The management gurus have been strangely reluctant to come forward with their views about the credit crunch. What could explain their unaccustomed shyness?
Back in 2005, London Business School's late Sumantra Ghoshal caused a furore in the groves of academe with a paper called Bad Management Theories Are Destroying Good Management Practices, which excoriated the business schools for their role in helping to create the Enron and WorldCom scandals.
Business schools, Ghoshal said, "do not need to do a great deal more to help prevent future Enrons; they need only to stop doing a lot [that] they currently do. They do not need to create new courses; they need to simply stop teaching some old ones… It is our theories and ideas that have done much to strengthen the management practices that we are all now so loudly condemning". In particular, obligingly backed the cult of shareholder value and macho management with ideas that were both self-serving and pseudo-science.
Ghoshal should be living at this hour. Managers from Bear Sterns, AIG, Merrill Lynch and others may not have done anything strictly illegal, but they are nonetheless in a direct line of descent from Enron in their devotion to their own cause.
In the FT last week, US economist William Lazonick reported that from 2003 to 2007, the top 500 American companies, including all those now in trouble, spent a stunning $1,700bn on buying back their own shares. Major beneficiaries, of course, were senior managers loaded to the gills with stock options. Lehman Brothers bought back $5bn of shares in the three years before it went bankrupt, money that could have come in handy these last few weeks. On his own admission CEO Dick Fuld took home "between $250m and $350m" since 2000 – and, as late as September, the company was seeking authorisation to pay out more than $22m in bonuses to departing executives.
Consultants and accountants, likewise deafening in their silence, will also be in the firing line for having lucratively devised and legitimised such schemes.
The secret that, understandably, none of the experts wants to admit to is that the heart of today's problems is human behaviour, not impersonal flows of money. Since it's people wot done it, it's there that the remedy has to be applied. What kind of remedy? Step forward two Harvard professors who in this month's Harvard Business Review, the US business bible, propose a radical solution: making management a profession, like medicine or the law, complete with its own Hippocratic oath, covering both personal ethics and wider responsibilities to society as a whole.
Ironically, given HBR's leisurely publication lead times, the piece doesn't even mention the financial crisis. But that does nothing to alter its accidental timeliness. The profs have given the game away: we can only avoid further episodes like this by junking the extraordinary and offensive idea that managers' only task is to make money and put responsibility back where it belongs – as managers' Job One.
