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Catholic Colleges & Universities

Corporate scandal as a teaching moment

St. Paul, Minn.

At least five former students telephone Jeff Cornwall or show up in his office here every week. Many are recent graduates of the University of St. Thomas’ elite College of Business.

They come because “they’re facing cutting-edge concerns and realizing very quickly how difficult it is to navigate the business arena within the grade. A lot want to know how they can keep an Enron-like debacle from happening in their company,” Cornwall told NCR.

The scandals that have darkened the face of corporate giants like Enron, WorldCom, Global Crossing, Adelphia, Qwest, Sunbeam and others have startled the business school, which currently enrolls some 2,100 undergraduates and some 3,300 graduate students -- half of St. Thomas’ enrollment. The scandals have given deans, instructors and students pause to rethink how the ethical principles that students come to know throughout their years at St. Thomas can support their decisions in and out of the workplace for their entire lives.

Enron has become “a teaching moment” at St. Thomas, noted William Raffield, interim associate dean for the College of Business. Corporate malfeasance has caused the school to “look in the mirror,” and ask: “Are we doing enough? Are our students getting out with the ethical awareness they need” for their futures?

This business school “embraces the ‘Catholicness’ of all that we do here,” said Cornwall, who holds the Sandra Schulze Chair in Entrepreneurship. As a business college within a Catholic university, the school “is trying to find unique ways to deliver on our commitment.”

One of the ways is by integrating the liberal arts and the professional school’s curricula. Business students take two-thirds of their courses outside the business curriculum. Efforts are made to bring ethics into all the professional courses.

All students take an introductory required course in ethics and end their studies with a capstone course that aims to relate ethical responsibility with their field of competence.

“We really want to see ethics as a flagship -- not a fig leaf -- of the curriculum. It’s what makes St. Thomas different,” said Kenneth Goodpaster, holder of the Koch Endowed Chair in Business Ethics.

But “unless the entire faculty owns the ethics agenda, it’s not going to work.”

After 20 years of teaching at Notre Dame and Harvard and 12 years at St. Thomas, he’s certain that students take their ethics from “the whole, not just from one professor.”

Goodpaster has written print and Web-based textbooks and case studies that are used around the world for teaching ethics. He has also persuaded teachers with doctorates and years of experience to weave ethics into a finance, marketing or management course.

Goodpaster’s workshops for faculty and fulltime research associates come with ready-for-the-classroom videos, which he labels “irresistible.” The videos present case portfolios highlighting ethical issues that relate to a particular sector of corporate life.

St. Thomas is one of the few universities that address ethics in every course evaluation, he said, and has been doing it since the 1980s. The evaluation form asks whether ethics came up and whether or not it was handled sufficiently in the course. Determining which university departments could use “a little reinforcement” is one of the ways the college tries to have values and virtues permeate the entire curriculum, he said.

What Enron and other scandals have shown is that the crisis in the corporate world today is a crisis in ethics, Goodpaster said. It is also a “crisis of professionals” in law, auditing, consulting, investment banking and financial analysis -- all fields in which graduates of St. Thomas and other Catholic business schools are employed.

“We’re seeing professional judgment being displaced” by economic pressures and by greed, he said. Conflicts of interest are proving “much more serious than we’d imagined.”

The desire to provide a values-endowed workplace has attracted many alumni and other Twin Citians to two popular courses. One -- a 14-week evening course titled, “Spirituality and Management” -- has been endowed by an anonymous donor.

About 60 professionals -- most of them from the business world, but some from law and education -- select the Great Books Seminar each year. Goodpaster, who has moderated the seminar for years, said it has the potential “to put the MBA in a wider context.” The course, which has a hefty pre-assigned reading list and a final paper, meets 8 hours a day for six days in Owatonna, Minn.

About 80 percent of participants take part in a field trip to a Minneapolis courtroom where they sit in the jury box and listen to the judge talk about the process of justice. Here they begin to understand what philosopher Thomas Hobbes saw as “the war between people and attempts to keep the peace,” Goodpaster said. Many respondents report that it’s been “a lifesaving” experience, one that goes “much deeper than careerism.”

This semester Goodpaster and attorney Thomas Triplett, an adjunct faculty member in the new University of St. Thomas Law School, located in downtown Minneapolis, are offering a capstone course on business strategy and implementation with ethics as its unifying theme. The 14-evening sessions will showcase 12 firms, a foundation and a local government commission.

Enron’s collapse

“We’re also spreading Enron across the semester,” Goodpaster said. On Sept. 24 the MBA candidates discussed avenues for ethical analysis in general management. They looked at conflicts of interest in professional life with an eye to recurring patterns and techniques for reconciling them.

