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The Big Question

November 10, 2011


What Should We Teach Our Business Leaders?


Executives must overcome moral hubris and realize they, too, might make bad choices, says Nitin Nohria. Leaders must learn to wield power to work for the greater good, not just to increase profit, says Carly Fiorina

Nitin Nohria: Business leaders often suffer from what I call “moral overconfidence,” or an inflated sense of their strength of character. So moral humility may be the most important thing we can teach them. Many people view “character” as an immutable trait formed during childhood and adolescence. I believe character development is similar to the development of knowledge or wisdom—it’s a lifelong process. The world isn’t neatly divided into good people and bad people. Most will behave well or poorly, depending on the context.

Experiments dating to the 1950s illustrate this. We discuss these at Harvard Business School in a required course called “Leadership and Corporate Accountability.” Nearly 60 percent of a group of Princeton divinity students, despite just having heard the parable of the Good Samaritan, declined to help an apparently injured man while walking across campus because they were asked to hurry to deliver a sermon—on the Good Samaritan parable. In a Yale experiment, nearly two-thirds of subjects acting as teachers administered excessive electric shock (or thought they were doing so) to actors playing students who made mistakes. At Stanford, students acting as jail guards quickly began to behave abusively toward a group of “prisoners.”

In each case, some did the right thing, even under pressure. But more people assume they’d be in this “good” group than really would be. When I teach about the Yale experiments, I ask students to raise their hands if they think they’d have stopped delivering shocks. At least two-thirds say they’d have had the courage to stop. In reality, the experiments suggest that only one-third would do so. Business leaders need to remember that most of us have too much confidence in our strength of character. B-schools can help by teaching them to remain vigilant about this hubris.
— Nohria is dean of Harvard Business School.

Carly Fiorina: Most businesses, most of the time, do what they’re supposed to do. They provide value to customers, create jobs, and are responsible members of their communities. Unfortunately, we also see spectacular failures in business responsibility. During the dot-com boom, intelligent people concluded that it was logical for companies to be worth hundreds of times projected earnings with little prospect for profitability. Enron executives were aided by lawyers, accountants, bankers, and analysts. The mortgage mess was created in no small measure by bankers and builders betting real estate prices would always go up and that it didn’t matter that people were borrowing money they could never repay.

Too many people simply set aside common sense, good judgment, and sound ethics. They could explain risk calculation models, but they either couldn’t see or ignored the fundamental risks they were taking. These people focused on the short-term opportunity to boost profit and stock prices without asking whether that opportunity might destroy long-term value by ruining companies and lives and undermining confidence in our economic system.

When I attended the Sloan School at MIT, one of the most valuable courses I took was called “Readings in Power and Responsibility.” We read literature, not business cases. These works were about power, not simply as an achievement but as an obligation to serve a greater good. We learned that the responsible exercise of power requires balancing constituents and considerations.

Business schools should teach that “going along to get along” can have disastrous consequences. They should teach CEOs to produce long-term, sustainable shareholder value by balancing the needs of customers, employees, communities, and financial backers.
— Fiorina is an ex-chairman and CEO of Hewlett-Packard (HPQ) and a former candidate for the U.S. Senate.