By Beth Gardiner
Provided by The Wall Street Journal
The sectors at the heart of the crisis have been the most popular areas of study at many top b-schools for years, luring future M.B.A.s with the promise of high-paying careers. The schools are having to rethink their approaches to finance and investment banking, updating lesson plans on the fly while they overhaul curricula for the long term.
Adding to the pressure for change is a debate about whether business schools bear some responsibility for the crisis. Critics see an arrogance in the schools’ culture, and accuse them of focusing too much on short-term gain and shareholder returns. They also cast blame on b-school researchers who helped design many of the models discredited by the financial meltdown.
"We have to try and figure out which parts of the intellectual and theoretical framework in finance and economics will remain relevant in the future," says Simon Taylor, who directs the master of finance program at the University of Cambridge’s Judge Business School. "There have been a lot of things taken for granted which are now seriously in question."
Deans and professors say the immediate priority for business schools has been to meet students’ demand for explanations of what is happening, with discussion sessions and panels in which financiers and bankers offer analyses and take questions.
Stefan Szymanski, associate dean for M.B.A.s at Cass Business School in London, says many academics are basing classroom work around real-world events. "If you can’t present a plausible account of the crisis, your lectures aren’t going to get off the ground in the first place," he says.
Meanwhile, economists and business-school professors are struggling to analyze the financial collapse and build new economic theories to replace those undermined by events. That is a process that will take years, ultimately leading to new models and ideas in business textbooks and syllabi.
In the long run, the biggest change may be a shrinking of schools’ finance and investment-banking programs. Taylor says he is surprised at the high number of prospective students still wanting to enter those fields, but predicts it will fall as they realize fewer jobs are available.
As the dust settles, areas like risk management, regulation, corporate governance and ethics are likely to play bigger roles in business-school curricula.
George Yip, dean of the Rotterdam School of Management at Erasmus University in the Netherlands, says teachers must deepen their approach to those areas. For example, many schools have had a simplistic approach to ethics, offering guidelines such as "’don’t take bribes,’ that kind of thing," he says. "You need to go beyond that, to how incentives encourage behavior that is unethical."
Such impressions are at the heart of critics’ contention that business schools helped set the stage for the financial crisis by fostering a short-term mentality that led graduates to make dangerous decisions.
Ken Starkey, a management professor at Britain’s Nottingham University School of Management, says the economic models developed by business-school faculty were central to a huge expansion of trading in the complicated financial products that now are crippling banks. "They’ve been absolutely at the forefront of delivering a new financial system which was relatively untested, a financial system which has taken us into uncharted waters," he says.
Some b-school faculty members say that, while it might be time for a shift in style, they aren’t to blame for former students’ actions. "I could teach you how to use a gun for good or for ill, and I can teach you how to create a financial product," says Alan Morrison, a finance professor at Oxford University’s Saïd Business School. "How you use that skill is down to you."
At Cambridge, Judge Business School director Arnoud De Meyer acknowledges that business academics had failed to sufficiently question their own economic theories when times were good. "Our academic role as a business school to be critical, to forcibly question the generally accepted rules, maybe we have forgotten that role in the last five to 10 years," he says.