The class is examining Enron’s collapse from global, corporate and personal perspectives. Its impact on investor confidence in the stock market, how it has affected Enron’s competitors and what the scandal has cost executives Jeffrey Skilling and Andrew Fastow as well as its laid-off employees are all part of the discussion.

“Speculate whether players like Skilling and Fastow are truly ‘bad people,’ ” Goodpaster exhorted the class. “If they are, how did they get to where they were in the corporate hierarchy? If they are not, what happened to them along the way?”

Students want to know what to make of all that’s been occurring in the last year. So Goodpaster invited a local business writer to discuss the media’s oversight responsibility.

St. Thomas’ new dean of the College of Business, Christopher Puto, arrived from Georgetown University in August. Like many at the school he’s more disappointed than angry over the current crop of corporate miscreants. “My personal retirement [fund] is down 25 percent,” he noted.

However, the scandals present all schools with the opportunity to enhance their values-based education, especially Catholic colleges, because church teaching “is so consistent,” Puto said. Faculty members must take these “remarkably complex” issues and get their students to imagine what it would have been like to face such situations.

That’s a hard task, he admitted, especially for undergraduates who often lack the framework for distinguishing between what’s unethical but still legal, even as the legal landscape in corporate America continues to shift. “When you have an option to reveal data or not, what do you do?” Puto asked, tossing his hands into the cloud of unknowing that confronts many in the business world.

Value structures

That’s why graduates are returning for refresher courses. Not exactly one-to-three-day moral boot camps, but a chance for faculty to capitalize on skills the enrollees already have and give them confidence to work through problems as they arise.

“By the time 19-year-olds get to us, our key mission is to get in touch with the value structures that are there, to reassess them, give them a process for recognizing -- ‘I’m in conflict here’ -- and then let them find appropriate resolutions.” Whistle-blowing, which can sometimes result in a cover-up, isn’t their only way out, the dean noted.

Puto believes that a St. Thomas graduate would probably close a factory at about the same time as a graduate from any other U.S. business school, given the economic necessity to close. But he hopes that a St. Thomas alum would have first tried to find a buyer for the factory and would have treated its workers fairly.

“We want to be known for producing highly principled global business leaders. … That’s why students come here. But is it how they live?” Puto asked. The job of the university is nothing less than transformation of the individual, he believes. “We can shine here; we have the responsibility of reminding ourselves of this on a regular basis,” and in so doing graduates -- aware of their values -- can change the corporate world, he said.

In the case of Enron, going into the attack mode in the classroom is not the way to instill values, he said. Rather the faculty needs to demonstrate how businesses can get to the right goals without all the negativity.

Most business schools teach that profit is the end goal of business. But St. Thomas instructors endeavor to show that profit is a reward for delivering superior value to your customers, for discovering their needs, producing a product they want and can use, and selling it at a fair price. The global business leader will also pay a just wage, provide a safe work environment and respect the role of the physical environment, Puto said.

The belief that corporations exist to make a profit is the chief reason why “ethics is on the defensive” in most enterprises, said Peter Vaill, who teaches management -- the leading major in the business school. Vaill opposes indoctrination but thinks that students must be confronted with the ethical dilemmas managers face. When it comes to returning students and MBA candidates, some have had “a heavy dose” of ethics, and some practically none, he said.

Although ethics is everywhere in the curriculum, it’s not enough to state principles, Vaill said. “There’s a danger that some of these issues are falling through the cracks.”

For the first time in its history the Academy of Management has begun to consider “our responsibility as faculty members -- to what extent do we supply the tools for an Enron to exist,” Vaill said.

He cited a recent example in which 200 senior managers were challenged to make the case that the primary reason for the existence of a corporation is for employment, not profit. None could. “That’s quite a dramatic indication of individual companies marching to a different drummer.”

“While most executives are not evil,” most are caught in a system they didn’t create, under crushing pressure to perform or be fired. That’s why they are highly motivated to make as much profit as possible, he said.

A consultant to an auto firm for 10 years, Vaill saw how lavishly compensated executives became insulated to the realities of daily life most people face. “These guys don’t know what it’s like to put gas in a car or buy insurance. They’re out of touch and running an organization as if it were primarily a money machine instead of a human community.”

It’s not enough to lay ethical principles before students, Vaill said, noting that these principles don’t apply clearly. Often two or more can be in conflict. Instead he calls for “ethical reasoning,” whereby business leaders work out an “ethical stance” -- making the case say for firing or retaining someone.

In a culture of sound bites where people think in bullets rather than connecting a series of thoughts, Vaill’s challenge is daunting and requires judgment, decision-making and choosing a course of action. When he has taught ethics, Vaill has frequently found that what students call an ethical question is not one at all. “It’s clear that a certain practice is wrong. Why isn’t it being seen as such?”

