True Professionalism

Are business managers "genuine professionals" or mere functionaries? Harvard professor Rakesh Khurana provided an intriguing viewpoint on management professionalism during yesterday's broadcast of National Public Radio's "Marketplace" program (available online; Khurana's commentary runs from approximately 0:02:45 to 0:05:00 [RealPlayer required]). Khurana's view is that business managers owe duties both to company shareholders and to society as a whole. He notes that business management is widely perceived by the public to be unethical and he attributes this lack of current public regard to business managers' abandonment of the aspirational norms of "true professions" in favor of a "purely vocational approach".

While such criticism may play well in business schools, I think it misperceives the public's expectations of business generally. People expect businesses to act in their own self-interests and to place their shareholders' financial interests above the more general interests of their employees and communities; as more people become shareholders themselves through direct investment in stocks, indirect stock investment through mutual fund purchases or retirement saving, or passive investment by receiving stock options and grants as compensation, this generalized expectation has become a mandate to maximize wealth. There are alternatives within the marketplace: it always has been the option of shareholders to choose to forego some of their investments' profit-seeking for more noble purposes (consider, for example, the rise over the past few decades of "green" and other socially-responsible investment funds and companies with strong charitable or social business objectives); more pragmatically, managers' fiduciary duty demands that they act to preserve their business environment generally and their products' goodwill specifically; this may be called brand-building or promoted as corporate conscience, but it boils down to not killing the goose which lays the golden egg. It has long been recognized that it's bad business to sacrifice long-term viability for short-term profit.

In Khurana's formulation, managers should aspire to use their specialized knowledge for the public good, recognizing a duty to society that, when in conflict, is superior to their duties to their companies' shareholders. It won't fly. We live in a free, fragmented society rarely produces clear social norms that are sustained unchanged over time. To the extent we are able as a society to identify common values, we seek to protect those values by establishing objective, measurable standards by which we may judge business conduct; we don't rely on "true professionals" to look out for our interests and we certainly don't trust them to decide for us what those interests are.

Americans often view their capitalist system as a game, in which businesses (through their managers) are expected to play fair, observing the rules established for all competitors, but to otherwise play as hard and as ruthlessly as they are able. In our system, it's for the scoreboard to determine the winners and losers. That may be deemed messily unprofessional in academia, but it's the pinnacle of professionalism out here in the real world.

[Update]