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Business Schools Are Beginning to Embrace Stakeholder Inclusion

(Bloomberg Businessweek) —

On the role of business in society, the trend lines are clear: Shareholder primacy is out and stakeholder inclusion is in. Chief Executive Officers Jamie Dimon of JPMorgan Chase & Co. and Larry Fink of BlackRock Inc. were among the scores of corporate luminaries who in 2019 publicly made “a fundamental commitment to all of our stakeholders,” including the environment, employees, suppliers, and communities, as members of the Business Roundtable. Similar pledges now pop up everywhere, from global gatherings of the business elite to advertisements for the Australian toilet paper company Who Gives a Crap Ltd., which uses recycled materials and spends half its profits on building toilets and improving sanitation in the developing world: “Wipe your bum, change the world.”

Business schools have been slow to reflect this zeitgeist, but they’re rapidly making up for lost time. This month, the University of Pennsylvania’s Wharton School is becoming the first large MBA program to offer a major in environmental, social, and corporate governance, standards used by socially conscious investors to vet companies. Harvard Business School offers courses that ask students to question the very purpose of capitalism. And Columbia Business School has set an ambitious goal to become the nation’s top generator of leadership in the burgeoning field of social entrepreneurship.

“Since I started teaching this class three years ago, there’s been this huge shift away from making the case for why businesses should act,” says Harvard assistant professor Ethan Rouen of his popular elective Reimagining Capitalism, created by colleagues Rebecca Henderson and George Serafeim. “All of a sudden, that was no longer a question for students—of course businesses should act. Now it’s more about how, about the toolkit business leaders need to actually implement ESG strategies.”

MBA programs are largely reacting to demand. Studies have consistently shown that millennials want a strong sense of purpose in their work. For the younger Generation Z workers, 95% want a meaningful job that goes beyond making ends meet, according to a 2021 study by career experts at; 71% would even take a pay cut to get it. Typical of today’s business school applicants, says Barbara Coward of the consulting company MBA 360 Admissions, is a young woman at a medical tech firm who wants to attend Harvard Business School in hopes of moving to a startup that makes wearable technology to improve public health. “I think a lot about, ‘What is a business school?’” says Coward. “When applicants write essays about their goals and the reason they’ve chosen their schools, it almost sounds like they’re looking for a public policy degree.”

Today’s B-school students want a career with meaning, says Witold Henisz, vice dean and faculty director of Wharton’s ESG Initiative. “They want to stand for something,” he says. “They don’t want to be part of the next scandal, whether it’s opioids or teenage depression from social media. They want to feel they’re creating value and doing good.” To serve such students, the school offers more than 30 courses dealing with sustainability, ethics, and stakeholder theory, double the number five years ago.

Columbia Business School had just one-quarter of its students enrolled in courses on social and environmental impact 15 years ago, delivered by its Tamer Center for Social Enterprise. Today, that number has swelled to 50% of the school’s roughly 1,000 students. Such courses include Bridging the American Divides, to help students understand the causes and consequences of social polarization, and Business and Society: Reconciling Shareholder and Stakeholder Interests. The latter course, says Dean Costis Maglaras, “really makes students think about things like inequality, technology and algorithmic bias, climate change, and financial services for people that don’t have access to the banking system.”

In many ways, MBA programs are simply returning to their roots. When industrialist Joseph Wharton founded the Wharton School in 1881, he wanted to help business “solve the social problems incident to our civilization.” At its founding, Harvard Business School’s mission was to train leaders who “make a decent profit—decently.” Such noble ideals eroded over the ensuing decades until a series of influential academic papers in the 1970s, most notably by the famed economist Milton Friedman, washed them away completely. Friedman argued that business has only one major responsibility: to maximize profits for shareholders. Belief in shareholder primacy has prevailed in business education for most of the past half-century, though pockets of resistance formed as early as 1984. That’s when philosopher R. Edward Freeman published his seminal book, Strategic Management: A Stakeholder Approach, which urged companies to find ways to harmonize the interests of all stakeholders.

Today, Freeman’s approach has gone mainstream, though some argue that business schools aren’t moving fast enough to adapt to this new reality. The vast majority of courses in areas such as ESG and social entrepreneurship are still offered as electives rather than part of the core curriculum. “Many professors in the United States still believe the bottom line is everything,” says Simon S.M. Ho, president of Hang Seng University of Hong Kong, which runs the city’s largest B-school. He advocates an overhaul of management education to make the multi-stakeholder model central to the entire curriculum—as Hang Seng does—so students can “rediscover the purpose and responsibility of business.”

Wharton’s Henisz agrees that modifying the core curriculum is the next step, though he cautions that it will take “a huge institutional commitment.” In an ideal world, he says, “this content would be part of our management courses, part of our finance, legal studies, and marketing courses. So instead of offering just one or two classes, it would be sprinkled throughout the core curriculum.”

For MBA programs, the stakes are high. Society’s persistent questions about the very purpose of business create an existential dilemma. “You see all these statistics about how the younger generations are having doubts about the efficacy and benefits of capitalism,” says Harvard’s Rouen. “I’ve had conversations with senior leadership about this. If people think that capitalism is not worth studying, then we go out of business.”

Read more: Best Business Schools & MBA Programs 2022–23

To contact the author of this story:
Paul Keegan in New York at

© 2022 Bloomberg L.P.


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