Investors were hardly the only ones shaken by the tumult in the financial markets this month. Business schools suddenly found themselves struggling to make sense of events on Wall Street, with some critics blaming an ethically challenged curriculum for the troubles. Current and prospective students, meanwhile, worried about job prospects.
“We are bracing for a storm,” said W. Carl Kester, a professor of finance and deputy dean for academic affairs at Harvard Business School, which typically sees nearly a 10th of each year’s graduating class go into investment banking.
At a recruitment fair for business schools staged here at the National Building Museum, Matthew Bryant, 21, said he had ruled out finance as a career option, having become convinced that the field too often comes crashing down when unethical behavior triggers a crisis of confidence.
Yinka Oyelaran, 26, said that he was still considering working in the capital markets, but that “I might need to re-evaluate” because that market seems “gone.”
On business-school campuses, some experts in business education were even calling for business schools to rethink what and how they teach students, suggesting that the blame for the financial crisis may lie partly with instruction in flawed accounting procedures or a failure to teach business students to behave ethically.
“The problems go even deeper than the curriculum,” said Rakesh Khurana, a professor of business administration at Harvard Business School and a prominent critic of business education. Business schools, he argued, “have actively fostered a mind-set among students” that business is about nothing more than the short-term pursuit of profits, which has “contributed to this culture of an uncritical view of the market” and helped bring about the financial crisis.
Vanishing Jobs
Many business schools began counseling their students about potential soft spots in the job market last March, when it became clear that the Bear Stearns investment bank was in trouble. This month, job prospects remained uncertain for new recruits of the investment giant Lehman Brothers, which declared bankruptcy, and for business students who had accepted job offers or internships at other troubled investment banks.
“A lot of students come to business school hoping to get into finance, and I think they are going to be particularly hurt by this,” predicted Paul Oyer, an associate professor of economics at Stanford University’s graduate business school, who has closely studied M.B.A. programs.
The business school at Harvard was beefing up efforts to coach students on job-searching skills, Mr. Kester said, based on the expectation that work will be harder to find. Many business-school administrators and professors did say they were optimistic that most companies would do everything possible not to cut back their recruitment on campuses, out of a belief that it is important to keep new talent moving up through their ranks.
Still, Lawrence M. Benveniste, dean of Emory University’s business school, said he had noted a “pretty dramatic shift in interest” among students entering the school this year. Whereas about 40 out of the 200 students in last year’s entering class were seeking to go into investment banking, only about 15 students in the current entering class have expressed an interest in that field, he said.
Trickle-Down Competition
The investment banks whose troubles have made headlines tend to recruit many employees from top business schools like Harvard. But Mr. Kester, of Harvard, predicted that “other schools are going to feel the ripple effects from this big boulder that has just been tossed in the pond.” Students from top schools may seek less-prestigious positions. As those students bump their counterparts from second-tier schools out of the running, he said, the students they have displaced will then lower their sights, causing a downward cascade of competition.
Ben J. Sopranzetti, an associate professor of finance and economics at Rutgers Business School, helps place dozens of students in jobs each year. He said he was well aware of how students were likely to be affected by such a dynamic. He has already “had a heart-to-heart” with Little Investment Bankers of Rutgers, a student group with about 200 members, to warn them about a potentially rough job market, and he plans to hold a meeting of alumni next month. “I honestly think the key is leveraging the alumni network and really empowering them in a way that, perhaps, they have not been before,” he said.
Flocking to Business Schools
Worries about future employment have not dampened spirits in admissions offices. As a rule, enrollment in business schools spikes during economic downturns, as people who find themselves with diminished employment prospects decide to spend their time acquiring new skills.
About 1,200 prospective students showed up for the business-school recruitment fair here, forming a line that stretched out the door and down the block. Among them was Daniel G. Day, a 27-year-old from Rockville, Md., who had decided to study international business after two years of trying to sell kitchen-remodeling jobs on commission. “No reason to be working eight hours a day if no one is buying,” he said.
The same trend was reflected in the number of people taking the Graduate Management Admission Test. As of the end of August, the number was up 6.6 percent in the United States and nearly 22 percent abroad over the same period a year ago.
Partly because the weak dollar has made attending an American higher-education institution much more affordable for many foreign students, international enrollments in many M.B.A. programs are up sharply. Such students could account for up to 35 percent of the enrollment at the nation’s top 30 full-time M.B.A. programs this academic year, up from 31 percent in 2007-8, according to the University of Rochester’s William E. Simon Graduate School of Business Administration, which tracks such enrollment data.
Asking the Big Questions
The economic turmoil will, at least, offer students some important lessons. “You learn a lot from mistakes, and professors are going to be very much active in engaging students in analyzing what happened here,” John J. Fernandes, president of AACSB International: the Association to Advance Collegiate Schools of Business, predicted.
Philippe Jorion, a professor of finance at the University of California at Irvine’s business school, devoted a class to discussing Lehman Brothers and the concept of credit risk. Asked if the collapse of major firms amounted to a “teachable moment,” he said, “unfortunately, yes.”
Experts on business education were divided last week over whether the curriculum of business schools should be changed in response to the financial crisis.
John Kraft, dean of the University of Florida’s business school, expressed doubt that business schools could have taught their students anything that would have averted such developments. “I think the people at the top just did not read the right signals,” he said. But Carolyn Y. Woo, dean of the University of Notre Dame’s business school, said the role that dishonest mortgage transactions played in triggering the crisis points to the need for many business schools to place more emphasis on ethics.
And Philip M.J. Reckers, a professor of accountancy at Arizona State University and the American Accounting Association’s vice president for education, said he expected the latest financial crises — and the role highly subjective accounting procedures played in it — to lead to changes in what accounting students are taught. “Every time there is some sort of scandal like this,” he said, “you get reforms.”
http://chronicle.com Section: The Faculty Volume 55, Issue 6, Page A11
