NED sized corporate governance hole in MBA curriculum requires filling now as 20-year time lag between lessons & execution
KEY findings from a recent paper on business diversification by Jiwook Jung and Taekjin Shin reveals that what is taught on the MBA core curriculum – aka what next generation CEOs learn in business school – has positive real-world business impacts and does actually directly inform and influence business performance! Mainly as a result of the beliefs CEO’s hold after completing their courses about what doing a good job could, would and should be. The bad news is that there is a twenty-year time lag between lessons and execution.
Nowadays it is a commonplace to scoff at the ubiquity of MBA qualifications or their apparent uselessness when it comes to controlling raging avarice and poor decision-making in the executive suite. Worse still, to many eyes the ubiquity of MBAs has further commoditised their diminishing utility while sanctioning the widespread over-confidence said business credential provides or is deemed to virtue signal. New research from Jung and Shin illustrates that pedagogic ripples in the MBA core curriculum can cause tsunami waves of change when current graduates gain executive office and power.
Using collected data on 2,031 CEOs who ran 640 large U.S. corporations from 1985 to 2015 who earned an MBA before, during, and after the 1970s, Jung and Shin found that once later (post 1970) cohorts had control of the levers of corporate power that they were 17-24% more likely to pursue radically different business ideas and agendas[1]. Indeed, not only did c.25% of these senior executives implement what were then the newest/innovative ways of thinking about the business world they learnt about at Business School, they were even more likely (83%!) to do so if they were taught and inspired by an expert thought leader. Indeed, Jung and Shin’s research found that inspirational teachers and their good teaching of important new ways of understanding and seeing the business world actually further turbo-charges the power and influence of the MBA business curriculum. [2]
These latest research findings give yet greater credence, authority and urgency to his ongoing calls for a better understanding of the important role and function of non-executive directors by finding its rightful full place on our MBA and business degree curriculums. If what gets measured gets managed, then clearly what finds its way on the MBA curriculum gets taught and then finds its own way out into the real-world business until it finally enters and dictates in the marketplace of ideas 20 years down the pipe.
Given the complete and scandalous absence of the role and importance of independent non-executive directors in the current MBA and business curricula, there is surely no reason for any educational institution offering business degrees – whether under or post-graduate – to delay any longer in shaping our better futures? Though, gifted teachers deliver premium future results, Jung and Shin reveal that even average tuition of new, important or innovative ideas provides significant impacts and uplift decades hence. Obviously, no teaching of a key topic such as the importance of independent non-executive directors (NEDs) fails to shape any version of future CEO performance and, thereby, delivers absolutely nothing for businesses and society alike.
Pretty well all UK Business Schools currently do not even cover the corporate governance basics and practicalities. Successfully educating, training and accrediting the non-executive directors (and executive boards) of the future requires actual attention on the curricula. Just like artists and gifted sportspeople, the NEDs of the future need to be made rather than found! Effectively educating the Directors and CEOs of tomorrow in how companies and boards should really be properly run should come fitted as standard on the MBA curriculum.
Notes
[1] “Up until the 1960s, business school professors viewed diversification as a valuable strategy,” but “thoughts on diversification turned into scepticism in the 1970s and outright criticism in the 1980s,” as “agency theory views diversification as a prime example of managerial opportunism at the expense of shareholders’ wealth”
“To test our argument, we collected data on 2,031 CEOs who ran 640 large U.S. corporations from 1985 to 2015. We also gathered information on their educational background, such as the school they attended for an MBA and their year of graduation. We split our sample into three cohorts—CEOs who earned an MBA before, during, and after the 1970s—and examined whether these groups made different strategic choice about diversification. Here’s what we found: Compared with CEOs without an MBA, CEOs in the first cohort, who earned an MBA before the 1970s, were 17% more likely to pursue diversification at some point during their career. The later cohorts of CEOs, those who earned an MBA in the 1970s and later, were less likely to pursue diversification than their non-MBA counterparts, by 24% and 30%, respectively.”
[2] “We also conducted some additional tests. A quarter of CEOs with an MBA in our data graduated from HBS, where Michael Jensen taught agency theory beginning in 1985. Given his elevated role in popularizing agency theory, we expected that being exposed to his teaching had an enduring effect on students’ views of diversification. We found that CEOs who attended HBS after Jensen joined the school were 83% less likely to engage in diversification than those who went to HBS before that.”
Paper summary is here:
image credit: HBS1908 via Wikimedia Commons (CC BY-SA 3.0)/Work in Progress