“I feel like I’m in Sin City,” said Rep. Christopher Shays in February to disgraced former Enron CEO Kenneth Lay and his subpoenaed cohorts who refused to testify at a House Financial Services Committee hearing.
What Shays said then is what we feel now. The Dow’s worst month since 1937 and the worst bear market in the history of NASDAQ are symptoms of a deep breach of public trust. But untainted is the Wharton School, ranked No. 1 by U.S. News and World Report — where undergraduates are trained to be corporate leaders.
The problem is that some Wharton graduates have lost their way when it comes to ethics. According to Thomas Dunfee, director of the school’s undergraduate program, Wharton instituted an ethics requirement for MBA candidates in 1991. Yet to this day it does not require its undergraduates to take Legal Studies 210 — “Corporate Responsibility and Ethics.”
Obviously, it should. Some Wharton undergrads avoid this course, which Professor Alan Strudler, who teaches it, says everybody should take. One student told the Penn Course Review, “It makes you think twice before doing anything unethical.” John Olson claims the corporate potholes unearthed in the last several years provide invaluable case studies in ethics.
Why should we listen to John Olson? We should have been listening to him all along. Last year, before Enron filed for bankruptcy, Olson told U.S. News and World Report, “They’re not very forthcoming about how they make their money…. I don’t know an analyst worth his salt who can seriously analyze Enron.”
Ken Lay’s response? “John Olson has been wrong about Enron for over 10 years and is still wrong. But he is consistent.”
It was easy to believe Olson was wrong. In 1995 he was the only person in a group of 17 prominent analysts that did not give Enron a “buy” rating. Olson said that Enron operated on a simple model: “money buys people, more money buys more people.”
Olson would not be bought. Olson led the Merrill Lynch natural gas research team to a No. 1 ranking in the 1998 Greenwich Institutional survey. Yet in a reign of collusion masked as “synergy” between investment bankers and analysts, management had no use for Olson’s objectivity. Olson told me that “if you didn’t get on the investment banking party line, they would whack you.”
Olson was fired by Merrill Lynch in 1998. But refusing to be bullish, Olson, a 1964 Penn graduate, has continued to preach what the University teaches — question authority and tirelessly pursue truth. The University Honor Council could devote an entire Integrity Week to the study of Olson’s 30-year career as a securities analyst.
When he received his MBA from Wharton two years later, it offered no courses in corporate ethics. But Olson says those courses weren’t necessary back then. His mentor, the late Willis Winn, gave “explicit notice that analysts and investment banking were going to be held to the highest standards.”
According to the U.S. Attorney for the Southern District of New York, one-time honors student Timothy Rigas could have benefited from an ethics course when he was a Wharton undergraduate. Rigas was chief financial officer at Adelphia Communications before he was arrested in May. A Manhattan grand jury charged Rigas with 24 counts of conspiracy, securities fraud, wire fraud and bank fraud.
And who knows whether Lawrence Tucker, a member of the board of directors at WorldCom, took ethics when he was on campus pursuing his Wharton MBA? Same goes for William Floyd, CEO of Beverly Enterprises and recipient of both a B.A. in American Studies and MBA from Penn.
A recently filed class action lawsuit charges Floyd violated federal securities laws by issuing “materially false and misleading statements… thus causing the Company’s securities to be overvalued and artificially inflated at all relevant times.”
This scandal of corporate responsibility is so widespread, so damaging, it deserves a “-gate” suffix. In response to Watergate, which was perpetrated primarily by lawyers, law schools across the country required their students to take courses in ethics. The State Bar of California required its entrants to take an additional and separate exam devoted entirely to ethics.
Lawyers, doctors, contractors, insurance brokers, electricians and barbers all need a license. But CEOs don’t need a license. No agency certifies that a CEO understands ethics. And that’s why Wharton is so important.
By not requiring it, Wharton gives the impression that ethics is not a business foundation, like finance and management. Finance will help you build a fortune. Management will help you build a business. But ethics is what prevents you from losing them.
Ethics is what secures jobs, pensions and civic charity. Ethics is what allows you to go to sleep at night, to look someone in the eye, to live with yourself.
Ethics is not only the foundation of Wall Street; it underlies the greater social contract of Main Street. And it must start on Walnut Street.
Jeff Millman is a senior Philosophy, Politics and Economics major from Los Angeles, Calif.