The author of Managing as a Performing Art harbors “deep doubts” that the corporate world will emerge cleansed after its most recent bout of corruption. “Corporations are totalitarian bureaucracies” and it takes “enormous courage to maintain your own personal integrity” within them, he said.

Catholic higher education ought to be about “importing more courage into this world,” he said. For their part, Vaill and Goodpaster have developed guidelines for what they call, “the courageous practitioner.” But better than extolling principles, they -- like many St. Thomas faculty -- invite executives into the classroom who stand out because of their ethics.

For more than a century St. Thomas has drawn students who want to be entrepreneurs. About 400 undergraduates are currently pursuing majors in the Department of Entrepreneurship. One of their courses -- “Christian Faith and the Management Professions: An Entrepreneurial Perspective” -- has won the Innovative Entrepreneurship Course Award for 2002 from the U.S. Association of Small Business and Entrepreneurship.

The gospel and the entrepreneur

What pleased Cornwall and Michael Naughton, who co-teaches the course, is that the prize has gone to a course that counts as a theology course. In it the two instructors help students understand the theological underpinnings for the Christian tradition’s idea of work and leisure. The pair tries to apply philosophical and theological knowledge to entrepreneurial issues.

The course examines such questions as: “Is creating wealth a virtue? What is the role and meaning of spirituality for the entrepreneur? How does one integrate the intense entrepreneurial lifestyle with the gospel?” It looks at entrepreneurship as a vocation and models ways of sharing wealth within an enterprise in light of Catholic social teachings.

One of the course’s aims is to engage in dialogue with those of differing opinions in an open, critical and creative way. Students say they like the fact that the course is team-taught and brings the assets of two distinct disciplines into sharp contrast as well as harmony.

Another objective is to help students appreciate the role of leisure in the work life of entrepreneurs. Often students have grown up in households with family-owned businesses and have known the pressures of such a life.

Naughton, who directs the John A. Ryan Institute for Catholic Social Thought, imparts an invitation during every opening class and on his syllabuses. “See me about any questions you have about the class or anything else.” It’s the “anything else” that draws students, he said, and gives him the opportunity to live out his vocation as a teacher.

A favorite book of Naughton’s and one that is on the entrepreneurs’ reading list is Josef Pieper’s 1937 critique of America’s overworked society, titled Leisure as the Basis of Culture. Often Naughton begins his classes with “an experiment” -- five minutes of silence. The effort is to teach how important is a moment of leisure in recreating one’s day, one’s world, he said.

“We are all so career-minded; our lives are alive with activity -- acquiring, assessing, managing -- where is there any room for stillness?” asked Naughton. But once students, many of whom have run to class, sit silently, they also appreciate its benefits. They report that in silence they are most receptive, most vulnerable and most true.

Naughton, who practices centering prayer and tries to attend Mass daily -- or at least weekly on campus -- hopes that after four or more years at St. Thomas, students will see that spirituality is a discipline. “It’s the way you organize your life. It’s realizing that God is always present.”

Enron has given everyone at St. Thomas a chance to “rethink how we understand ourselves in this world and the institutions in which we live and work,” Naughton said. To see corporate deceit and corruption through the eyes of faith means to confront the notion of personal and structural sin.

The two places where people most likely will save or lose their souls are within the family and on the job, Naughton said. “This will strike some as overly intrusive and more pious than necessary, yet, given the reality of personal and structural sin, a just organization is not the ordinary human condition.

“Rather,” he said, “it’s something that must be laboriously built.” This occurs not only through markets, technology and skills, but through “the spiritual practices that challenge our market rationalizations, our economic structure and our organizational policies.”

Enron and the other myriad examples of corporate deceit that have come to light this year could prompt a new appreciation and invocation of Catholic social thought on America’s 235 Catholic campuses --163 of them with undergraduate and 93 with graduate programs in business. Naughton and a half dozen others with whom NCR spoke on both of St. Thomas’ campuses hope that this will be the case.

But don’t expect it to happen overnight, warned Robert Kennedy, professor of management and Catholic studies. St. Thomas will continue to hold breakfast meetings with local and business leaders (see Page 38), to provide forums for discussions in the parishes and especially to raise awareness among its students of ethical dilemmas that could await them in the workplace. After Enron, there’s an appetite for something new, he said.

Patricia Lefevere is an NCR special report writer.

Related Web sites

John A. Ryan Institute for Catholic Social Thought

Georgetown Business Ethics Institute

Net Impact

St. Olaf Catholic Church

St. Thomas College of Business

National Catholic Reporter, October 25, 2002