Dear Harvard, Thanks for Enron!

It’s a well known fact that Enron was chock full of Harvard MBAs; Jeff Skilling, John Wing, Rebecca Mark and plenty of others were all Harvard MBAs.  This year BusinessWeek ranked Harvard’s MBA program as 2nd in the nation, so clearly they are held in high regards in the academic community.  Yet, this is the school that gave prestigious degrees to some of the masterminds behind the collapse of Enron.  Did Harvard teach them that it was acceptable to act in the ways they did?  Was the collapse of Enron all Harvard’s fault?

Since the collapse of Enron, there has been the Great Recession with the fall of Lehman Brothers, Merrill Lynch, Fannie Mae and others.  Much of the economic collapse was due to bad decisions and too much risk taking by management.  Sound familiar?  Maybe similar to the reasons behind the collapse of Enron?  The former CEO of Merrill Lynch was Stanley O’Neal, also a Harvard MBA. There are many parallels between Skilling and O’Neal.  According to a New York Times article, Risk-Taker’s Reign at Merrill Ends With Swift Fall, O’Neal “pushed Merrill into risky investments despite his experience as chief financial officer, where assessing risk was one of his responsibilities.”  Skilling also pushed Enron into many very risky situations, such as the off-balance sheet partnership JEDI.  In 2001, prior to the spike in losses at Merrill and O’Neal’s eventual termination, Harvard Business School Bulletin wrote a glowing profile of O’Neal.  Skilling and Enron, were used for case studies in innovation at Harvard.  What does this say about business education in America?  Has it changed at all since Enron and the Great Recession?

The Harvard Business School website says “The best measure of the success of an educational institution is the success of its alumni, and HBS is well known to have one of the largest and most influential alumni networks of any institution in the world.”  Given Harvard’s track record with alumni managing the collapse of companies due to excessive risk taking, it would seem that Harvard is not as successful in teaching the dangers of excessive risk.  According to the Harvard Business School Annual Report, Dean Jay Light believes that in responding to the financial crisis, “I think we saw quickly where we needed to strengthen the MBA curriculum, including areas such as risk management and understanding the increasingly connected interface of business and government.”  It would appear that Harvard was not convinced to instill more risk management in the curriculum by the fact that Harvard MBAs were behind the collapse of Enron.  We can only hope that this is a measure that Harvard actually employs, and that it is not something they simply say, like the Enron code of ethics.  Because it is true that Harvard has one of the most influential alumni networks, and Harvard MBAs will continue to be CEOs of some of the most powerful companies, it is necessary that Harvard take measures to ensure they do not provide the world with another Jeff Skilling.

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2 Responses

  1. I talked about this subject a bit in my paper. I think business schools need to adjust their curriculum’s to include more about ethics and corporate social responsibility, in addition to risk managment. Students need to be trained to recognize that the sole purpose of an organization is not to maximize shareholder value. They need to recognize the value of the attainment of other goals as an organization. For example, the attainment of goals geared towards furthering the interests of our planet.

  2. […] Dear Harvard, Thanks for Enron! […]

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