By LARRY ROMANOFF – September 20, 2020
“The first thing we do, let’s kill all the lawyers”
(William Shakespeare, Henry VI)
Confucius taught that wisdom must come before knowledge, the reason for which is not difficult to fathom. When we impart knowledge, we give people tools – and the power to use them, and we all know that many tools, improperly used, can cause harm. The tools of knowledge imparted in most of the prominent MBA programs have a surprising capacity for malevolence and which, in the hands and minds of immature recruits lacking the basic wisdom of tool safety, i.e., morality, have altered our corporate ethical landscape beyond hope of repair.
The world’s large corporations have always contained a shrouded element of malevolence inherited from the characters of their owners, but there was a discernible point in time when this element became wholeheartedly embraced as part of the politically correct mainstream of corporate thought, a true watershed in the history of unbridled capitalism. As you no doubt already know, the US financial system, fueled by credit and cheap money alternating with deliberate monetary contractions, all controlled by the FED, has been responsible for most of the world’s recession. It was thus in 1971 when the US was deeply immersed in its war in Vietnam, and it was this that would set the stage for the management changes that were to follow. When in 1971 the US government reneged on the Bretton Woods Agreement, it set in motion a worldwide inflationary spiral that ended with the savage FED-induced economic contraction in the early 1980s, initiating an abrupt and brutal recession. If we have to choose a time when everything changed, this was the time.
Until this point, much of the corporate world still possessed a social conscience and an occasionally-respectable ethical standard. Prior to this time, few corporations would lay off or fire large portions of their workforce in response to a poor financial quarter or even a poor year. Corporate loyalty still existed, often functioning more or less well in both directions. But as the world slowly recovered from the severe economic contraction, all the rules changed. The corporate world discarded its social conscience, personnel became costs instead of assets, and the quarterly financial statements became the new bible of capitalism. In one case in the early 1980s, and I could cite many, a regional telecom company in Canada fired without notice about 3,500 people, 30% of its workforce. In the next quarter, the company re-hired more than 3,000 people, this time as contract workers only, meaning no pensions, no health care, no paid vacations, no benefits of any kind. And no more corporate loyalty in either direction. This disease infected and spread throughout the Western corporate world, and this is where – and when – the MBA became prominent. This is when the tools of management began to be imparted without the necessary wisdom. And this is where greed became the mainstream religion of our new capitalism.
I recall a conversation I had with a new MBA during that brutal recession, an ex-banker who boasted to me of “a nice little M&A project” he had done. He had convinced the owners of two successful and profitable small oil companies to merge their operations. For those who don’t know, the oil industry is not labor-intensive; doubling the amount of your oil production may require no additional staff. His plan was to merge all the assets into one company and fire fully 50% of the combined staff, thereby adding several millions in profit to the pockets of the owners, and of course a pleasantly fat fee for himself. The highlight of the conversation was his recounting that a senior geophysical engineer, a Ph.D., one of the unlucky high-salaried ones to be fired at 55 years of age, was later seen mixing milkshakes in his own little shop in a strip mall. I can still recall him telling me almost breathlessly, “It’s amazing how individuals are able to adapt and cope with adversity.” When I suggested that this senior professional had had his career prematurely and senselessly terminated with no future hope of employment, that his losses in future salary, pensions and other benefits, to say nothing of his reputation and self-esteem, were formidable, and that there had been irreparable human damage, he abruptly terminated our discussion. I would have to say he exhibited an intense disappointment at my inability to appreciate the intricacies of his corporate finesse. What a dullard I was, to ‘focus on the negatives’ of human loss in the face of such clear financial gain.
For our corporate descent into the moral swamps of capitalism, I lay much of the blame on the business schools and on the MBA graduates they produce. It should not go unnoticed that these schools are increasingly financed by the top 1%, with their curricula increasingly dictated to conform to the beneficial interests of this group. Management has become a commodity, like garbage collection. If you have the skills to empty one trash bin, you can empty any of them. Executives began complaining in the 1980s that it was almost impossible to find senior staff “who loved the product”. Given the standard approach by the prominent business schools, we can understand why. The product is irrelevant.
