the likes of CEOs such as Michael Hawker of IAG, who discussed why he has put such an emphasis on sustainability, including working with police and local government on crime reduction initiatives, or Leigh Clifford of Rio Tinto, who recently explained how doing the right thing to advance indigenous communities in Australia, through training, scholarships and community foundations, has led to privileged access to resources with indigenous communities in other countries. Students also attend lectures by overseas visitors such as the Scottish social entrepreneur and author of The Spirit of Success, Norman Drummond, who emphasises the moral dimensions of responsible leadership and the opportunity of managers to contribute to their communities.⁴

Are these initiatives enough in an MBA program? Should there be specific courses in CSR and sustainability? Should there be an integration of sustainability and CSR perspectives across the curriculum? Should the leadership dimension of a business school education be strengthened to incorporate the social and environmental context? Are students demanding CSR courses and sustainability?

These are the kind of issues AGSM curriculum design has to address, as is the case at other leading business schools. The way in which a school responds to these questions reflects its view of how best to design and deliver the MBA experience. Moreover, one can point to significant shifts over time in the demand for and supply of courses addressing the social context of business.

MBA curricula of the 1960s and 1970s paid scant consideration to the social context of business. In my MBA program the one core course that came close was called Conceptual Foundations of Business. It provided an outline of the corporation, shareholder interests and the foundations of a capitalist society. In 1978 a report on Harvard Business School by the then President, Derek Bok, criticised the School for the lack of a course on the role of the corporation in a free society. That criticism was subsequently addressed.

It’s only in the past decade that courses and research on sustainability, social responsibility and social enterprise have become common in business schools. In marketing courses there are case examples of companies such as the Body Shop positioning its brand as an ethical company. In finance courses triple bottom line and balanced scorecard notions are taught, and there may be reference to the Equator Principles of the World Bank for lending by a number of global banks for dams and forestry projects. Research on social responsibility by AGSM Professor Timothy Devinney⁵ highlights the value consumers are prepared to pay for ethical products and socially responsible business practices. Research by Professor Timothy Devinney and Dr Giana Eckhardt explores how consumers rationalise ‘unethical’ purchase decisions.⁶

Last year a report on teaching sustainability in Australian business schools reached a conclusion that came as no surprise to business school deans. It was that the demand for such courses is limited. Students undertaking an MBA are seeking skills to advance their careers and most are of the view that another elective in finance, marketing or organisation will have more value than a course in CSR/sustainability. This may be a shortsighted view but it is one that comes into consideration in curriculum design. AGSM offered a sustainability course for several years but take-up was disappointing, with less than a quarter of students selecting it. Students are skeptical about whether many reported CSR initiatives are anything more than PR, a view many journalists share. They have the opportunity to test this skepticism through discussions with CEOs and senior executives during the MBA program.

Changes in demand are afoot for executives who can develop the ‘social contract’ referred to by Ian Davis. Learning and Development executives are charged with developing greater strategic thinking and execution ability in their leadership ranks. Recruiters are attracted to students who have the ability to solve problems and get things done, especially where they have demonstrated capability in a social context. As corporations become better able to articulate how social issues fit into their strategies, they will be in a position to communicate the skills and perspectives needed in the managers they attract and develop. That in turn will encourage business schools to integrate the social context into leadership development and strategy thinking.

The current orientation of business schools to thinking about social responsibility owes much to Peter Drucker. In his 1986 book, Frontiers of Management, he argued ‘the first responsibility of business (thus) is to make enough profit to cover the costs for the future.⁷ If this social responsibility is not met, no other social responsibility can be met.’ He then goes on to argue that …’the proper social responsibility of business ….is to turn a social problem into economic opportunity and economic benefit, into productive capacity, into human competence, into well-paid jobs, and into wealth.'

This thinking has influenced other business school contributors on sustainability such as CK Prahalad with the book, Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits.⁸ The $100 lap top computer proposal announced recently is an example of this type of thinking. I first heard the proposal a year ago when an MBA team at AGSM produced a business plan in the Connector Business Plan Competition for such a product.

If we bring Drucker’s insightful views into the way we develop future business leaders we will be in a position to ‘do well and do good’, a credo Drucker ascribes to Control Data founder William Norris.

*Presentation to Financial Community on Anglo American’s Sustainable Development Performance 2004-05.
² http://www.angloamerican.co.uk/
³ Davis, I (2005) The Biggest Contract, The Economist, May 26 2005.
⁴ Drummond, N (2004) The Spirit of Success: How to Connect the Heart to the Head in Work and in Life, Hodder and Stoughton
⁵ Devinney, T., Auger, P., Louviere, J. and Burke,P (2003) What Will Consumers Pay for Social Product Features? J. Business Ethics, vol 42, no 3.
⁶ Devinney, T., Eckhardt, G. and Belk,R. (2005) Consumption Ethics Across Countries, Consumption, Markets, and Culture, vol 8, no 3.

⁷ Drucker, P (1986) The Frontiers of Management, Harper and Row, New York.
⁸ Prahalad CK (2004) Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits, Upper Saddle River, NJ: Wharton School Publishing.