September 09, 2008
Business Ethics
Posted by Gordon Smith

Should law students care about business ethics? How about legal scholars?

Many of us here have written and taught about corporate social responsibility. Count me a skeptic on the potential role of law in improving corporate decision making, and my conversation yesterday with a business school professor at BYU only served to reinforce my skepticism.

This professor is serving on a committee to evaluate the Marriott School's success (or not) at inculcating business ethics in its students. The preliminary conclusion: students use ethical reasoning less as they advanced in their business training. They often become "single note" decision makers, meaning that they focus on shareholder wealth maximization as they progress.

This result is certainly not a function of legal constraints, unless business school professors are misunderstanding corporate law -- not that this would be unprecedented. Legal rules offer corporate managers lots of room to make "ethical" business decisions at the expense of shareholder wealth maximization. And this is why I often tell would-be corporate reformers that they should focus their efforts on business schools, not legal rules.

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