Look at this from the point of view of a new MBA graduate. He knows how to “manage”. Not manage anything in particular, but just manage. However, auto manufacturing is very different from making pizzas or running an airline, and he knows nothing useful about any of these. He could invest the time to learn the business, and perhaps even learn to love the product, but that appears unprofitable to him. He could spend some time on the factory floor, but he didn’t invest all that MBA tuition money so he could get his hands dirty. So, he tries to focus his attention on areas that will result in bonuses and promotions, and to him that means increasing profits. But since he knows nothing about the business or the industry, the only part he can understand is the financial statements. And when he looks at those statements, the first thing he sees is a huge number for salaries, and the light goes on. Let’s just fire all the people or hire only contract workers, or cut salaries, or outsource all labor to a less expensive environment. Since he wasn’t given the wisdom necessary to use his tools correctly, he graduates from his business school with no social conscience and no ethical standards. Money and profit are now the only measures.
By avoiding the shop floor and any workforce contact, by focusing only on screens of numbers, our new MBA is desensitised to the point of numbness and appears incapable of recognising that real people, live human beings, are behind those numbers. He doesn’t know, and doesn’t want to know, about the tragedies of unemployment that he causes. He willingly blinds himself to his own inhumanity, ignoring the stark evidence of displaced families and derailed careers, of the trauma he inflicts on his own colleagues. This blindness is legendary. An MBA who was a very close friend for many years, had become the president of a tiny oil company. He, and a former classmate – lifetime friends – worked together to build this firm into a very respectable mid-size energy company. The two were indispensable to each other, and to the firm. Then one day, in what I would describe as a fit of insanity brought on by his ‘knowledge without wisdom’ education, he fired his best lifetime friend for the sake of meeting analysts’ profit projections for that quarter.
Wal-Mart in China knowingly sells meat from diseased animals, labels regular food as ‘organic’, repackages food with new prolonged expiration dates. The fines paid are lower than the profits collected. Forced to remove its SK-II cosmetics from Western countries because of their carcinogenic content, P & G shipped them all to China. Being forced again to remove all SK-II products from the shelves in China, P & G reportedly shipped them to Africa. Faced with a new national labor union, Coca-Cola in Mexico hired thugs to force all employees to resign – often at gunpoint. They were rehired the next day, but were no longer union members and were unlikely to ever become such. Nestle’s unconscionable baby milk marketing in Africa has indirectly resulted in the deaths of millions of babies, producing a continuing worldwide boycott of all Nestle products, but the profits are immense and the Saatchi brothers do great damage control. The International Red Cross in Canada knowingly distributed blood plasma that was infected with HIV and hepatitis for over a year, and covered up its sins for a much longer time. Merck sold Vioxx for 10 years, knowing that medication may have killed as many as 500,000 people in the US alone, but it produced so many billions in profits, it was worth doing. American pharmaceutical companies began outsourcing their clinical drug trials to poor countries on the financially-sound but morally bankrupt theory that killing Asians and Africans was safer and cheaper than killing whites.
The list of serious and felonious corporate acts from this same lack of social conscience and ethical standards would fill an encyclopedia. It is true that some of these have always existed, that “the public be damned” has always been with us, but it was never so accepted as standard behavior that the perpetrators were immune from prosecution as they are in the US today. And again, I lay most of the blame for the greed and the rampant desensitisation to humanity on the amoral capitalist culture promulgated by the prominent business schools and so eagerly adopted by our MBA graduates – so weak, so immature and so easily corruptible.
In a book titled The End of Equality, (1) author Mickey Kaus clearly hit on the crux of the matter, the focus on “free markets” and the ruthless drive for profit maximisation in our new globalised world. It is that ruthlessness, the single-minded and empty-headed, thoughtless push for profit at the eventual expense of everything else, that changed the world for the worse. It is at the most admired Business Schools like the USA’s Harvard or Canada’s Western or the LSE, and in their MBA classes, where students’ heads are filled with values that have no value to either themselves or society, and are taught only the things necessary to further entrench the top 1% in their financial enslavement of humanity. It is axiomatic in human society that just because a thing can be done, that is not necessarily a reason to do it, but MBA students are taught only ‘what and ‘how’, and heavily proscribed from asking “Why?”. Business schools, MBA graduates and multi-national businesses have no such questions because they have no values against which to measure the wisdom of their actions. Indeed, questioning the capitalist bible at this stage will lead to rejection, isolation and ostracism, to say nothing of failing the MBA program.
