MBA Programs Teach Students to Learn From Enron-Type Scandals

Enron, WorldCom, Tyco, ImClone, Xerox. All have become synonymous with corporate corruption and scandal. But lately those and other black-mark companies have acquired a new identity — as teaching tools for MBA students.

"They make great case teachings in business school of what not to do," said Arvin Pasricha, 26, a second-year MBA candidate at New York University's Stern School of Business.

B-school professors and administrators are finding it hard to ignore the chain of corporate crimes and deceptions that rattled investors, consumers and the markets in the past year.

On the contrary, they've discovered that cases like Enron, WorldCom and the litany of others fit snugly into the curriculum — sparking invigorating class discussions and making for relevant homework assignments.

Though graduate business programs have been offering or even requiring ethics and law classes for years, the issue has a new pertinence for current students and teachers.

"Everything going on with the scandals has brought it all to life," said Gene Anderson, associate dean for degree programs at the University of Michigan Business School.

One of the Stern term projects this semester asks students to analyze a real-life ethical or legal dilemma they were privy to on the job and detail how the problem was resolved. Class readings have titles like "Requiem for an Honorable Profession" and "Is Business Bluffing Ethical?" Then there's the "New York Times test," when professors tell students to picture their names and faces splashed all over the morning papers the next time they think of bending business ethics a bit.

Sometimes even the notorious companies' dodgy financials are used in the lesson plans.

Pasricha said he was taking an accounting class when the nearly daily Enron news was breaking last spring. The professor brought in the company's financial statements to illustrate how the firm was recording its numbers and why its actions were dishonest.

"She showed us what they did wrong," he said. "It's a way to turn these negative things into real positives by teaching us how not to do business."

Because Enron — the energy giant that collapsed after executives pumped up stock values and earnings to hide $1 billion in debt — is such a meaty textbook case, lessons about it pepper the curriculum for Stern's required "Professional Responsibility" ethics class.

"Enron is in some sense the perfect storm," said one of the course professors, Bruce Buchanan. "So many different facets of the case raise issues: possible insider trading, whistle blowing, truth and disclosure."

Since the principle of professional responsibility pops up at every turn in the Enron maze, it's an ideal case for MBA hopefuls to learn ethics from, according to Buchanan. For some, at least, the lesson seems to be sinking in.

"It definitely makes you want to be on the right side of business," Pasricha said. "You don't want to be the villain. You want to be a part of something positive that helps people."

In the past, MBA students and professors say, class interest in ethics was barely more than a flicker. That's all changed now, especially since the corporate demise stories are often so juicy and compelling.

"A lot of students were sitting back with 'Show me' attitudes," Anderson said. "This year, they're right up on the edge of their seats."

Like Stern and Michigan, Penn State's Smeal College of Business has also incorporated the scandal stories into the program. Rather than delineating what's right and wrong, according to one first-year student, professors encourage MBA prospectives to figure it out by looking beyond short-term returns toward the bigger-picture impact of unethical actions.

"The professors are saying, 'Step back a little bit and look further off the horizon,'" said the student, Dave Fuetterer, 30. "Think about the consequences of your decisions. If you feel a little queasy about it being right, then it's probably not."

Fuetterer, like so many others in the business world, has stories of maneuvering around tricky ethical issues at work and feeling under fire to use some "gray-area" tactics to get desired results.

"In some cases I may not have been totally forthcoming, but I believed it would work and I felt OK with it," he said. "There were pressures about getting things done and out."

The rule books are partly to blame, because certain principles are vague, hazy and open to interpretation. Business types frequently have tales about using practices that are technically legal but ethically dicey.

Fuetterer, for his part, believes he'd handle those situations differently now. The scandals and his MBA program's focus on them have made him think more carefully about long-term consequences, he said.

"Before, there wasn't anybody policing or scrutinizing what was going on with big business," he said. "Now, there's less emphasis on doing borderline ethical things. Everybody is saying, 'We can't do that.'"