The capitalists in our corporate world openly discarded their social conscience and replaced it with greed. So a firm like Pepsi will today come to China, form a superficially good-faith Joint-Venture contract giving it control of a renowned Chinese brand like Tianfu Cola, then siphon off all the profits, drive the JV into bankruptcy, and kill the brand. Pepsi’s executives in China did this because of a business-school morality that told them profit and market domination are the only values. Society is irrelevant, as is culture. Morality doesn’t exist. Ethical conduct is an archaic concept for the weak. The law of the jungle: the strong prey on the weak and only they survive. It was this loss of morality and the substitution of greed that marked the main contribution of the 1% elite to the world’s business schools and their MBAs. It is the main reason these people give huge donations to the business schools: they get their names plastered on the building and they dictate the curriculum.
From this, there were many concurrent corporate events and social changes, apparently disparate but in reality closely connected. This was when the time horizon of businesses became truncated, with increasingly short-term focus entirely on profits and share prices, eventually where the future consisted almost exclusively of the next quarter. This was when a corporation’s profits became more important than the products produced or the customers who purchased them. This was when business schools began to deny that the proper focus of a corporation was to identify and fill needs, instead teaching students to use marketing and psychology to manipulate real needs and fabricate imagined ones. This was when corporations abandoned the theory of giving value for money and of products filling needs, and in practice abandoned the concepts of value and needs altogether. This was when firms like H-P metamorphosed from companies that made products to companies that made money. This was when personnel became commoditised and dehumanised, when employees became costs instead of assets, when firms would lay off large portions of their workforce simply to improve the current quarter’s financial statements. Corporations now thought nothing of closing their factories and firing all their employees, to outsource production to another country with lower wages, with no apparent recognition of, nor any concern for, the obvious and irreparable damage being inflicted on both societies and nations by these immoral and irresponsible policies.
The propagandists helped the MBAs mask their social pathology by creating neutral euphemisms to describe their dehumanisation. Mass layoffs to permit foreign outsourcing became known by the emotionally-neutral terms of “downsizing” or “restructuring”, expressions as impersonal as ‘redecorating’ or ‘renovating’. Another part of the dehumanising process was the introduction of the brutal tactic of shock to accompany this callous corporate redecorating, the practice of terminating staff without cause and without notice, a method heavily promoted by the business schools and think-tanks as professional and low-risk tactics that spared executives the moral agony of personally facing their victims and one which carried less chance of being challenged in a court. Wal-Mart in China recently terminated more than 100 professional staff – their entire finance and accounting division, in just such a fashion. The staff appeared for work one morning to find the building locked, with a printed statement on the door that the division had been disbanded and all of them were now unemployed. A rather cowardly way to fire people, but MBA grads are not evaluated on courage.
This was when the international bankers re-entered the gold mine of privatisation with a vengeance, convincing foolish and short-sighted governments to sell off their nation’s infrastructure and social services in permanent, irreversible and unnecessary solutions to short-term problems. This was the time when ignorant and misguided Western politicians, pushed on by the same bankers, adopted the mantra of “user pay”, a process of levying countless and substantial new taxes on already burdened populations. This was when the education of mainstream society became an unnecessary burden to the elite 1%, when many Western nations, especially the US, the UK and Canada began the “dumbing down” and lack of affordability that still continue and are accelerating. This was when university Presidents became Finance MBAs instead of academics, their main responsibilities now being primarily endowment fund management and cost reduction by resorting to disposable, non-tenured professors and the ‘user-pay’ philosophy for tuitions. This was also when companies began to lie. About everything. Corporate crimes became merely PR occasions, and “damage control” became the operative expression created to deal with them. It was during this same period that multi-national corporations went from merely aggressive and belligerent to downright vicious, in seeking out and attacking real and imaginary infringements on their precious IP.
This was the time also when large corporations, with the eager support of their governments, launched an all-out war on labor unions. It must be said in fairness that some unions, like the US Teamsters and Canada’s Postal Workers, acquired excessive power and leverage which they applied in ways surprisingly self-destructive for both themselves and their members. Notwithstanding this, aside from a nation’s legislated minimum-wage law, unions were the only source of protection for a great many industrialised workers, whom the 1% attacked with a vengeance to the point where this last defense has all but disappeared in the politically Right-Wing countries like the US, Canada and the UK. This was when the US Congress amended corporate bankruptcy laws to permit ease in voiding labor contracts and eliminating unions. It was also when the elites invented, and the US Congress legislated, individual retirement accounts to permit workers to save tax-free retirement cash, but which were instead meant as a legal framework to eliminate the expense of corporate pension plans.
This was the time when the goal of the evisceration of the middle class was no longer denied or even hidden. During the decades in question, executive and financial salaries increased by about ten times – 1,000% – while incomes of the nation’s working population remained static or down after inflation. These senior executives and financial professionals have increasingly come to dominate the boards of directors and the compensation committees of the large (and not so large) firms, and all cooperate in feathering their own nests at the expense of the entire corporate workforce. As well, the elite have been extraordinarily successful in pressuring governments to reduce taxes for their group, to the point where even Warren Buffett complained that his secretary paid an income tax rate almost twice that of his own.
There was a time before MBA’s when it was recognised that all businesses – not only yours – needed a profit to survive, and when society strongly disapproved of profiteering and greed. The general corporate attitude was one of “pay and be paid”, evidenced by an absence of the brutal (and often inhuman) drive for lower costs that are so common today with companies like GM and Wal-Mart. Of course all companies attempted to lower their costs, but seldom did larger firms intimidate and browbeat smaller suppliers into providing products and services at little or no profit, forcing them into increasingly smaller margins and to the very edge of bankruptcy. Today, this latter process is standard procedure, enshrined and taught in all business schools as an axiom. Wal-Mart is renowned for its ruthless tactics and pressures to force suppliers to find and concede every tiny fraction of a percent of cost reduction, most often leaving suppliers with margins too thin for survival. General Motors was bitterly reviled for its practice of forcing parts suppliers to concede all their profits to the auto giant, staging competitions where the ‘victor’ was forced to reduce his price in each succeeding year by yet another 5%, and refusing to permit a parts supplier to quote on new contracts without first initiating a 5% or 10% discount on existing contracts.
When the MBA programs first appeared, they had a semblance of moral legitimacy, giving students a deeper appreciation and understanding of finance or marketing, but those days are gone. Today, an MBA is a graduate degree in sociopathology. I will say that I have met almost no executives (above a certain level) of a large corporation or institution who were not sociopaths, at least to some notable degree. I would go further and claim that it is virtually impossible to enter the higher ranks of multinational business if one lacks credible sociopathic credentials. The reason is that no other form of insect could outsource lethal drug trials to impoverished nations and ignore the residue of dead bodies. Who, other than a confirmed sociopath, would market baby milk powder to poor countries and ignore the millions of dead infants in his wake? Who else would hire a group of thugs to force all workers to resign at gunpoint, in order to eliminate a union? These and many other examples are the direct result of the 1% taking over the funding and curricula of the business schools, infecting impressionable young minds with the basic philosophies of profit maximisation and the amorality necessary for such. It is perhaps worthy of note that MBA graduating salaries are at an extreme level, especially for those at the top business schools and, with such high salaries, surprisingly little guidance appears necessary to make our budding sociopaths blossom.
Larry Romanoff is a retired management consultant and businessman. He has held senior executive positions in international consulting firms, and owned an international import-export business. He has been a visiting professor at Shanghai’s Fudan University, presenting case studies in international affairs to senior EMBA classes. Mr. Romanoff lives in Shanghai and is currently writing a series of ten books generally related to China and the West. He can be contacted at: email@example.com.